____________________________________________________
EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
DATED AS OF _________________, 1998
____________________________________________________
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II. TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS. . . . . . . . . . . . . . . . . . .7
Section 2.1. Transfer of Employees.. . . . . . . . . . . . . . . . . .7
Section 2.2. Allocations between Hilton and Park Place.. . . . . . . .8
Section 2.3. Change of Control Benefits; Termination Benefits. . . . .9
ARTICLE III. INCENTIVE PLANS . . . . . . . . . . . . . . . . . . . . .10
Section 3.1. Stock Option and Incentive Plans. . . . . . . . . . . . .10
Section 3.2. Stock Purchase Plans. . . . . . . . . . . . . . . . . . .11
Section 3.3. Compensation Plans. . . . . . . . . . . . . . . . . . . .11
ARTICLE IV. PENSION AND SAVINGS PLAN. . . . . . . . . . . . . . . . .12
Section 4.1. 401(k) Plans. . . . . . . . . . . . . . . . . . . . . . .12
Section 4.2. Retirement Plan.. . . . . . . . . . . . . . . . . . . . .14
ARTICLE V. WELFARE AND OTHER BENEFITS. . . . . . . . . . . . . . . .15
Section 5.1. Hilton Medical/Dental Plans.. . . . . . . . . . . . . . .15
Section 5.2. Park Place Medical/Dental Plans.. . . . . . . . . . . . .16
Section 5.3. Vacation and Sick Pay Liabilities.. . . . . . . . . . . .17
Section 5.4. Payroll Reporting and Withholding.. . . . . . . . . . . .18
Section 5.5. Post-Retirement Welfare Benefits. . . . . . . . . . . . .19
ARTICLE VI. LABOR AND EMPLOYMENT MATTERS. . . . . . . . . . . . . . .19
Section 6.1. Separate Employers. . . . . . . . . . . . . . . . . . . .19
Section 6.2. Employment Policies and Practices.. . . . . . . . . . . .20
Section 6.3. Collective Bargaining Agreements. . . . . . . . . . . . .20
Section 6.4. Notice of Claims. . . . . . . . . . . . . . . . . . . . .20
Section 6.5. Assumption of Unemployment Tax Rates. . . . . . . . . . .20
Section 6.6. Employees on Leave of Absence.. . . . . . . . . . . . . .20
Section 6.7. Release and Separation Agreements.. . . . . . . . . . . .21
ARTICLE VII. NON-U.S. PLANS. . . . . . . . . . . . . . . . . . . . . .21
Section 7.1. Non-U.S. Plans Generally. . . . . . . . . . . . . . . . .21
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ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . .21
Section 8.1. Relationship of Parties.. . . . . . . . . . . . . . . . .21
Section 8.2. Access to Information; Cooperation. . . . . . . . . . . .21
Section 8.3. Assignment. . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.5. Severability. . . . . . . . . . . . . . . . . . . . . . .22
Section 8.6. Parties in Interest; No Third Party Beneficiary Rights. .22
Section 8.7. Notices.. . . . . . . . . . . . . . . . . . . . . . . . .23
Section 8.8. Further Assurances. . . . . . . . . . . . . . . . . . . .24
Section 8.9. Waiver of Conditions. . . . . . . . . . . . . . . . . . .24
Section 8.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . .24
Section 8.11. Preservation of Right To Amend or Terminate Plans.. . . .24
Section 8.12. Entire Agreement. . . . . . . . . . . . . . . . . . . . .24
Section 8.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . .25
Section 8.14. Survival. . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.15. Dispute Resolution. . . . . . . . . . . . . . . . . . . .25
Section 8.16. Reimbursement.. . . . . . . . . . . . . . . . . . . . . .25
Section 8.17. Default.. . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.18. Force Majeure.. . . . . . . . . . . . . . . . . . . . . .25
Section 8.19. Attorney/Client Privilege.. . . . . . . . . . . . . . . .26
Section 8.20. Specific Performance. . . . . . . . . . . . . . . . . . .26
SCHEDULES
Schedule A Release and Separation Agreements
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EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT
(this "AGREEMENT") is made and entered into as of [________ __], 1998, by and
between HILTON HOTELS CORPORATION, a Delaware corporation ("HILTON"), and PARK
PLACE ENTERTAINMENT CORPORATION, a Delaware corporation ("PARK PLACE"),
effective as of the Distribution Date (as hereinafter defined).
RECITALS
WHEREAS, subject to certain conditions, Hilton intends to spin-off its
operations, assets and liabilities relating to its gaming business by
distributing all of the issued and outstanding shares of common stock, par value
$.01 per share, of Park Place (together with the Park Place Rights, as
hereinafter defined, the "PARK PLACE COMMON STOCK") to the holders as of the
Record Date (as hereinafter defined) of the common stock, par value $2.50 per
share, of Hilton (the "HILTON COMMON STOCK"), on a pro rata basis (the
"DISTRIBUTION");
WHEREAS, in connection with such spin-off, Hilton and Park Place have
entered into a Distribution Agreement of even date herewith (the "DISTRIBUTION
AGREEMENT"), pursuant to which, among other things, Hilton is divested of the
gaming business to be conducted by Park Place; and
WHEREAS, pursuant to, and as contemplated by, the Distribution Agreement,
Hilton and Park Place have agreed to enter into an agreement allocating
responsibilities with respect to certain matters relating to employees and
employee compensation, benefits, labor and certain other employment matters
pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
agreements, undertakings and obligations set forth herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below. Capitalized
terms used and not otherwise defined in this Agreement shall have the meaning
ascribed to them in the Distribution Agreement. All references herein to
"Article," "Sections" or "Schedules" shall be deemed to be references to
Articles or Sections hereof or Schedules hereto unless otherwise indicated.
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"ANCILLARY AGREEMENT" shall mean any agreement contemplated by the
Distribution Agreement, and such other documents as the parties thereto shall
mutually agree are required to effect the Distribution.
"AMG COMPENSATION AGREEMENT" shall mean the Deferred Compensation
Agreement, dated as of January 16, 1997, by and between Hilton and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇.
"CHANGE OF CONTROL AGREEMENTS" shall mean any and all employment or
severance agreements of Hilton which provide severance or termination benefits
to any Employee subsequent to a change of control of Hilton.
"CIRP" shall mean the ▇▇▇▇▇▇ International Retirement Plan, with any
amendments thereto.
"COBRA" shall mean Code Section 4980B and ERISA Sections 601 through 608,
and any applicable state law establishing employer requirements for continuation
of health care, life insurance or other Welfare Plan benefits for the benefit of
certain current and former employees or dependents thereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"COLLECTIVE BARGAINING AGREEMENT" shall mean any collective bargaining
agreement or other labor agreement to which Hilton or any of its subsidiaries or
affiliates was a party on or before the Distribution Date.
"DISTRIBUTION" shall have the meaning set forth in the Recitals.
"DISTRIBUTION AGREEMENT" shall have the meaning set forth in the Recitals.
"DISTRIBUTION DATE" shall mean the date on which the Distribution occurs.
"EMPLOYEE" shall mean with respect to any entity, an individual who is
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, layoff with rights of recall, and any other leave of absence or
similar interruption of active employment that is not considered, according to
the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave. An employee
includes, without limitation, any individual who is in one of the following
categories: a Retained Employee, a Hilton Terminee, a Park Place Employee or a
Transferred Employee.
"EMPLOYER" shall mean Hilton or Park Place, as the context so indicates.
"EMPLOYER COMMON STOCK" shall mean Hilton Common Stock with respect to
Hilton Individuals, and Park Place Common Stock with respect to Park Place
Individuals.
