Document:

Exhibit 10.30

 

EMPLOYMENT
AGREEMENT

 

AMENDED AND RESTATED
AGREEMENT by and between Hilton Hotels Corporation, a Delaware corporation (the
“Company”), and Stephen F. Bollenbach (the “Executive”), dated November 11,
2004, as amended on January 27, 2005, but effective as of January 1,
2005, except as specifically provided otherwise herein.

 

WHEREAS, the Executive
and the Company entered into an Employment Agreement dated as of March 9,
2000 (the “Employment Agreement”);

 

WHEREAS, the Executive
and the Company also entered into a letter agreement dated May 23, 2002,
pursuant to which the Executive was to provide consulting services (the “Consultancy”)
to the Company following his retirement at the end of the term of the
Employment Agreement (the “Consulting Agreement”);

 

WHEREAS, the Board of
Directors of the Company (the “Board”) has determined that it is in the best
interests of the Company and its shareholders to continue to employ the
Executive as  Chief Executive Officer
beyond the expiration of the Employment Agreement and to delay the commencement
of the Consultancy, and the Executive desires to continue to serve as Chief
Executive Officer and thereafter provide services as a consultant, all on the
terms and conditions set forth below;

 

WHEREAS, the Board desires
to amend the Employment Agreement to set forth the Executive’s compensation
during the new term of employment, to incorporate the terms of the Consultancy
into this Employment Agreement and to permit the Executive to diversify his
stock holdings in the Company in light of his expected retirement from the
Company on the Retirement Date (as hereinafter defined);

 

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NOW, THEREFORE, IT IS
HEREBY AGREED THAT THE EMPLOYMENT AGREEMENT SHALL BE AMENDED AND RESTATED,
EFFECTIVE AS OF JANUARY 1, 2005, TO READ AS FOLLOWS:

 

1.                                       Employment
and Consulting Periods.

 

(a)                                  The
Company shall continue to employ the Executive, and the Executive shall serve
the Company, on the terms and conditions set forth in this Employment Agreement,
for the period (the “Employment Period”) beginning on January 1, 2005 (the
“Commencement Date”) and ending on December 31, 2007, unless sooner
terminated pursuant to Section 4 below (the “Term”).  Upon the expiration of the Term, and subject
to subparagraph (b) below, the Executive shall retire and the Executive’s
employment by the Company shall not be further extended.  The Executive’s “Retirement Date” will be December 31,
2007 for purposes of the Company’s benefit plans and programs and the supplemental
retirement benefit provided in Section 3(i) below.

 

(b)                                 Upon
the termination of the Executive’s employment, the Consultancy will commence
and the Company will engage the Executive as a consultant to the Executive’s
successor and the Board through the day before the fifth anniversary of the
date of such termination of employment (the “Consulting Period”).  Notwithstanding the foregoing, the Consulting
Period will end, and the Company shall have no further obligation to make any
payments to the Executive under subsection 3(k), in the event that the
Executive shall materially breach his obligations to the Company under Section 8
below.

 

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2.                                       Position
and Duties.

 

(a)                                  During
the Employment Period, the Executive shall continue to be employed as the Chief
Executive Officer of the Company and, when applicable, the Company shall cause
the Executive to be reelected as a member of the Board.  In his executive capacity, the Executive
shall report to the Board.  During the
Employment Period, the Executive shall have authority to make all executive
decisions, plan the strategic direction of the Company, and hire, promote and
terminate the employment of all personnel, subject to the direction of the
Board.  During the Employment Period, the
Executive shall have such reasonable and customary powers as are generally
associated with the position of Chief Executive Officer, including, without
limitation, authority to expend capital resources of the Company and shall have,
subject to the direction of the Board, authority to fill all management
positions.

 

(b)                                 During
the Consulting Period, the Executive will perform such consulting services as
may reasonably be requested of the Executive by the new CEO or the Board but
such services will not be in excess of 20 hours per
month and will be designed so as not to interfere with any other business
obligations of the Executive.

 

(c)                                  If,
during the Employment Period, Barron Hilton shall cease to serve as Chairman of
the Board for any reason, the Company shall cause the Executive thereupon to be
elected as Chairman of the Board in addition to the position of Chief Executive
Officer and shall, as Chairman, report directly to the Board.

 

(d)                                 During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive shall devote principal attention
and time during normal business hours to the business and affairs of the
Company and, to the extent

 

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necessary to discharge
the responsibilities assigned to the Executive under this Employment Agreement,
use the Executive’s reasonable best efforts to carry out such responsibilities
faithfully and efficiently. 
Notwithstanding the foregoing, nothing in this Employment Agreement
shall be construed to limit the ability of the Executive from providing
services to the entity which holds the Company’s former gaming operations.  It shall not be considered a violation of the
foregoing for the Executive to (A) serve on corporate, civic or charitable
boards or committees (excluding those which would create a conflict of
interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this
Employment Agreement.

 

(e)                                  The
Executive’s services shall be performed primarily at the Company’s Headquarters
in Beverly Hills, California.

 

3.                                       Compensation.

 

(a)                                  Base
Salary.  During the Employment
Period, the Executive shall receive an annual base salary (“Annual Base Salary”)
of $1,000,000, payable in accordance with the regular payroll practices of the
Company.

 

(b)                                 Bonuses.

 

(1)                                  Signing Bonus.  In
consideration for the Executive’s agreement to enter into this amended and
restated Employment Agreement, the Company shall establish a book entry account
to which it shall credit as of January 2, 2005 a one-time non-recurring
signing bonus of $193,194.

 

(2)                                  Annual Bonus.  In
addition to the Annual Base Salary, the

 

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Executive shall be
eligible to earn, for each fiscal year ending during the Employment Period, an
annual bonus (the “Annual Bonus”), pursuant to the Company’s annual incentive
plan, with a target equal to 100% of Annual Base Salary and a maximum of 200%
of Annual Base Salary.