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"EMPLOYER STOCK OPTION PLAN" shall mean a plan which provides for awards of
additional compensation to eligible Employees in the form of nonqualified or
incentive options to purchase Employer Common Stock, including without
limitation, the Hilton Stock Option Plans and the Park Place Stock Option Plans.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
"EXERCISE DATE" shall have the meaning set forth in Section 3.2(a).
"FOREIGN PLANS" shall have the meaning set forth in Section 7.1.
"FOREIGN PLANS AGREEMENT" shall have the meaning set forth in Section 7.1.
"HILTON" shall have the meaning set forth in the Preamble.
"HILTON COMMON STOCK" shall have the meaning set forth in the Recitals.
"HILTON COMPENSATION PLANS" shall mean collectively, the Hilton Incentive
Compensation Plan, the Hilton Executive Deferred Compensation Plan and any and
all other incentive or bonus compensation plans of Hilton.
"HILTON DIRECTOR OPTION PLAN" shall mean the 1997 Independent Director
Stock Option Plan of Hilton.
"HILTON EXECUTIVE DEFERRED COMPENSATION PLAN" shall mean the Executive
Deferred Compensation Plan, with amendments thereto, of Hilton.
"HILTON EXECUTIVE INCENTIVE PLAN" shall mean the 1996 Chief Executive Stock
Incentive Plan of Hilton.
"HILTON 401(K) PLAN" shall mean the Thrift Savings Plan of Hilton, as
amended and restated.
"HILTON INCENTIVE COMPENSATION PLAN" shall mean the Incentive Compensation
Plan of Hilton, as amended.
"HILTON INDIVIDUAL" shall mean any individual who (a) is a Retained
Employee, (b) is, as of the Distribution Date, a Hilton Terminee whose last
employment with Hilton or any of its subsidiaries was with a Hilton Retained
Business or (c) is a dependent or beneficiary of any individual specified in
clause (a) or (b).
"HILTON MEDICAL/DENTAL PLANS" shall mean any Medical/Dental Plans
maintained for or providing benefits to Hilton Individuals.
"HILTON 1984 STOCK OPTION PLAN" shall mean the 1984 Stock Option and Stock
Appreciation Rights Plan, and amendments thereto, of Hilton.
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"HILTON 1990 STOCK OPTION PLAN" shall mean the 1990 Stock Option and Stock
Appreciation Rights Plan, and amendments thereto, of Hilton.
"HILTON QUALIFIED BENEFICIARY" shall mean a Qualified Beneficiary who,
immediately following the Distribution, is not a Park Place Qualified
Beneficiary and who, immediately prior to the Distribution, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"HILTON RETAINED BUSINESS" shall mean any business or operation of Hilton
or its subsidiaries which is, pursuant to the Distribution Agreement, to be
conducted by Hilton following the Distribution.
"HILTON RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of July
14, 1988 between Hilton and the First National Bank of Chicago, as rights agent,
as amended from time to time.
"HILTON STOCK INCENTIVE PLAN" shall mean the 1996 Stock Incentive Plan of
Hilton, as amended.
"HILTON STOCK OPTION" shall mean an option to purchase Hilton Common Stock
pursuant to any of the Hilton Stock Option Plans.
"HILTON STOCK OPTION PLANS" shall mean collectively, the Hilton 1984 Stock
Option Plan, the Hilton 1990 Stock Option Plan, the Hilton Director Option Plan,
the Hilton Stock Incentive Plan and the Hilton Executive Incentive Plan.
"HILTON STOCK PURCHASE PLAN" shall mean the Employee Stock Purchase Plan of
Hilton, as amended.
"HILTON TERMINEE" shall mean any individual who was formerly employed by
Hilton who terminated such employment prior to the Distribution Date.
"HMO" shall mean any health maintenance organization organized under 42
U.S.C. Section 300e-9, or a state health maintenance organization statute that
provides medical services for Hilton Individuals or Park Place Individuals under
any Plan.
"IRS" shall mean the Internal Revenue Service.
"LOCAL ACTUARY" shall have the meaning set forth in Section 7.1.
"MEDICAL/DENTAL PLAN" shall mean a Welfare Plan providing health benefits
to Employees and their dependents.
"PARK PLACE" shall have the meaning set forth in the Preamble.
"PARK PLACE BUSINESS" shall mean any business or operation of Hilton or its
subsidiaries which is, pursuant to the Distribution Agreement, to be conducted
by Park Place immediately following the Distribution.
▇
"▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇" shall have the meaning set forth in the Recitals.
"PARK PLACE COMPENSATION PLANS" shall have the meaning set forth in Section
3.3(b).
"PARK PLACE EMPLOYEE" shall mean any individual who is (a) a Transferred
Employee or (b) not a Transferred Employee but becomes an employee of Park Place
on or after the Distribution Date.
"PARK PLACE EMPLOYMENT AGREEMENTS" shall have the meaning set forth in
Section 2.1(d).
"PARK PLACE 401(k) PLAN" shall have the meaning set forth in
Section 4.1(b).
"PARK PLACE INDIVIDUAL" shall mean any individual who (a) is a Transferred
Employee, (b) is otherwise a Park Place Employee, (c) is, as of the Distribution
Date, a Hilton Terminee whose last employment with Hilton or a subsidiary of
Hilton was with a Park Place Business or (d) is a dependent or beneficiary of
any individual described in clause (a), (b) or (c).
"PARK PLACE MEDICAL/DENTAL PLANS" shall mean the Medical/Dental Plans to be
established by Park Place in accordance with Section 5.2(a).
"PARK PLACE OPTION" shall have the meaning set forth in Section 3.1(a).
"PARK PLACE QUALIFIED BENEFICIARY" shall mean any Park Place Individual (or
dependent thereof) who, on or before the Distribution Date, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"PARK PLACE RIGHTS" shall mean the rights issued under the Park Place
Rights Agreement to purchase shares of Park Place Common Stock.
"PARK PLACE RIGHTS AGREEMENT" shall mean the Rights Agreement to be entered
into by Park Place prior to the Distribution, the terms of which shall be
substantially the same as the Hilton Rights Agreement.
"PARK PLACE STOCK OPTION PLANS" shall mean the Stock Option Plans of Park
Place, as established by Park Place pursuant to Section 3.1(b) hereof.
"PARK PLACE STOCK PURCHASE PLAN" shall have the meaning set forth in
Section 3.2(b).
"PLAN" shall mean any plan, policy, arrangement, contract or agreement
providing compensation benefits for any group of Employees or individual
Employees (including former Employees,) or the dependents or beneficiaries of
any such Employee, whether formal or informal or written or unwritten, and
including, without limitation, any means, whether or not legally required,
pursuant to which any benefit is provided by an Employer to any such Employee or
the beneficiaries of any such Employee, existing as of the Distribution Date or
prior thereto.
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"QUALIFIED BENEFICIARY" shall mean an individual (or dependent thereof) who
either (a) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan or (b) becomes a "qualified beneficiary" (as that term is
defined in Code Section 4980B(g)(1) and ERISA 607(3)) under any Medical/Dental
Plan.
"RECORD DATE" shall mean [________ __], 1998.
"RELEASE AND SEPARATION AGREEMENTS" shall mean those Release and/or
Separation Agreements identified on SCHEDULE A hereto, and any other similar
agreements entered into by Hilton or any of its subsidiaries and a Hilton
Terminee whose last employment with Hilton or such subsidiary was with either a
Park Place Business or a Hilton Retained Business.
"REPLACEMENT PLAN" shall mean the Retirement Benefit Replacement Plan of
Hilton, as amended.
"RETAINED EMPLOYEE" shall mean any individual who immediately prior to the
Distribution was an Employee of Hilton and who is an employee of Hilton
immediately following the Distribution.
"REV. PROC. 84-77" shall have the meaning set forth in Section 5.4(a).
"RETIREMENT PLAN" shall mean the Retirement Plan, and amendments thereto,
of Hilton.
"SEC" shall mean the Securities and Exchange Commission.
"SERP" shall mean the Supplemental Executive Retirement Plan effective as
of June 14, 1989, as amended and restated, of Hilton.
"SERVICE CREDIT" shall mean the period taken into account under any Plan
for purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
"TERMINATION BENEFITS" shall have the meaning set forth in Section 2.3(a).
"TRANSFERRED EMPLOYEE" shall mean any individual who was an Employee of
Hilton immediately prior to the Distribution and who becomes, immediately after
the Distribution, an Employee of Park Place.
"WELFARE PLAN" shall mean any Plan which provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment benefit, but
excluding vacation benefits covered under Section 5.3.
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ARTICLE II.
TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS
Section 2.1. TRANSFER OF EMPLOYEES.
(a) Hilton and Park Place shall take all steps necessary or
appropriate so that all of the Employees of Hilton and its subsidiaries are
allocated between the Hilton Retained Business and the Park Place Business in
accordance with the principles set forth in Section 2.1(b) below, and so that
each individual who is so allocated to the Park Place Business is, as of the
Distribution Date and immediately following the Distribution, an Employee of
a member of the Park Place Business, and each individual who is so allocated
to the Hilton Retained Business is, as of the Distribution Date and
immediately following the Distribution, an Employee of a member of the Hilton
Retained Business.
(b) In making the allocation provided for in this Section 2.1,
Hilton and Park Place shall allocate each Employee who is primarily engaged
in the Hilton Retained Business to Hilton and/or its subsidiaries and each
Employee who is primarily engaged in the Park Place Business to Park Place
and/or its subsidiaries. All other Employees shall be allocated in a
mutually agreeable manner that, to the extent possible, takes into account
(i) the Employees' expertise, experience and existing positions and duties,
(ii) the likelihood of unreasonably disrupting either the Hilton Retained
Business or the Park Place Business and (iii) maximizing the ability of each
of Hilton and Park Place and their respective subsidiaries to manage and
operate their respective businesses after the Distribution Date, taking into
account the respective needs of such businesses as established by past
practice, and with a view towards maximizing the value and effectiveness of
both the Hilton Retained Business and the Park Place Business.
(c) Hilton and Park Place each agree that, between the date hereof
and the Distribution Date, Employees will not be transferred between the
Hilton Retained Business or Park Place Business except as (i) necessary to
effect the transfer pursuant to this Section 2.1 or (ii) in the ordinary
course of business consistent with past practice. Notwithstanding the
foregoing allocation, Hilton and Park Place acknowledge that (x) Hilton may
need the services of certain Transferred Employees for a transitional period
following the Distribution and (y) Park Place may need the services of
certain Retained Employees for a transitional period following the
Distribution. Hilton and Park Place agree to enter into an Ancillary
Agreement to this effect and to cooperate to make such services available on
a transitional basis.
(d) Effective as of the Distribution Date, Hilton shall assume all
obligations and liabilities for, and arising under all written employment
agreements and oral employment agreements, if any, in each case with respect
to Retained Employees, and Park Place shall have no liability or obligation
with respect thereto. Effective as of the Distribution Date, Park Place
shall assume all obligations and liabilities for and arising under all
written employment agreements and oral employment agreements, if any, in each
case with respect to Transferred Employees (the "PARK PLACE EMPLOYMENT
AGREEMENTS"), and Hilton shall have no liability or obligation with respect
thereto. Park Place shall take, or cause to be taken, all action necessary
7
and appropriate to assume, effective as of the Distribution Date, all Park
Place Employment Agreements, with such changes as may be necessary to reflect
the change in the employer thereunder and such other changes as Park Place
shall determine. Such Park Place Employment Agreements shall otherwise have
the same terms and conditions as in effect immediately prior to the
Distribution Date, except that references to employment by or termination of
employment with Hilton and its affiliates shall be changed to references to
employment by or termination of employment with Park Place and its affiliates.
Section 2.2. ALLOCATIONS BETWEEN HILTON AND PARK PLACE.
(a) ALLOCATION OF RESPONSIBILITIES AS EMPLOYER ON DISTRIBUTION DATE.
On the Distribution Date, except to the extent assumed by Hilton under this
Agreement or any Ancillary Agreement, Park Place shall retain or assume, as the
case may be, responsibility as employer for Transferred Employees. On the
Distribution Date, except to the extent assumed by Park Place under this
Agreement or any Ancillary Agreement, Hilton shall retain responsibility as
employer for Retained Employees.
(b) ASSUMPTION OF LIABILITIES ON DISTRIBUTION DATE. Except as
specifically provided in this Agreement, or as otherwise agreed by the
parties hereto:
(i) Except as provided in Section 2.2(c) and with respect to
the Retirement Plan, immediately following the Distribution, Park Place shall
assume all benefit obligations and all related rights in connection with any
Plan with respect to the Transferred Employees and Hilton Terminees engaged
in a Park Place Business and Hilton shall have no further liability with
respect thereto.
(ii) Hilton shall retain all benefit obligations and all
related rights which accrue after the Distribution Date in connection with
any Plan and with respect to Retained Employees, and Park Place shall have no
further liability with respect thereto; PROVIDED, HOWEVER, that with respect
to such Retained Employees who become employed by Park Place after the
Distribution, any benefit obligations and all related rights in connection
with any Plan with respect to such employment with Park Place shall be
assumed by Park Place.
(c) SERVICE CREDITS.
(i) DISTRIBUTION DATE TRANSFERS. In connection with the
Distribution and for purposes of determining Service Credits under any Plan,
Hilton shall credit each Retained Employee and Park Place shall credit each
Transferred Employee with such Employee's Service Credits and original hire date
as reflected in the Hilton records as of the Distribution Date. Such Service
Credits and hire date shall continue to be maintained as described herein for as
long as the Employee does not terminate employment or as otherwise may be
required by applicable law or any applicable Plan.
(ii) SERVICE CREDITS FOLLOWING THE DISTRIBUTION DATE. Subject to
the provisions of applicable law, (x) Park Place may, in the case of Transferred
Employees, in its sole discretion, make such decisions as it deems appropriate
with respect to determining Service
8
Credits accrued after the Distribution Date and (y) Hilton may, in the case
of Retained Employees, in its sole discretion, make such decisions as it
deems appropriate with respect to determining Service Credits accrued after
the Distribution Date.
Section 2.3. CHANGE OF CONTROL BENEFITS; TERMINATION BENEFITS.
(a) No Retained Employee and no Transferred Employee shall be
deemed, as a result of any actions taken pursuant to this Article II or
otherwise as a result of the consummation of the transactions contemplated by
the Distribution Agreement, to have become entitled to any benefits under any
Plan, contract, agreement, statute, regulation or other arrangement that
provides for the payment of severance pay, salary continuation, pay in lieu
of notice, unused vacation pay, or similar benefits in connection with actual
or constructive termination or alleged actual or constructive termination of
employment (collectively, "TERMINATION BENEFITS"). Without limiting the
generality of the foregoing, none of the transactions contemplated by the
Distribution Agreement constitutes a "change of control" or a "change in
control" for purposes of any Plan.
(b) Notwithstanding Section 2.3(a), effective as of the
Distribution Date, Hilton shall retain all liabilities relating to or arising
out of claims made by or on behalf of Retained Employees (including the
beneficiary, dependent or alternate payee of such individual) for, or with
respect to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of employment of
any Retained Employee with any member of the Park Place Business or the
Hilton Retained Business, whether before, on or after the Distribution Date.