 

(3)                                  Special Bonus.  In
consideration for the Executive’s agreement to terminate the $10.0 million life
insurance arrangement set forth in subsection 3(j) of the Employment
Agreement prior to this amendment and restatement, and to release the Company
of its obligations to make the annual premium contributions to the Supplemental
Policy, as defined therein, the Executive shall be entitled, on the first
business day in January in each calendar year, beginning with 2005 and
through and including 2009, to receive from the Company a special annual bonus
of $137,830, regardless of whether the Executive is then still employed by, or
providing consulting services to, the Company. 
If the Executive is still an employee of the Company on, or was an
employee at any time within six months prior to, the date such bonus is due,
such amount shall be credited to a book entry account to be established by the
Company.  If the Executive has not been
an employee of the Company on any date that is six months prior to the date
such bonus is due, the Company shall pay such amount directly to the Executive
within a reasonable period (but not later than 10 business days) after it is
due.

 

(4)                                  Section 162(m) Deferrals.  That portion of any bonus to be paid to the
Executive during any taxable year of the Company which, when added to any otherwise
deductible compensation and benefits paid or provided to the Executive by the
Company during such taxable year, would not be deductible by the Company in the
taxable year such bonus is to be paid or accrued because of the applicable
limitations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), shall be deferred annually and paid to the Executive, in
a lump sum, on first

 

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date (the “Deferral Date”)
which is after (i) the last day of the Company’s taxable year in which the
Executive ceases to be a “covered employee,” within the meaning of Section 162(m)(3)
of the Code, and (ii) the date which is six months and one day after the date
on which the Executive’s employment terminated (except that this subclause (ii)
shall not apply if the Executive’s employment with the Company terminates due
to his death or “disability,” as defined in Section 409A of the Code).

 

(5)                                  Earnings on Deferrals. 
Except as otherwise provided below, any amounts of bonus deferred or
amounts credited to a book entry account, as provided above, shall be credited,
from the date it would otherwise have been paid to the date the deferred
amounts are paid, with interest at a floating rate equal to the rate which
Morgan Guaranty announces from time to time as its prime lending rate, as in
effect from time to time, compounded quarterly, and such accrued interest shall
be paid to the Executive on the Deferral Date (said deferred bonus and credited
amounts plus interest collectively referred to as the “Deferred Compensation”).  Notwithstanding the foregoing, the Executive
may elect, prior to the end of each calendar year for which a bonus is
deferred, to have all or any portion of the Deferred Compensation to be credited
for that year treated as though invested in shares of the Company’s common
stock, on a book entry account basis. 
Such Deferred Compensation shall be deemed to be used to purchase such
shares on the date the bonus would otherwise have been paid, based on the
average of the high and low trading prices of the stock on such day.  The number of shares credited to the
Executive’s account  under this
subparagraph (5) shall be adjusted to reflect any changes to the Company’s
capital structure in the same manner as if shares were actually issued to the
Executive on the day the bonus would otherwise have been paid.  The Company shall also credit the Executive’s
account with additional amounts equivalent to any 

 

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and all dividends or
distributions paid on its shares of common stock (on the same basis as though
such shares had been outstanding on the record date for such dividend or
distribution), with any such dividends or distributions deemed invested in additional
shares of the Company’s common stock based on the average of the high and low
trading prices of the stock on the day the dividend or distribution is payable
to shareholders of the Company.

 

(6)                                  Distribution of Deferred Compensation.  The Deferred Compensation shall be paid on
the Deferral Date by wire transfer to an account designated by the Executive
prior to the Deferral Date (or by transfer of shares of common stock to the
extent of the account referred to in subparagraph (5)).

 

(c)                                  Other
Benefits.  During the Employment
Period: (i) the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs of the Company
to at least the same extent as other senior executives of the Company, provided
that the Executive’s right to receive additional grants after the date hereof
under any long-term incentive plans shall be solely as specified in this
Employment Agreement; and (ii) the Executive and/or the Executive’s family, as
the case may be, shall be eligible for participation, and shall receive all
benefits under, all welfare benefit plans, practices, policies and programs
provided by the Company (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life insurance, group life
insurance, accidental death and travel accident insurance plans and programs)
to at least the same extent as other senior executives of the Company.

 

(d)                                 Expenses.
During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in carrying
out the Executive’s duties under this Employment Agreement, provided that the
Executive complies with

 

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the generally applicable
policies, practices and procedures of the Company for submission of expense
reports, receipts, or similar documentation of such expenses.

 

(e)                                  Fringe
Benefits and Air Travel.  During the
Employment Period, the Executive shall be entitled to fringe benefits and
perquisites in accordance with the most favorable plans, practices, programs
and policies of the Company as in effect at the time with respect to other
senior executives of the Company, including, without limitation, the use of an automobile
and payment of related expenses; and first-class travel accommodations on all
commercial carriers for travel related to the business of the Company.  The Executive shall also be entitled to
unrestricted, but not exclusive, use of the Company’s aircraft (leased or
owned); provided, however, that if the Executive uses the Company’s aircraft
for his personal purposes, he shall incur the Federal, state and local income
tax consequences for the value of such usage, as determined in accordance with
the Company’s cost determination methodology applied to the Company’s senior
executives with respect to their personal use of the Company’s aircraft.

 

(f)                                    Office
and Support Staff.  During the
Employment Period, the Executive shall be entitled to his current office at the
Company’s Beverly Hills Headquarters, and to secretarial and other assistance,
at least equal to the most favorable of such as provided with respect to other
senior executives of the Company. 
Without limiting the generality of the foregoing, during the Employment
Period, the Executive shall at all times have a personal secretary and a
personal assistant.

 

(g)                                 Vacation.  During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation annually.

 

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(h)                                 Stock
Options:

 

(i)                                     Prior Option Grants.

 

1.                                       On
December 31, 1998 (the “Incentive Option Grant Date”), the Executive was
granted, inter alia, non-statutory stock options
(the “Incentive Option”) under the Company’s 1996 Stock Incentive Plan, as
amended (the “Old Stock Plan”) covering 2,000,000 shares of the Company’s
common stock.  The exercise price of the
shares subject to the Incentive Option is $27.52676.  The Incentive Option is exercisable for 10
years except as otherwise specifically provided in this Employment
Agreement.  The Incentive Option shall
vest and become exercisable on the date that is 9 years and 9 months following
the Incentive Option Grant Date if the Executive continues in the employment of
the Company through such date. 
Notwithstanding the foregoing, all shares subject to the Incentive
Option shall vest and become exercisable upon the occurrence of any of the
following events (each of (A), (B) and (C) below a “Triggering Event”):

 

(A)                              termination
of the Executive’s employment by the Company other than for Cause, as defined
below;

 

(B)                                termination
of the Executive’s employment because of death or Disability;

 

(C)                                termination
of employment by the Executive for Good Reason, as defined below;

 

(D)                               retirement
of the Executive on the Retirement Date; or

 

(E)                                 a
Change of Control, as defined in the Old Stock Plan;

 

provided that if the
Executive shall have materially breached the terms of the covenants contained
in Section 8 below (i) on or prior to the Triggering Event, the Incentive
Options shall not vest and become exercisable or (ii) after the Triggering
Event, any portion of such Incentive Option that shall

 

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have not been exercised
shall cease to be exercisable; it being understood that such vesting and
exercisability are part of the consideration for the Executive’s undertakings
under Section 8.

 

2.                                       If
a Triggering Event occurs, any portion of the Incentive Option that has become
vested on or before the date of such Event (including without limitation, any
portion that becomes exercisable due to such Triggering Event) shall remain
exercisable until December 30, 2008. 
All non-vested portions of the Incentive Option shall immediately
terminate.

 

3.                                       The
Executive may assign the right to exercise the Incentive Option to his spouse,
children, grandchildren, or parents of a recipient, to trusts for the benefit
of the Executive’s immediate family, to a family partnership or limited
liability company designated by the Executive in which the Executive’s family
members are the only partners or shareholders or to an entity exempt from
federal income tax under Section 501(c)(3) of the Code.

 

4.                                       The
Incentive Option shall be subject to the terms of the Old Stock Plan in all
respects not described herein.

 

(ii)                                  New Option Grant.  In
each year of the Employment Period (but subject to the Executive’s continued
employment through the applicable grant date), the Executive shall be granted,
at the same time each year as grants are made generally to other executives, a
stock option covering 400,000 shares (each, a “New Option”) of the Company’s
common stock under the Company’s 2004 Equity Compensation Plan (the “New Stock
Plan”).  The exercise price of the shares
subject to each New Option shall be the fair market value of a share on the
date of grant of such New Option (each, a “New Option Grant Date”).  Each New Option shall become exercisable upon
the earlier of (i) the Retirement Date and (ii) the date on which a Triggering
Event (including a Change of Control, but as defined in the New Plan) occurs,
but in either case only if the Executive is

 

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continuously employed by
the Company through the earlier of such dates. 
Once exercisable, each New Option shall remain exercisable until March 31,
2013; provided, however, that any portion of each New Option that shall not
have been exercised shall cease to be exercisable on the date, if any, that the
Executive materially breaches his obligations under Section 8 below, it
being recognized that such vesting and exercisability are part of the
consideration for the Executive’s undertakings under Section 8.  The New Options shall be subject to the terms
of the New Stock Plan in all respects not described herein; provided, however,
that the provisions of subparagraph (i)(3) above shall also apply.

 

(iii)                               Performance Share Grant. 
In each year of the Employment Period (but subject to the Executive’s
continued employment through the applicable grant date), the Executive shall be
granted, at the same time each year as grants are made generally to other
executives, performance units (the “Performance
Shares”) under the New Stock Plan that equate, at “targeted performance,” to
140,000 shares of the Company’s common stock. 
The actual number of shares to be earned with respect to each such grant
shall be determined by the Compensation Committee of the Board based on the performance
goals established by the Compensation Committee with respect to performance share
grants to the Company’s other executive officers made at such time.  Each grant of Performance Shares shall vest
on the last day of the third year of the relevant performance period (even if
that date is after the Retirement Date) provided that the Executive is employed
until the Retirement Date.  In addition,
each grant of Performance Shares shall also vest upon the occurrence of a
Triggering Event (including a Change of Control, but as defined in the New Stock
Plan).  The Performance Shares shall be
subject to the terms of the New Stock Plan in all respects not described
herein.

 

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(iv)                              Release of Restrictions on Prior Option Shares.  Effective upon the execution of this
Agreement and in consideration for the Executive’s agreement to extend the
Employment Period, the Company hereby releases the Executive from the
restrictions imposed pursuant to an agreement, dated September 10, 2003,
between the Company and the Executive on his ability to resell certain shares
of common stock acquired upon the exercise of the stock options referenced in
such agreement.

 

(i)                                     Supplemental
Retirement Benefit.

 

(i)                                     Phantom
Share Interest.  Pursuant to the
terms of this Employment Agreement, as in effect prior to the amendment and
restatement hereof, the Executive elected to convert his right to receive the
joint and survivor annuity provided thereunder into a phantom interest in the
equivalent value of the Company’s common stock, resulting in a credit to a book
entry account for the Executive of 700,000 of its common shares.  By reason of such election, the Executive
shall be entitled to receive a distribution, on the Retirement Date, of 700,000
shares of common stock multiplied by his vested percentage.  As of the date of this amendment and
restatement of the Employment Agreement, the Executive is 80% vested in such
phantom interest.  The Executive shall
become fully vested in such interest on the earliest to occur of (i) June 30,
2005, (ii) the date, if any, on which a Change of Control (as defined below)
occurs, and (iii) the date, if any, on which the Executive’s employment is
terminated by the Company other than for Cause or due to his death or
disability, or by the Executive for Good Reason; provided that no additional
vesting shall occur under subclause (i) or (ii) above unless the Executive is
continuously employed by the Company through the date referred to therein.  Such distribution shall be made as soon as
practicable after the Retirement Date (or such later date(s) as the Executive
shall elect at least 13 months prior to the

 

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Retirement Date but in no
more than 10 annual installments); provided, however, that if the final 20%
portion of the phantom interest becomes vested after December 31, 2004,
the attributable distribution shall be made, irrespective of any election by
the Executive, on the later of (i) the last day of the Company’s taxable year
in which the Executive ceases to be a “covered employee,” within the meaning of
Section 162(m)(3) of the Code, and (ii) the date which is six months and
one day after the date on which the Executive’s employment terminated (except
that this subclause (ii) shall not apply if the Executive’s employment with the
Company terminates due to his death or “disability,” as defined in Section 409A
of the Code).  The number of shares
credited to the Executive’s account under this subparagraph shall be adjusted
to reflect any changes to the Company’s capital structure in the same manner as
if shares were actually issued to the Executive on March 9, 2000.  The Company shall also credit the Executive’s
account with additional amounts equivalent to any and all dividends or
distributions paid on its shares of common stock (on the same basis as though
such shares had been outstanding on the record date for such dividend or
distribution), with any such dividends or distributions deemed invested in
additional shares of the Company’s common stock based on the average of the
high and low trading prices of the stock on the day the dividend or
distribution is payable to shareholders of the Company.