In addition, Hilton shall retain all liabilities and obligations pursuant to
any Change of Control Agreements with respect to Retained Employees.
(c) Notwithstanding Section 2.3(a), and except as provided
otherwise in Section 2.3(b) above, effective as of the Distribution Date,
Park Place shall assume all liabilities relating to or arising out of claims
made by or on behalf of Transferred Employees (including the beneficiary,
dependent or alternative payee of such individual) for, or with respect to,
Termination Benefits relating to the actual or constructive termination or
alleged actual or constructive termination of employment of any Transferred
Employee with any member of the Park Place Business or the Hilton Retained
Business, whether before, on or after the Distribution Date. In addition,
Park Place shall assume all liabilities and obligations pursuant to any
Change of Control Agreements with respect to Transferred Employees.
ARTICLE III.
INCENTIVE PLANS
Section 3.1. STOCK OPTION AND INCENTIVE PLANS.
(a) HILTON STOCK OPTION PLANS. Hilton shall continue the Hilton
Stock Option Plans. Effective as of the Distribution Date, all outstanding
Hilton Stock Options, other than Hilton Stock Options held by ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, shall be adjusted to represent options to purchase an equivalent
number of shares of Hilton Common Stock and shares of Park Place Common Stock
(each such option to purchase Park Place Common Stock, a "PARK PLACE
9
OPTION"). Pursuant to such adjustment, the value of the Hilton Stock Options
immediately prior to the Distribution shall be preserved immediately after
the Distribution, and the exercise price of the Hilton Stock Options
immediately prior to the Distribution shall be allocated between the Hilton
Stock Options, as adjusted, and the Park Place Options based upon the
relative values of the Hilton Common Stock and the Park Place Common Stock
subsequent to the Distribution, all as determined by Hilton. Effective as of
the Distribution Date, all outstanding Hilton Stock Options held by ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ shall be adjusted to represent Park Place Options. Pursuant to such
adjustment, the value of ▇▇. ▇▇▇▇▇▇▇▇'▇ Hilton Stock Options immediately
prior to the Distribution shall be preserved immediately after the
Distribution, and the number of shares subject to and the exercise price of
such Hilton Stock Options shall be adjusted based on the relative values of
the Hilton Common Stock and the Park Place Common Stock subsequent to the
Distribution, all as determined by Hilton. To the extent necessary, Hilton
shall amend the Hilton Stock Option Plans to provide that with respect to
Park Place Individuals, references to employment or termination of employment
with Hilton and its affiliates shall be changed to references to employment
by or termination of employment with Park Place and its affiliates.
(b) PARK PLACE STOCK OPTION PLANS. Park Place shall take, or
cause to be taken, all action necessary and appropriate to adopt, effective
as of the Distribution Date, stock option plans in substantially the same
form as the Hilton Stock Option Plans, with such changes as may be necessary
to reflect the change in the issuer of awards thereunder and such other
changes as Park Place shall determine (such plans as adopted, the "PARK PLACE
STOCK OPTION PLANS"). All awards under the Park Place Stock Option Plans
will be options with respect to Park Place Common Stock. Park Place Options
which are issued pursuant to the adjustment of the Hilton Stock Options under
subsection (a) above shall otherwise have substantially similar terms and
conditions as the Hilton Stock Options with respect to which they are issued,
except that with respect to Hilton Individuals, references to employment by
or termination of employment with Park Place and its affiliates shall be
changed to references to employment by or termination of employment with
Hilton and its affiliates. From and after the Distribution Date, Park Place
shall assume all obligations with respect to the Park Place Options, and
shall administer the Park Place Stock Option Plans under terms governing such
awards.
Section 3.2. STOCK PURCHASE PLANS.
(a) HILTON STOCK PURCHASE PLAN. The Hilton Stock Purchase Plan
shall be administered and amended, if necessary, to provide that the options
held by each participant under such Plan shall be exercised on the date
immediately prior to the Distribution Date (the "EXERCISE DATE") under the terms
and conditions set forth in such Plan; PROVIDED that, the exercise price per
share shall be the lesser of (i) 95% of the Fair Market Value (as defined
therein) of Hilton Common Stock on the applicable Grant Date (as defined
therein) or (ii) 95% of the Fair Market Value of Hilton Common Stock on the
Exercise Date. From and after the Distribution Date, Hilton shall continue the
Hilton Stock Purchase Plan with respect to Retained Employees. Hilton shall
assume all obligations, and shall administer the Hilton Stock Purchase Plan
under terms governing such awards, with respect to Retained Employees, except as
adjusted or amended herein.
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(b) PARK PLACE STOCK PURCHASE PLAN. Park Place shall take, or
cause to be taken, all action necessary and appropriate to adopt, effective
as of the Distribution Date, a stock purchase plan in substantially the same
form as the Hilton Stock Purchase Plan, with such changes as may be necessary
to reflect the change in the issuer of awards thereunder and such other
changes as Park Place shall determine (such plan as adopted, the "PARK PLACE
STOCK PURCHASE PLAN"). The terms and conditions of the Park Place Stock
Purchase Plan shall be substantially similar to the terms and conditions of
the Hilton Stock Purchase Plan, except that references to employment by or
termination of employment with Hilton and its affiliates shall be changed to
references to employment by or termination of employment with Park Place and
its affiliates.
Section 3.3. COMPENSATION PLANS.
(a) HILTON COMPENSATION PLANS. Hilton shall pay, or cause to be
paid, all compensation and bonuses earned by each Hilton Individual who, on
the Distribution Date, is a participant under any of the Hilton Compensation
Plans, for the period prior to the Distribution Date, in accordance with the
terms of the applicable Hilton Compensation Plan. From and after the
Distribution Date, Hilton shall retain all liabilities relating to or arising
under the Hilton Compensation Plans with respect to any Hilton Individuals.
(b) PARK PLACE COMPENSATION PLANS. Park Place shall assume and
shall be solely responsible for, all obligations to pay all compensation and
bonuses earned by each Park Place Individual who, on the Distribution Date,
is a participant under the Hilton Compensation Plans. Park Place shall take,
or cause to be taken, all action necessary and appropriate to adopt,
effective as of the Distribution Date, compensation plans in substantially
the same form as the Hilton Compensation Plans which cover Park Place
Individuals, with such changes as may be necessary to reflect the change in
the issuer of awards thereunder and such other changes as Park Place shall
determine (such plan as adopted, the "PARK PLACE COMPENSATION PLANS"). From
and after the Distribution Date, the Park Place Compensation Plans shall
provide future compensation benefits thereunder to Park Place Individuals
pursuant to the terms therein. The terms and conditions of the Park Place
Compensation Plans shall be substantially similar to the terms and conditions
of the Hilton Compensation Plans.
(c) AMG COMPENSATION AGREEMENT. Park Place shall pay, or caused
to be paid, all compensation and bonuses earned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ under
the AMG Compensation Agreement according to the terms thereof. As of the
Distribution Date, Park Place shall retain and shall be solely responsible
for, all liabilities and obligations in connection with or arising under the
AMG Compensation Agreement, and Hilton shall have no liability or obligation
with respect thereto.
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ARTICLE IV.
PENSION AND SAVINGS PLAN
Section 4.1. 401(k) PLANS.
(a) CONTINUATION OF HILTON 401(k) PLAN. Hilton shall take, or
cause to be taken, all action necessary and appropriate to maintain the
Hilton 401(k) Plan. From and after the Distribution Date, such Plan shall
provide benefits for all eligible Hilton Individuals, subject to the terms
and provisions of such Plan.