 

(j)                                     Death
Benefit and Life Insurance.  During
the Employment Period, the Executive shall be entitled to a Company-provided
death benefit in the following amounts:

 

	
  Date
  of Death

  	
   

  	
  Amount of Benefit

  
	
   

  	
   

  	
   

  
	
  On or before June 30,
  2001

  	
   

  	
  $5.0 million

  
	
   

  	
   

  	
   

  
	
  After June 30,
  2001 and before July 1, 2002

  	
   

  	
  $4.0 million

  

 

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  After June 30,
  2002 and before July 1, 2003

  	
   

  	
  $3.0 million

  
	
   

  	
   

  	
   

  
	
  After June 30,
  2003 and before July 1, 2004

  	
   

  	
  $2.0 million

  
	
   

  	
   

  	
   

  
	
  After June 30,
  2004 and before July 1, 2005

  	
   

  	
  $1.0 million

  

 

The Company has purchased
for the Executive a $10.0 million face amount, last to die, variable life
insurance policy on the lives of the Executive and the Executive’s spouse (the “Supplemental
Policy”).  In light of the prohibition of
loans to executive officers under the Sarbanes-Oxley Act of 2002 and the
uncertainty of its application to split-dollar life insurance arrangements,
such as the Supplemental Policy, the Company and the Executive agree to
terminate the Supplemental Policy and the provisions of this Section as in
effect on March 9, 2000 (the “Split Dollar Arrangement”).  Under the Split Dollar Arrangement, the
Company retained an interest in the Supplemental Policy equal to the lesser of
the premiums the Company paid to the Supplemental Policy or the cash surrender
value of the Supplemental Policy.  The
parties now agree that the Executive shall take all actions necessary so as to
permit the Company to withdraw from the Supplemental Policy, by December 31,
2004, the maximum amount that may be withdrawn from the Supplemental Policy
without incurring any surrender charges or terminating the Supplemental Policy
and the Company shall take such withdrawal no later than January 31,
2005.  The date on which the Company’s
withdrawal from the Supplemental Policy shall be effected shall hereinafter be
referred to as the “Withdrawal Date.”  As
soon as practicable after the Withdrawal Date, the Executive shall pay to the
Company an amount equal to the cash surrender value remaining in the
Supplemental Policy as of the Withdrawal Date. 
The Split-Dollar Arrangement shall be terminated effective as of the
Withdrawal Date, with the effect that: (i) the Company shall release its
collateral interest in the cash

 

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surrender value of the
Supplemental Policy, (ii) the Company shall have no obligation to make any
premium contributions to the Supplemental Policy, and (iii) the Executive’s
designated trust shall have an unfettered ownership interest in the
Supplemental Policy.

 

(k)                                  Consulting
Fee, etc.  During the Consulting
Period, the Executive’s annual fee shall be $500,000, payable in quarterly
installments; provided, however, that the Company shall have the right, in its
sole discretion, at any time to pay the Executive the lump sum present value,
as reasonably determined by the Company, of the consulting fee or that portion
remaining due at the time of the payment. 
The Executive shall not be entitled to an annual bonus or any additional
grants of long term incentive compensation but shall be entitled to continued
health benefits, or, at the Company’s sole election, a tax equivalent bonus to
enable the Executive to purchase such benefits from the Company with the same
after-tax cost to the Executive as in effect for executives of the Company on
any relevant date; provided, however, that the right to health benefits shall
cease at the time, if any, that the Executive is eligible for reasonably
comparable health benefits, as determined by the Company, from any new
employment, consulting or other business arrangement.  However, except to the extent that the
Executive otherwise qualifies to receive any such benefit following his
employment by reason of his service to the Company as an employee prior to the
commencement of the Consulting Period, all other employee benefits,
perquisites, automobile allowances, use of the Company’s aircraft and fringe
benefits as well as holiday and vacation pay will cease on the Retirement
Date.  During the Consulting Period, the
Executive will also be entitled to office space appropriate to the Executive’s
status as a consultant to the new CEO and the Board and to a personal assistant
of the Executive’s choosing.

 

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4.                                       Termination
of Employment.

 

(a)                                  Death
or Disability.  The Executive’s
employment and the Employment Period shall terminate automatically upon the
Executive’s death during the Employment Period. 
The Company shall be entitled to terminate the Executive’s employment
because of the Executive’s Disability during the Employment Period.  “Disability” means that (i) the Executive has
been unable, for a period of 180 consecutive business days, to perform the
Executive’s duties under this Employment Agreement, as a result of physical or
mental illness or injury, and (ii) a physician selected by the Company or its
insurers, and acceptable to the Executive or the Executive’s legal
representative, has determined that the Executive’s incapacity is total and
permanent.  The Executive agrees to
reasonably cooperate with the Company in order to obtain its physician’s
evaluation of the Executive.  A
termination of the Executive’s employment by the Company for Disability shall
be communicated to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive (the “Disability
Effective Date”), unless the Executive returns to full-time performance of the
Executive’s duties, as determined by the Board, before the Disability Effective
Date.

 

(b)                                 By
the Company.

 

(i)                                     The
Company may terminate the Executive’s employment during the Employment Period
for Cause or without Cause.  “Cause”
means:

 

(A)                              the
willful and continued failure of the Executive substantially to perform the
Executive’s duties under this Employment Agreement (other than as a result of
physical or mental illness or injury), after the Board delivers to the
Executive a written demand for substantial performance that specifically
identifies the manner in which the Board believes that the Executive has not
substantially performed the Executive’s duties;

 

(B)                                illegal
conduct or gross misconduct by the Executive, in either case that is willful
and results in material and demonstrable damage to the business or reputation
of the Company; or

 

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(C)                                a
breach of the covenants or representations contained in Section 8.