(b) ESTABLISHMENT OF PARK PLACE 401(k) PLAN. Effective as of the
Distribution Date, Park Place shall take, or cause to be taken, all action
necessary and appropriate to establish and administer a 401(k) Plan separate
from the Hilton 401(k) Plan (the "PARK PLACE 401(k) PLAN"). The Park Place
401(k) Plan shall contain substantially the same terms and conditions as the
Hilton 401(k) Plan. The Park Place 401(k) Plan shall be a split up of that
portion of the Hilton 401(k) Plan which is attributable to Park Place
Individuals. Park Place shall provide benefits under the Park Place 401(k)
Plan after the Distribution Date for all Park Place Individuals subject to
the terms and provisions of such Plan. The Park Place 401(k) Plan shall be
intended to qualify for tax-favored treatment under Sections 401(a) and
401(k) of the Code and to comply with the requirements of ERISA.
(c) MATCHING AND PROFIT SHARING CONTRIBUTIONS. Matching and
discretionary contributions under the Hilton 401(k) Plan with respect to
Hilton Individuals will be made solely by Hilton pursuant to the terms of the
Hilton 401(k) Plan. Matching and discretionary contributions under the Park
Place 401(k) Plan with respect to Park Place Individuals will be made solely
by Park Place pursuant to the terms of the Park Place 401(k) Plan.
(d) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES. As soon as
practicable after the Distribution Date, Hilton and Park Place shall cause
the trustees of the Hilton 401(k) Plan to transfer to the trustees or other
funding agent of the Park Place 401(k) Plan, the amounts (in cash,
securities, other property or a combination thereof) representing the account
balances of all Park Place Individuals, said amounts to be established as
account balances or accrued benefits of such individuals under the Park Place
401(k) Plan. Each such transfer shall comply with Section 414(1) of the Code
and the requirements of ERISA and the regulations promulgated thereunder.
Park Place shall cause the trustees or other funding agent of the Park Place
401(k) Plan to accept the plan-to-plan transfer from the Hilton 401(k) Plan
trustees, and to credit the accounts of such Transferred Employees under the
Park Place 401(k) Plan with amounts transferred on their behalf.
(e) INFORMATION. Hilton shall provide Park Place, as soon as
practicable after the Distribution Date (with the cooperation of Park Place
to the extent that relevant information is in the possession of Park Place),
with a list of Park Place Individuals who, to the best knowledge of Hilton,
were participants in or otherwise entitled to benefits under the Hilton
401(k) Plan on the Distribution Date, together with a listing of each
participant's Service Credits under such Plan and a listing of each such Park
Place Individual's account balance thereunder, and each Park Place
Individual's investment election. Hilton shall, as soon as practicable after
12
the Distribution Date, provide Park Place with such additional information in
the possession of Hilton (and not already in the possession of Park Place) as
may be reasonably requested by Park Place and necessary for Park Place to
administer effectively the Park Place 401(k) Plan.
(f) REGULATORY FILINGS. Hilton and Park Place shall, in
connection with the plan-to-plan transfer described in Section 4.1(a) and
Section 4.1(b) above, cooperate in making any and all appropriate filings
required by the SEC or the IRS, or required under the Code or ERISA or any
applicable securities laws and the regulations thereunder, and take all such
action as may be necessary and appropriate to cause such plan-to-plan
transfer to take place as soon as practicable after the Distribution Date or
otherwise when required by law. Further, Park Place shall seek a favorable
IRS determination letter that the Park Place 401(k) Plan as organized,
satisfies all qualification requirements under Section 401(a) of the Code.
Notwithstanding the foregoing, such plan-to-plan transfers shall take place
pending issuance of such favorable determination letter. Park Place shall
make any necessary amendments on a retroactive basis to the Park Place 401(k)
Plan as required by the IRS to issue the favorable determination letter
described above.
(g) ACCOUNT BALANCES OF PARTICIPANTS. Except as otherwise
provided herein, on the Distribution Date, Park Place shall assume sole
responsibility for all liabilities and obligations existing as of the
Distribution Date under the Park Place 401(k) Plan, and Hilton shall have no
liability or obligation with respect thereto. Hilton shall retain sole
responsibility for all liabilities and obligations arising before and after
the Distribution Date under the Hilton 401(k) Plan with respect to Retained
Employees, and Park Place shall have no liability or obligation with respect
thereto.
Section 4.2. RETIREMENT PLAN.
(a) RETIREMENT PLAN. Effective as of January 1, 1997, Employees
who were participants in the Retirement Plan ceased accruing additional
benefits thereunder. From and after the Distribution Date, Hilton shall
retain and shall be responsible for the administration of the Retirement
Plan, and each of Hilton and Park Place shall retain or assume, as
applicable, all liabilities and excess assets, if any, relating to or arising
under the Retirement Plan, including, without limitation, all liabilities for
benefits accrued and payable thereunder to each participant thereunder, and
for all costs of administering the Retirement Plan after the Distribution
Date, in a proportion based upon the ratios of the accrued benefits of Hilton
Individuals and of Park Place Individuals, respectively, as of December 31,
1997.
(b) SERP AND THE REPLACEMENT PLAN. Effective as of January 1,
1997, Employees who were participants in the SERP and/or the Replacement Plan
ceased accruing additional benefits thereunder. From and after the
Distribution Date, Hilton shall retain and shall be responsible for the
administration of the SERP and the Replacement Plan, and each of Hilton and
Park Place shall retain or assume, as applicable, all liabilities relating to
or arising under the SERP and/or the Replacement Plan, as the case may be,
and for all costs of administering the SERP and/or the Replacement Plan, as
the case may be, after the Distribution Date, in a
13
proportion based upon the ratios of the accrued benefits of Hilton
Individuals and of Park Place Individuals, respectively, under each such
respective Plan, as of December 31, 1997.
(c) QUALIFICATION OF PLANS AND OTHER LIABILITIES. Hilton shall be
responsible for all liabilities incurred by Hilton or Park Place as a result
of any failure of the Hilton 401(k) Plan or the Retirement Plan to be
qualified under Section 401(a) of the Code, or any other liability which
might be incurred with respect to such Plans (including, without limitation,
all liabilities relating to or arising out of claims made by or on behalf of
participants therein for, or with respect to, benefits under such Plan), with
respect to Hilton Individuals, and Park Place shall be responsible for all
liabilities incurred by Hilton or Park Place as a result of any such failure
or other liability (including, without limitation, all liabilities relating
to or arising out of claims made by or on behalf of participants therein for,
or with respect to, benefits under such Plan) with respect to Park Place
Individuals. Notwithstanding the foregoing, to the extent that any
liabilities incurred by Hilton or Park Place as a result of any failure of
the Hilton 401(k) Plan or the Retirement Plan to be qualified under Section
401(a) of the Code, or any other liability which might be incurred with
respect to such Plans (including, without limitation, all liabilities
relating to or arising out of claims made by or on behalf of participants
therein for, or with respect to, benefits under such Plan) are not directly
or indirectly attributable to either Hilton Individuals or Park Place
Individuals, then each of Hilton and Park Place shall be responsible for such
liabilities in a proportion based upon the ratios of the accrued benefits of
Hilton Individuals and of Park Place Individuals, respectively, under each
such respective Plan, as of December 31, 1997. The parties hereto agree that
to the extent any of them becomes aware that any such Plan fails or may fail
to be so qualified, it shall notify the other party and the parties shall
cooperate and use best efforts to avoid such disqualification, including
using the Internal Revenue Service's Employee Plans Compliance Resolution
System or similar programs, and taking any steps available pursuant to such
program to avoid disqualification, as determined by the party who is made
responsible under this Section 4.2(c) for the liabilities that would result
from such disqualification (and the liabilities for which such party is
responsible shall include all costs and expenses resulting from such steps,
including fines, penalties, contributions, attorneys' fees and expenses and
administrative expenses).