 

(ii)                                  A
termination of the Executive’s employment for Cause shall be effected in
accordance with the following procedures. 
The Company shall give the Executive written notice (“Notice of
Termination for Cause”) of its intention to terminate the Executive’s
employment for Cause, setting forth in reasonable detail the specific conduct
of the Executive that it considers to constitute Cause and the specific
provision(s) of this Employment Agreement on which it relies, and stating the
date, time and place of the Special Board Meeting.  The “Special Board Meeting” means a meeting
of the Board called and held specifically for the purpose of considering the
Executive’s termination for Cause, that takes place not less than five and not
more than fifteen business days after the Executive receives the Notice of
Termination for Cause.  The Executive
shall be given an opportunity, together with counsel, to be heard at the
Special Board Meeting.  The Executive’s
termination for Cause shall be effective when and if a resolution is duly
adopted at the Special Board Meeting, stating that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in the Notice of
Termination for Cause, and such conduct constitutes Cause under this Employment
Agreement.

 

(c)                                  Good
Reason.

 

(i)                                     The
Executive may terminate employment for Good Reason or without Good Reason.  “Good Reason” means:

 

A.                                   the
assignment to the Executive of any duties inconsistent in any material respect
(in any respect, following a Change of Control) with paragraph (a) or, if
applicable, (b) of Section 2 of this Employment Agreement, or any other
action by the Company that

 

17

 

results in a material
diminution in the Executive’s position or authority, duty, titles,
responsibilities, or reporting requirements other than an action that is not
taken in bad faith and is remedied by the Company within 30 days after receipt
of written notice thereof from the Executive; provided, however, that the Executive
acknowledges that the appointment of a President of the Company and the
transition of duties to that individual, consistent with his position, shall
not be treated as a diminution of the Executive’s duties for this purpose.

 

B.                                     Any
material failure (any failure, following a Change of Control) by the Company to
comply with any provision of Section 3 of this Employment Agreement, other
than a failure that is not taken in bad faith and is remedied by the Company
within 30 days after receipt of written notice thereof from the Executive;

 

C.                                     any
requirement by the Company that the Executive’s services be rendered primarily
at a location or locations other than that provided for in paragraph (d) of Section 2
of this Employment Agreement, other than normal business travel;

 

D.                                    any
purported termination of the Executive’s employment by the Company for a reason
or in a manner not expressly permitted by this Employment Agreement; or

 

E.                                      any
failure by the Company to comply with paragraph (c) of Section 9 of this Employment
Agreement.

 

In addition, following a
Change of Control, a termination by the Executive for any reason during the
30-day period immediately following the first anniversary of the Change of
Control shall be deemed to be a termination for Good Reason for all purposes of
this Employment Agreement.

 

(ii)                                  A
termination of employment by the Executive for Good Reason shall be effectuated
by giving the Company written notice (“Notice of Termination for Good

 

18

 

Reason”) of the
termination, setting forth in reasonable detail the specific conduct of the
Company that constitutes Good Reason and the specific provision(s) of this
Employment Agreement on which the Executive relies.  A termination of employment by the Executive
for Good Reason shall be effective on the fifth business day following the date
when the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than 30 days after
the notice is given).

 

(iii)                               A
termination of the Executive’s employment by the Executive without Good Reason
shall be effected by giving the Company at least 10 business days’ advance
written notice of the termination.

 

(d)                                 Date
of Termination.  The “Date of Termination”
means the date of the Executive’s death, the Disability Effective Date, the
date the termination of the Executive’s employment by the Company for Cause or
by the Executive for Good Reason or without Good Reason, as the case may be, is
effective.

 

5.                                       Obligations
of the Company upon Termination.

 

(a)  By the Company Other Than for Cause, Death
or Disability or By the Executive for Good Reason.  If, during the Employment Period, the Company
terminates the Executive’s employment, other than for Cause or Disability or by
reason of the Executive’s death, or the Executive terminates employment for
Good Reason, the Company shall fulfill its obligations as to Base Salary under Section 3(a)
hereof for the balance of the Employment Period.  Fifty percent of such amounts shall be
consideration for the Executive’s undertaking not to breach the terms of the
covenants contained in Section 8 below. 
The Company shall also provide the Executive with all benefits due in
accordance with the terms of any applicable plans and programs of the Company
and 

 

19

 

shall also pay to the
Executive, in a lump sum in cash within 30 days after the Date of Termination,
the Executive’s accrued but unpaid cash compensation (the “Accrued Obligations”),
which shall equal the sum of (1) any portion of the Executive’s Annual Base
Salary through the Date of Termination that has not yet been paid, (2) an
amount representing the Annual Bonus for the year of termination based on
target, and multiplying that amount by a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365 (the “Annual Bonus Amount”); (3) the
Deferred Compensation and any other compensation previously deferred by the
Executive (together with any accrued interest or earnings thereon) that has not
yet been paid; and (4) any accrued but unpaid Annual Bonuses and vacation pay;
provided, however, that the Company’s obligation to make any payments under
this Section to the extent any such payment shall not have accrued as of
the day before the Date of Termination shall also be conditioned upon the
Executive’s execution, and non-revocation, of a written release, substantially
in the form attached hereto as Annex 1, (the “Release”), of any and all claims
against the Company and all related parties with respect to all matters arising
out of the Executive’s employment by the Company (other than any entitlements
under the terms of this Employment Agreement or under any other plans or
programs of the Company in which the Executive participated and under which the
Executive has accrued a benefit), or the termination thereof.

 

Notwithstanding the
foregoing, in the event payment is due to the Executive under this Section following
a Change of Control, then conditioned upon the Executive’s execution, and
non-revocation, of the Release and the Executive not breaching the terms of the
covenants contained in Section 8 below, the Executive, in lieu of the amounts
specified in the first sentence above, shall receive in a lump sum in cash
within 30 days after the Date of Termination equal to 3

 

20

 

multiplied by the sum of
the Executive’s Base Salary and the Annual bonus paid to the Employee for the
last full fiscal year (if any) ending during the Employment Period or, if
higher, the Annual Bonus paid to the Employee for the last full fiscal year
prior to the Change of Control.  Fifty
percent of such amount shall be consideration for the Executive’s undertaking
not to breach the terms of the covenants contained in Section 8
below.  In addition, the Executive shall
also be entitled in the case of the Deferred Compensation and any other
compensation previously deferred by the Executive, to a lump sum equal to all
amounts previously deferred (together with any accrued interest thereon) and
not yet paid by the Company, and any accrued vacation pay not yet paid by the
Company.  For the remainder of the
Employment Period, or such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits to the Employee and/or
the Employee’s family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3 of this Employment Agreement if the Employee’s employment had
not been terminated, including health insurance and life insurance, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its subsidiaries during the 90-day period immediately preceding
the date on which the Change of Control occurs or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families and for purposes of eligibility for retiree
benefits pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.

 

(b)                                 Death
or Disability.  If the Executive’s
employment is terminated by reason of the Executive’s death or Disability
during the Employment Period, the Company, in addition to fulfilling its
obligations under Section 3(a) hereof, shall pay the Accrued Obligations
to

 

21

 

the Executive or the
Executive’s estate or legal representative, as applicable, in a lump sum in
cash within 30 days after the Date of Termination, and the Company shall have
no further obligations under this Employment Agreement other than for any
entitlements under the terms any other plans or programs of the Company in
which the Executive participated and under which the Executive has accrued a
benefit.

 

(c)                                  Cause;
Other than for Good Reason.  If the
Executive’s employment is terminated by the Company for Cause during the
Employment Period, the Company shall pay the Executive the Annual Base Salary
through the Date of Termination, the amount of the Deferred compensation and
any other compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon), in each case to the extent not yet paid,
and the amount of any earned but unpaid Annual Bonuses and vacation pay, and
the Company shall have no further obligations under this Employment Agreement
other than for any entitlements under the terms any other plans or programs of
the Company in which the Executive participated and under which the Executive
has accrued a benefit.  If the Executive
voluntarily terminates employment during the Employment Period, other than for
Good Reason, the Company shall pay the Accrued Obligations to the Executive in
a lump sum in cash within 30 days of the Date of Termination, and the Company
shall have no further obligations under this Employment Agreement other than
for any entitlements under the terms any other plans or programs of the Company
in which the Executive participated and under which the Executive has accrued a
benefit.

 

6.                                       Non-exclusivity
of Rights.  Nothing in this
Employment Agreement shall prevent or limit the Executive’s continuing or
future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies for which the Executive may

 

22

 

qualify, nor, subject to Section 13,
shall anything in this Employment Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. 
Vested benefits and other amounts that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of, or any
contract or agreement with, the Company or any of its affiliated companies on
or after the Date of Termination shall be payable in accordance with such plan,
policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Employment Agreement.

 

7.                                       No
Mitigation.  In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Employment Agreement and such amounts shall not be reduced,
regardless of whether the Executive obtains other employment.

 

8.                                       Confidential
Information; Non-solicitation; Non-competition; No Conflict.  In exchange for the Company agreeing to
accelerated vesting and exercisability of the Incentive Option upon any of the
Triggering Events and the payment to the Executive of fifty percent of his Base
Salary under Section 3(a) hereof for the balance of the Employment Period
or fifty percent of the lump sum payment in lieu of Base Salary provided under Section 5
in the event of Executive’s termination of employment following a Change of
Control, the Executive agrees as follows:

 

(a)                                  The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data, customer information,
supplier information, cost and pricing information, marketing and sales
techniques, strategies and programs, computer programs and software and
financial information relating to the Company or any of its affiliated
companies and their respective businesses that the Executive obtains during the

 

23

 

Executive’s employment by
the Company or any of its affiliated companies and that is not public knowledge
(other than as a result of the Executive’s violation of this paragraph (a) of Section 8)
(“Confidential Information”).  The
Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after the Executive’s employment with the
Company, except in the good faith performance of his duties hereunder, with the
prior written consent of the Company or as otherwise required by law or legal
process.  In no event shall an asserted
violation of the provisions of this paragraph (a) of Section 8 constitute
a basis for deferring or withholding any amounts otherwise payable to the
Executive under this Employment Agreement.

 

(b)                                 Until
the later of (i) the end of the Consulting Period or (ii) the second
anniversary of the expiration or termination of the Executive’s employment with
the Company, the Executive will not, except with the prior written consent of
the Board, directly or indirectly, own, manage, operate, join, control, finance
or participate in the ownership, management, operation, control or financing
of, or be connected as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise with, or use or permit Executive’s
name to be used in connection with, any business or enterprise which is engaged
in any business that is competitive with any business or enterprise in which
the Company is engaged at the Date of Termination or expiration of the
Employment Period.  In addition, the
Executive agrees that he will not, for a period of two years after the
expiration or termination of the Executive’s employment with the Company,
without the prior written consent of the Company, whether directly or
indirectly, employ, whether as an employee, officer, director, agent,
consultant or independent contractor, or solicit the employment of, any
managerial or higher level person who is or at any time during the previous
twelve months was an employee, representative, officer or director of the
Company or any of its subsidiaries.

 

24

 

(c)                                  The
Executive represents to the Company that neither his continuation of employment
hereunder nor the performance of his duties hereunder conflicts with any
contractual commitment on his part to any third party or violates or interferes
with any rights of any third party.

 

(d)                                 The
Executive acknowledges and agrees that the restrictions contained in this Section are
reasonable and necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company, that the Company would not
have entered into this Employment Agreement in the absence of such restrictions
and that irreparable injury will be suffered by the Company should the
Executive breach any of those provisions. 
Executive represents and acknowledges that (i) the Executive has been
advised by the Company to consult Executive’s own legal counsel in respect of
this Employment Agreement, and (ii) that the Executive has had full
opportunity, prior to execution of this Employment Agreement, to review
thoroughly this Employment Agreement with the Executive’s counsel.  The Executive further acknowledges and agrees
that a breach of any of the restrictions in this Section cannot be
adequately compensated by monetary damages. 
The Executive agrees that the Executive’s right to the payments
specified above in consideration for his undertakings under this Section shall
be forfeited, the Executive’s right to exercise the Incentive Option and the
New Options shall cease and Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, as well as an equitable accounting of all earnings,
profits and other benefits in the event of 
any violation of this Section, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company may be entitled;
provided, however, that the foregoing remedies shall be conditioned upon the
Company providing the Executive with at least 30 days written notice of its
good faith belief that a violation of the Executive’s undertakings hereunder
has occurred and