ARTICLE V.
WELFARE AND OTHER BENEFITS
Section 5.1. HILTON MEDICAL/DENTAL PLANS.
(a) LIABILITY FOR CLAIMS.
(i) Except as otherwise provided herein, as of the Distribution
Date, Hilton shall assume or retain and shall be responsible for, or cause its
insurance carriers or HMOs to be responsible for, all liabilities and
obligations related to claims asserted or incurred or premiums owed as of and
after the Distribution Date in respect of any Hilton Individual under any Hilton
Medical/Dental Plan and claims asserted or incurred or premiums due after the
Distribution Date in respect of any Hilton Individual under any Hilton
Medical/Dental Plan, and Park Place shall have no liability or obligation with
respect thereto.
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(ii) Except as otherwise provided herein, as of the Distribution
Date, Park Place shall assume or retain and shall be responsible for, or cause
its insurance carriers or HMOs to be responsible for, all liabilities and
obligations related to claims asserted or incurred or premiums owed as of and
after the Distribution Date in respect of any Park Place Individual under any
Hilton Medical/Dental Plan and claims asserted or incurred or premiums due after
the Distribution Date in respect of any such Park Place Individual under any
Hilton Medical/Dental Plan or any Park Place Medical/Dental Plan, and Hilton
shall have no liability or obligation with respect thereto.
(b) CONTINUATION COVERAGE ADMINISTRATION. As of the Distribution
Date, Hilton shall retain and shall be solely responsible for, or cause its
insurance carriers or HMOs to be responsible for, providing and administering
the continuation coverage required by COBRA as it relates to any Hilton
Qualified Beneficiary, and Park Place shall have no liability or obligation
with respect thereto. As of the Distribution Date, Park Place shall retain
and shall be solely responsible for, or cause its insurance carriers or HMOs
to be responsible for, providing and administering the continuation coverage
required by COBRA as it relates to any Park Place Qualified Beneficiary, and
Hilton shall have no liability or obligation with respect thereto.
(c) CONTINUATION COVERAGE CLAIMS. As of the Distribution Date,
Hilton shall assume or retain and shall be responsible for, or cause its
insurance carriers or HMOs to be responsible for, all liabilities and
obligations in connection with claims asserted or incurred or premiums owed
through the Distribution Date under any Hilton Medical/Dental Plan in respect
of any Hilton Qualified Beneficiary and claims asserted or incurred or
premiums owed after the Distribution Date under any Hilton Medical/Dental
Plan in respect of any Hilton Qualified Beneficiary, and Park Place shall
have no liability or obligation with respect thereto. As of the Distribution
Date, Park Place shall assume or retain and shall be responsible for, or
cause its insurance carriers or HMOs to be responsible for, all liabilities
and obligations in connection with claims asserted or incurred or premiums
owed through the Distribution Date under any Hilton Medical/Dental Plan in
respect of any Park Place Qualified Beneficiary and claims asserted or
incurred or premiums owed after the Distribution Date under any Hilton
Medical/Dental Plan or any Park Place Medical/Dental Plan in respect of any
Park Place Qualified Beneficiary, and Hilton shall have no liability or
obligation with respect thereto.
Section 5.2. PARK PLACE MEDICAL/DENTAL PLANS.
(a) ESTABLISHMENT OF PARK PLACE MEDICAL/DENTAL PLANS. On or prior
to the Distribution Date, Park Place shall take, or cause to be taken, all
action necessary and appropriate to establish and administer the Park Place
Medical/Dental Plans and to provide benefits thereunder for all Park Place
Individuals and Park Place Qualified Beneficiaries (with respect to
continuation coverage under COBRA only) who, immediately prior to the
Distribution Date, were participants in or otherwise entitled to benefits
under the Hilton Medical/Dental Plans. Each such individual shall, to the
extent applicable, for all purposes under the new Park Place Medical/Dental
Plans (i) have coverage which is substantially comparable to that provided
immediately prior to the Distribution Date, (ii) have no preexisting
condition limitation imposed other than that which is or was already imposed
under the applicable existing Plan and (iii) be
15
credited with or otherwise have taken into account, to the extent applicable,
Service Credits, any expenses incurred towards deductibles, out-of-pocket
limits, maximum benefit payments, and any benefit usage towards plan limits
credited to such individual as of the Distribution Date under the terms of
the applicable existing Plan as if such service had been rendered to Park
Place and as if such expenses and usage had originally been credited to such
individual under the Park Place Medical/Dental Plans.
(b) HILTON TO PROVIDE INFORMATION. As soon as practicable after
the Distribution Date, Hilton shall provide Park Place (with the cooperation
of Park Place to the extent that relevant information is in the possession of
Park Place, and in accordance with Section 8.2), with a list of Park Place
Individuals who were, to the best knowledge of Hilton, participants in or
otherwise entitled to benefits under the Hilton Medical/Dental Plans
immediately prior to the Distribution Date, together with a listing of each
such individual's Service Credit under such Plans and a listing of each such
individual's expenses incurred towards deductibles, out-of-pocket limits,
maximum benefit payments, and any benefit usage towards plan limits
thereunder. Hilton shall, as soon as practicable after the Distribution
Date, in accordance with Section 8.2, provide Park Place with such additional
information in the possession of Hilton (and not already in the possession of
Park Place) as may be reasonably requested by Park Place and necessary for
Park Place to establish and administer effectively any Park Place
Medical/Dental Plan.
Section 5.3. VACATION AND SICK PAY LIABILITIES.
(a) DIVISION OF LIABILITIES. Effective on the Distribution Date,
(i) Hilton shall retain and shall be responsible for all accrued liabilities
(whether vested or unvested, and whether funded or unfunded) for vacation and
sick leave in respect of all Hilton Individuals as of the Distribution Date
and (ii) Park Place shall assume and shall be responsible for all accrued
liabilities (whether vested or unvested, and whether funded or unfunded) for
vacation and sick leave in respect of all Park Place Individuals as of the
Distribution Date. From and after the Distribution Date, (x) Hilton shall be
solely responsible for the payment to Hilton Individuals of vacation or sick
leave accrued after the Distribution Date and (y) Park Place shall be solely
responsible for the payment to Park Place Individuals of vacation or sick
leave accrued after the Distribution Date.
(b) POST-DISTRIBUTION TRANSFERS. For a period of 90 days after
the Distribution Date, an Employee who leaves the service of one party to
immediately begin employment with the other party (i.e., leaving Hilton
employment to work for Park Place, or leaving Park Place employment to work
for Hilton) shall be provided by the successor employer with the same balance
of vested and unvested vacation and sick leave hours as had been accrued by
the former Employer through such termination date. The former Employer shall
promptly notify the successor Employer in writing of the occurrence of any
termination subject to the provisions of this Section 5.3(b), and the former
Employer shall make a payment to the successor Employer within thirty (30)
days of the aforesaid termination date in an amount equal to the value of the
terminating Employee's vested balance of vacation leave and sick leave
accrued by the former Employer through such termination date, based on the
Employee's final rate of pay with the
16
former Employer. No payment shall be made by the former Employer to the
successor Employer for any unvested sick leave or vacation leave balance
relating to any post-Distribution transfer which occurs within or after the
90-day period referred to above.
Section 5.4. PAYROLL REPORTING AND WITHHOLDING.