 

25

 

Executive failing to
cease any such prohibited activity within 30 days after such written notice is
given.  In the event that any of the
provisions of this Section should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, it is the intention of the parties that the provision shall be
amended to the extent of the maximum time, geographic, service, or other
limitations permitted by applicable law, that such amendment shall apply only
within the jurisdiction of the court that made such adjudication and that the
provision otherwise be enforced to the maximum extent permitted by law.  The Executive irrevocably and unconditionally
(i) agrees that any suit, action or other legal proceeding arising out of this
Section, including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief and other equitable relief, may be
brought in the United States District Court for the District of Delaware, or if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in Wilmington, Delaware, (ii) consents to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iii) waives any objection which the Executive may have to the
laying of venue of any such suit, action or proceeding in any such court.  The Executive also irrevocably and
unconditionally consents to the service of any process, pleadings, notices or
other papers in a manner permitted by the notice provisions of Section 13
hereof.

 

9.                                       Successors.

 

(a)                                  This
Employment Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution.  This Employment Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representatives.

 

26

 

(b)                                 This
Employment Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

 

(c)                                  The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree to perform this
Employment Agreement in the same manner and to the same extent that the Company
would have been required to perform it if no such succession had taken place.  As used in this Employment Agreement, “Company”
shall mean both the Company as defined above and any such successor that
assumes and agrees to perform this Employment Agreement, by operation of law or
otherwise.

 

10.                                 Change
of Control.

 

(a)                                  For
the purpose of this Employment Agreement, a “Change of Control” shall mean:

 

(i)                                     The
acquisition by any person, entity or group, within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”),
(excluding, for this purpose, (A) the Company or its subsidiaries, (B) any
employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company or (C) Barron Hilton
or the Conrad N. Hilton Fund, collectively the “Hilton Interests”), of
beneficial ownership, (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of common
stock or the combined voting power of the Company’s then outstanding voting
securities entitled to vote generally in the election of directors; provided,
however, that
notwithstanding the foregoing, a Change of Control of the Company shall not

 

27

 

be deemed to occur solely because any person acquires beneficial
ownership of more than 20% of such common stock or the voting securities of the
Company as a result of the acquisition of common stock or voting securities by
the Company which reduces the amount of common stock or voting
securities; provided, that if after such acquisition by the Company such person
becomes the beneficial owner of additional common stock or voting securities
that increases the percentage of common stock or voting securities beneficially
owned by such person, a Change of Control of the Company shall then occur;
or

 

(ii)                                  Individuals
who, as of the date hereof, constitute the Board (as of the date hereof the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or

 

(iii)                               Approval
by the stockholders of the Company of (A) a reorganization, merger or
consolidation, in each case, with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 60% of the combined
voting

 

28

 

power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company’s then outstanding voting securities, or (B) a liquidation
or dissolution of the Company or (C) the sale of all or substantially all of
the assets of the Company.

 

(b)                                 Anything
in this Employment Agreement to the contrary notwithstanding, in the event that
it shall be determined that any payment or distribution by the Company to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Employment Agreement or otherwise
(the “Payment”), would constitute an “excess parachute payment” within the
meaning of Section 280G of the Code, 
the Executive shall be paid an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Executive after deduction of any
excise tax imposed under Section 4999 of the Code, and any federal, state
and local income and employment tax and excise tax imposed upon the Gross-Up
Payment shall be equal to the Payment. 
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive’s residence on the Termination Date, net of the maximum reduction in
federal income taxes that may be obtained from the deduction of such state and
local taxes.

 

(c)                                  All
determinations to be made under this Section 10 shall be made by the
Company’s independent public accountant immediately prior to the Change of
Control (the “Accounting Firm”), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date.  Any such 

 

29

 

determination by the
Accounting Firm shall be binding upon the Company and the Executive.  Within five days after the Accounting Firm’s
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Employment Agreement.

 

(d)                                 The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment.  Such notification
shall be given as soon as practicable but no later than ten business days after
the Executive knows of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.  The Executive shall not pay such claim prior
to the expiration of the thirty day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:

 

(i)                                     give
the Company any information reasonably requested by the Company relating to
such claim,

 

(ii)                                  take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the company,

 

(iii)                               cooperate
with the Company in good faith in order to effectively contest such claim, and

 

30

 

(iv)                              permit
the Company to participate in any proceedings relating to such claim;

 

provided, however, that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax, income tax or employment tax, including interest and penalties,
with respect thereto, imposed as a result of such representation and payment of
costs and expenses.  Without limitation
on the foregoing provisions of this Section 10, the Company shall control
all proceedings taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearing
and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue for
a refund or contest  the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
termination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, however, that if the Company directs the Executive
to pay such claim and sue for a refund the Company shall advance the amount of
such payment to the Executive, on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any Excise Tax,
income tax or employment tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any imputed income
with respect to such advance; and provided further that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be 

 

31

 

payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue  raised by the Internal Revenue
Service or any other taxing authority.

 

(e)                                  If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to this Section, the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of subsection (c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). 
If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

 

(f)                                    All
of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company.  The Company
agrees to indemnify and hold harmless the Accounting Firm of and from any and
all claims, damages and expenses resulting from or relating to its
determinations pursuant to subsections (b) and (c) above, except for claims,
damages or expenses resulting from the gross negligence or wilful misconduct of
the Accounting Firm.

 

(g)                                 Following
a Change of Control and for a period of not less than three years after the
Date of Termination, the Executive be entitled to indemnification and, to the
extent available on commercially reasonable terms, insurance coverage therefor,
with respect to the various

 

32

 

liabilities as to which
the Executive has been customarily indemnified prior to the Change of Control.

 

11.                                 Arbitration.  The Company and the Executive mutually
consent to the resolution by arbitration, in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association, of all claims or controversies arising out of the Executive’s
employment (or its termination) that the Company may have against the Executive
or that the Executive may have against the Company or against its officers,
directors, shareholders, employees or agents in their capacity as such other
than a claim which is primarily for an injunction or other equitable
relief.  The Company and the Executive
shall equally share the fees and costs of the arbitrator, and each party shall bear
its own costs in connection with any arbitration, unless the Executive shall
prevail in an arbitration proceeding as to any material issue, in which case
the Company shall reimburse the Executive for all reasonable costs, expenses
and fees incurred in connection with such arbitration.