(a) FORM W-2 REPORTING. Hilton and Park Place may adopt the
"alternative procedure" for preparing and filing IRS Forms W-2 (Wage and Tax
Statements), as described in Section 5 of Revenue Procedure 84-77, 1984-2 IRS
Cumulative Bulletin 753 ("REV. PROC. 84-77"). Under this procedure Park
Place as the successor employer shall provide all required Forms W-2 to all
Park Place Individuals reflecting all wages paid and taxes withheld by both
Hilton as the predecessor and Park Place as the successor employer for the
entire year during which the Distribution takes place. Hilton shall provide
all required Forms W-2 to all Hilton Individuals reflecting all wages and
taxes paid and withheld by Hilton before and after the Distribution Date.
In connection with the aforesaid agreement under Rev. Proc. 84-77,
each business unit or business operation of Hilton shall be assigned to either
Hilton or Park Place, depending upon whether it is a Hilton Retained Business or
a Park Place Business, and each Hilton Individual or Park Place Individual
associated with such business unit or business operation shall be assigned for
payroll reporting purposes to Hilton or Park Place, as the case may be. Hilton
and Park Place shall be responsible for filing IRS Forms 941 for their
respective Employees.
(b) FORMS W-4 AND W-5. Hilton and Park Place may adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms
W-4 (Employee's Withholding Allowance Certificate) and W-5 (Earned Income
Credit Advance Payment Certificate). Under this procedure Hilton shall
provide to Park Place all IRS Forms W-4 and W-5 on file with respect to each
Park Place Individual, and Park Place will honor these forms until such time,
if any, that such Park Place Individual submits a revised form.
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, AND WAGE
ASSIGNMENTS. With respect to garnishments, tax levies, child support orders,
and wage assignments in effect with Hilton on the Distribution Date, Park
Place shall honor such payroll deduction authorizations with respect to Park
Place Individuals and will continue to make payroll deductions and payments
to the authorized payee, as specified by the court or governmental order
which was filed with Hilton on or before the Distribution Date, and Hilton
will continue to make such payroll deductions and payments to authorized
payees with respect to Hilton Individuals. Hilton shall, as soon as
practicable after the Distribution Date, in accordance with Section 8.2,
provide Park Place with such information in the possession of Hilton (and not
already in the possession of Park Place) as may be reasonably requested by
Park Place and necessary for Park Place to make the payroll deductions and
payments to the authorized payee as required by this subsection (c).
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS. Unless otherwise
prohibited by this or another agreement entered into in connection with the
Distribution, or by a Plan document, with respect to Park Place Individuals
with authorizations for payroll deductions in
17
effect with Hilton on the Distribution Date, Park Place will honor such
payroll deduction authorizations relating to each Park Place Individual, and
shall not require that such Park Place Individual submit a new authorization
to the extent that the type of deduction by Park Place does not differ from
that made by Hilton. Such deduction types include, without limitation:
contributions to any Plan; scheduled loan repayments to any Plan or to an
employee credit union; and direct deposit of payroll, bonus advances, union
dues, employee relocation loans, and other types of authorized company
receivables usually collectible through payroll deductions. Hilton shall, as
soon as practicable after the Distribution Date, in accordance with Section
8.2, provide Park Place with such information in the possession of Hilton
(and not already in the possession of Park Place) as may be reasonably
requested by Park Place and necessary for Park Place to honor the payroll
deduction authorizations contemplated by this subsection (d).
Section 5.5. POST-RETIREMENT WELFARE BENEFITS. As of the Distribution
Date, Hilton shall assume or retain and shall be responsible for, or cause
its insurance carriers or HMOs to be responsible for, all liabilities and
obligations related to claims asserted or incurred or premiums owed as of and
after the Distribution Date for post-retirement medical or life benefits in
respect of any Hilton Individual under any Plan and claims asserted or
incurred or premiums due after the Distribution Date in respect of any Hilton
Individual under any such Plan, and Park Place shall have no liability or
obligation with respect thereto. As of the Distribution Date, Park Place
shall assume or retain and shall be responsible for, or cause its insurance
carriers or HMOs to be responsible for, all liabilities and obligations
related to claims asserted or incurred or premiums owed as of and after the
Distribution Date for post-retirement medical or life benefits in respect of
any Park Place Individual under any Plan and claims asserted or incurred or
premiums due after the Distribution Date in respect of any Park Place
Individual under any such Plan, and Hilton shall have no liability or
obligation with respect thereto.
ARTICLE VI.
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
agreement between Hilton and Park Place to the contrary, Hilton and Park Place
understand and agree that:
Section 6.1. SEPARATE EMPLOYERS. On and after the Distribution Date
and the separation of Employees into their respective companies, Hilton and
Park Place will be separate and independent employers.
Section 6.2. EMPLOYMENT POLICIES AND PRACTICES. Subject to the
provisions of ERISA and the provisions herein governing post-Distribution
transfers, and except as limited by applicable law or agreement, Hilton and
Park Place may adopt, continue, modify or terminate such employment policies,
compensation practices, retirement plans, welfare benefit plans, and other
employee benefit plans of any kind or description, as each may determine, in
its sole discretion, are necessary or appropriate.
Section 6.3. COLLECTIVE BARGAINING AGREEMENTS. With regard to
Employees covered by a Collective Bargaining Agreement on the Distribution
Date who are Retained Employees or become Park Place Employees, Hilton and
Park Place promise and covenant to each other not to
18
take any action which disrupts or otherwise negatively impacts the labor
relations of the other. Hilton and Park Place will diligently work to
substitute the appropriate employer for Hilton in Collective Bargaining
Agreements with respect to Transferred Employees.
Section 6.4. NOTICE OF CLAIMS. Without limitation to the scope and
application to each party in the performance of its duties herein, each party
hereto will notify in writing and consult with the other party prior to
making any settlement of an employee claim, for the purpose of avoiding any
prejudice to such other party arising from the settlement.
Section 6.5. ASSUMPTION OF UNEMPLOYMENT TAX RATES. Changes in state
unemployment tax experience from that of Hilton as of the Distribution Date
shall be handled as follows. In the event an option exists to allocate state
unemployment tax experience of Hilton, the Hilton experience shall be
transferred to Park Place if this results in the lowest aggregate
unemployment tax costs for both Hilton and Park Place combined, and the
Hilton experience shall be retained by Hilton if this results in the lowest
aggregate unemployment tax costs for Hilton and Park Place combined.
Section 6.6. EMPLOYEES ON LEAVE OF ABSENCE. After the Distribution
Date, Park Place shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Park Place Business. After the
Distribution Date, Hilton shall assume responsibility, if any, as employer
for all Employees returning from an approved leave of absence who prior to
the Distribution Date were not employed in a Park Place Business.
Section 6.7. RELEASE AND SEPARATION AGREEMENTS. Effective as of the
Distribution Date, Hilton shall assume all obligations and liabilities for,
and arising under those Release and Separation Agreements with respect to
Hilton Individuals, and Park Place shall have no liability or obligation with
respect thereto. Effective as of the Distribution Date, Park Place shall
assume all obligations and liabilities for and arising under those Release
and Separation Agreements with respect to Park Place Individuals, and Hilton
shall have no liability or obligation with respect thereto.
ARTICLE VII.
NON-U.S. PLANS
Section 7.1. NON-U.S. PLANS GENERALLY. As soon as practicable after
the date of this Agreement, the parties hereto shall enter into one or more
agreements or memoranda of understanding (collectively, the "FOREIGN PLANS
AGREEMENT") regarding the treatment and allocation of liabilities relating to
or arising under the CIRP and all other Plans (the "FOREIGN PLANS") for
Employees located outside the United States, including without limitation
expatriates, and to expatriate Employees located in the United States. The
Foreign Plans Agreement shall provide for the treatment of each Foreign Plan,
which treatment may include, without limitation, (a) the retention or
assumption of such Foreign Plan by Hilton, (b) the retention or assumption of
such Foreign Plan by Park Place or (c) an allocation of the liabilities and
assets of the Foreign Plan between a Plan (which may include the Foreign
Plan) that is intended to be maintained by Hilton and a Plan (which may
include the Foreign Plan) that is intended to be maintained by Park
19
Place, after the Distribution Date. Any transfers of assets or liabilities
from a Foreign Plan shall be made on the basis of reasonable methods and
assumptions determined by the local actuarial firm that is, as of the date of
this Agreement, serving as the actuary for such Foreign Plan (or another
actuarial firm if the parties hereto so agree) (the "LOCAL ACTUARY"), in
accordance with applicable legal and regulatory requirements, local practice
and the past practice of Hilton; PROVIDED that, each of Hilton and Park Place
shall be entitled to review such methods and assumptions and object to them
if they are unreasonable, and to review all calculations and determinations
of the Local Actuary for accuracy.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall
be deemed or construed by the parties hereto or any third party as creating
the relationship of principal and agent, partnership or joint venture between
the parties hereto, it being understood and agreed that no provision
contained herein, and no act of the parties hereto, shall be deemed to create
any relationship between such parties other than the relationship set forth
herein.
Section 8.2. ACCESS TO INFORMATION; COOPERATION. Hilton and Park
Place and their authorized agents shall be given reasonable access to and may
take copies of all information relating to the subjects of this Agreement (to
the extent permitted by federal and state confidentiality laws) in the
custody of the other party, including any agent, contractor, subcontractor,
agent or any other person or entity under the contract of such party. The
parties hereto shall provide one another with such information within the
scope of this Agreement as is reasonably necessary to administer each party's
Plans. The parties hereto shall cooperate with each other to minimize the
disruption caused by any such access and providing of information.
Section 8.3. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party hereto and any purported transfer without
such consent shall be void.
Section 8.4. HEADINGS. The section and paragraph headings and table
of contents contained herein are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
Section 8.5. SEVERABILITY. If any provision set forth in this
Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of its being too extensive in any respect, such
provision shall be interpreted to have the broadest application as shall be
enforceable. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the validity of the other provisions
hereof, which shall continue in full force and effect.
Section 8.6. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
20
(a) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Except as specifically provided herein, this Agreement is for the sole and
exclusive benefit of the parties hereto and nothing herein is intended to give
or shall be construed to give to any person or entity other than the parties
hereto any rights or remedies hereunder.
(b) No provision of this Agreement shall create any third party
beneficiary rights in any Employee, any beneficiary or dependent thereof, or any
collective bargaining representative thereof, with respect to the compensation,
terms and conditions of employment and benefits that may be provided to any
Employee by either party hereto or under any Plan which a party may maintain.
(c) Nothing contained in this Agreement shall confer upon any
Employee any right with respect to continuance of employment by either party
hereto, nor shall anything herein interfere with the right of either party
hereto to terminate the employment of any Employee at any time, with or without
cause, or restrict a party in the exercise of its independent business judgment
in modifying any of the terms and conditions of the employment of an Employee,
except as provided by applicable law.
Section 8.7. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to
be given and effective (a) upon delivery if delivered in person or by
courier, (b) when sent by electronic transmission (telegraph, telex, telecopy
or facsimile transmission), receipt confirmed, (c) five days after being sent
by airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall
be delivered to the addresses of each party hereto as follows, or to such
other persons or addresses as may be designated in writing by the party to
receive such notice:
(a) if to Hilton:
Hilton Hotels Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to Park Place:
Park Place Entertainment Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
____________________________
____________________________
____________________________
Attn: _______________________
Fax: ________________________
Section 8.8. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further
actions as may be reasonably required or desirable to carry out the
provisions hereof and to consummate the transactions contemplated hereby.
Section 8.9. WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to effect the transactions contemplated herein are for
the sole benefit of such party. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 8.10. GOVERNING LAW. This Agreement shall be deemed to be made
in and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 8.11. PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS.
Except as otherwise expressly provided herein, no provisions of this
Agreement, including, without limitation, the agreement of Hilton or Park
Place to make a contribution or payment to or under any Plan referred to
herein for any period, shall be construed as a limitation on the right of
Hilton or Park Place to amend such Plan or terminate its participation
therein which Hilton or Park Place would otherwise have under the terms of
such Plan or otherwise, and no provision of this Agreement shall be construed
to create a right in any employee or former employee, or dependent or
beneficiary of such employee or former employee under a Plan which such
person would not otherwise have under the terms of the Plan itself; PROVIDED,
HOWEVER, that neither party shall amend any Plan to the extent that such
amendment would have the effect of increasing the liabilities of the other
party under any Plan of the other party, without such other party's consent.
Section 8.12. ENTIRE AGREEMENT. This Agreement, the Distribution
Agreement and all other Ancillary Agreements constitute the entire
understanding between the parties hereto, and
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supersede all prior written or oral communications, relating to the subject
matter covered by said agreements. To the extent that the terms of this
Agreement and similar terms of the Distribution Agreement are in conflict,
the interpretation given to the conflicting terms of the Distribution
Agreement shall govern the interpretation and performance of this Agreement.
No amendment, modification, extension or failure to enforce any condition of
this Agreement by either party shall be deemed a waiver of any of its rights
herein.
Section 8.13. COUNTERPARTS. This Agreement and any amendments hereto
may be executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
Section 8.14. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Distribution Date.
Section 8.15. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated
by Section 9.14 of the Distribution Agreement, including Section 9.14(c)
thereof regarding the parties' ability to seek specific performance or
injunctive relief, and including the attorneys' fees provisions referred to
therein.
Section 8.16. REIMBURSEMENT. Hilton and Park Place acknowledge that
Hilton, on the one hand, and Park Place, on the other hand, may incur costs
and expenses, including, but not limited to, contributions to Plans and the
payment of insurance premiums arising from or related to any of the Plans
which are, as set forth in this Agreement, the responsibility of the other
party hereto. Accordingly, Hilton and Park Place shall reimburse each other,
as soon as practicable, but in any event within thirty (30) days of receipt
from the other party hereto of appropriate verification, for all such costs
and expenses.
Section 8.17. DEFAULT. In the event of a material default by either
party hereunder, the non-defaulting party shall be entitled to all remedies
provided by law or equity (including reasonable attorneys' fees and costs of
suit incurred).
Section 8.18. FORCE MAJEURE. Hilton and Park Place shall incur no
liability to each other due to a default under the terms and conditions of
this Agreement resulting from fire, flood, war, strike, lock-out, work
stoppage or slow-down, labor disturbances, power failure, major equipment
breakdowns, construction delays, accident, riots, acts of God, acts of United
States' enemies, laws, orders or at the insistence or result of any
governmental authority or any other delay beyond each other's reasonable
control.
Section 8.19. ATTORNEY/CLIENT PRIVILEGE. The provisions herein
requiring either party hereto to cooperate shall not be deemed to be a waiver
of the attorney/client privilege for either party hereto nor shall it require
either party to waive its attorney/client privilege.
Section 8.20. SPECIFIC PERFORMANCE. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that
any party by whom this Agreement is
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enforceable shall be entitled to specific performance in addition to any
other appropriate relief or remedy. Such party may, in its sole discretion,
apply to a court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable laws, each party waives any objection to the
imposition of such relief.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
HILTON HOTELS CORPORATION,
a Delaware corporation
By:
-------------------------------
Name:
Title:
PARK PLACE ENTERTAINMENT CORPORATION,
a Delaware corporation
By:
--------------------------------
Name:
Title:
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