 

12.                                 Legal
Fees.  The Company agrees to pay all
reasonable legal fees incurred by the Executive in connection with the
negotiation and preparation of this Employment Agreement.

 

13.                                 Miscellaneous.

 

(a)                                  This
Employment Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without reference to principles of conflict
of laws.  The captions of this Employment
Agreement are not part of the provisions hereof and shall have no force or
effect.  This Employment Agreement may
not be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

 

33

 

(b)                                 All
notices and other communications under this Employment Agreement shall be in
writing and shall be given by hand to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

 

If to the
Executive:

 

c/o Debevoise &
Plimpton

875 Third Avenue

New York, NY 10022

Attention:  Lawrence Cagney

 

If to the Company:

 

9336 Civic Center Drive

Beverly Hills, CA 90210

 

Attention:  General Counsel

 

With a required
copy to:

Morgan, Lewis &
Bockius LLP

1701 Market Street

Philadelphia, PA  19103-6993

Attention:  Robert J. Lichtenstein

 

or to such other address
as either party furnishes to the other in writing in accordance with this
paragraph (b) of Section 13.  
Notices and communications shall be effective when actually received by
the addressee.

 

(c)                                  The
invalidity or unenforceability of any provision of this Employment Agreement
shall not affect the validity or enforceability of any other provision of this
Employment Agreement.  If any provision
of this Employment Agreement shall be held invalid or unenforceable in part,
the remaining portion of such provision, together with all other provisions of
this Employment Agreement, shall remain valid and enforceable and continue in
full force and effect to the fullest extent consistent with law.

 

34

 

(d)                                 Notwithstanding
any other provision of this Employment Agreement, the Company may withhold from
amounts payable under this Employment Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.

 

(e)                                  The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of, or to assert any right under, this Employment Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 5 of this
Employment Agreement) shall not be deemed to be a waiver of such provision or
right or of any other provision of or right under this Employment Agreement.

 

(f)                                    This
Employment Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.

 

14.                                 Prior
Agreements.  This Employment
Agreement supersedes all prior agreements, except for the provisions of Section 14
of the employment agreement between the Executive and the Company dated as of December 31,
1998, until the rights under that Section have expired, and otherwise sets
forth the entire understanding among the parties hereto with respect to the
subject matter hereof.

 

35

 

IN WITNESS WHEREOF, the
Executive has hereunto set the Executive’s hand and, pursuant to the
authorization of its Board of Directors, the Company has caused this Employment
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.

 

 

	
  HILTON HOTELS
  CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/
  Madeleine A. Kleiner

  	
   

  	
  /s/
  Stephen F. Bollenbach

  	
   

  
	
   

  	
  Stephen F. Bollenbach

  
					

 

36Exhibit
10.14

 

THIRD AMENDMENT TO AMENDED AND RESTATED

CREDIT AGREEMENT

 

This THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is made and entered
into as of the 5th day of November, 2004, by and among Dover Downs
Gaming and Entertainment, Inc. (the “Borrower”) and Wilmington Trust Company, a
Delaware banking corporation (“WTC”), and PNC Bank, Delaware, a Delaware
banking corporation (collectively, the “Banks”) and WTC, as agent (the “Agent”).

 

WHEREAS, the Borrower, the
Banks and the Agent have entered into an Amended and Restated Credit Agreement,
dated as of March 25, 2002, as amended by the Amendment to Amended and
Restated Credit Agreement, dated as of August 12, 2002, and the Second
Amendment to Amended and Restated Credit Agreement, dated as of February 19,
2004 (as amended, the “Agreement”), pursuant to which the Banks agreed to make
available certain credit facilities to the Borrower; and

 

WHEREAS,
the Borrower, the Banks and the Agent desire to amend the Agreement as set forth
herein.

 

NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:

 

SECTION 1.  Defined Terms.  Capitalized terms used herein and not
otherwise defined are used as defined in the Agreement.

 

SECTION 2.  Amendments.

 

2.1.                              The definition
of Termination Date found in Section 1.1 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

“Termination Date”:  the earlier of (a) October 31, 2007, or
such later date to which the Termination Date shall have been extended pursuant
to Section 2.10(d) and (b) the date the Commitments are terminated as
provided herein.

 

2.2.                              Section 2.10(c)
of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Each reduction in the Total
Commitment hereunder, other than the scheduled reductions of $7,500,000 as of December 31,
2005 and $10,000,000 as of December 31, 2006, shall be made

 

 

ratably among the
Banks in accordance with their respective Commitment Percentages.  The Borrower shall pay to the Agent for the
account of the Banks, on the date of each termination or reduction, the
Commitment Fees on the amount of the Commitments so terminated or reduced
accrued to the date of such termination or reduction.  In connection with any reduction of the Total
Commitment, the Borrower shall make any prepayment required under Section 2.11(b).

 

2.3.                              Section 2.19
of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“The Letters of Credit and
proceeds of the Loans shall be used by the Borrower for (a) working capital and
general corporate purposes in the ordinary course of business (including, but
not limited to refinancing existing working capital - related indebtedness and,
subject to other provisions of this Agreement, acquisition financing) and (b)
repurchases of the Borrower’s Common Stock and Class A Common Stock pursuant to
(i) the repurchase authorization announced by the Board of Directors of the
Borrower on October 23, 2002 for up to 2,000,000 shares of stock and (ii)
the self tender to be announced by the Board of Directors of the Borrower in November 2004
for up to 10% of the Company’s outstanding shares.  For purposes of clause (b) above, Section 6.6
of this Agreement shall not be interpreted to prohibit such repurchases.”

 

2.4.                              Section 6.1(c)
of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Permit Consolidated Tangible
Net Worth on any day to be less than $65,000,000 through and including December 31,
2004, and thereafter as follows: the greater of $65,000,000 and (i) ninety
percent (90%) of the Consolidated Tangible Net Worth of the Borrower as of December 31,
2004, plus (ii) an amount equal to twenty-five percent (25%) of the
consolidated net income (if positive) of the Borrower and its Subsidiaries for
each fiscal quarter ending after December 31, 2004, calculated on a
cumulative basis.”

 

2.5.                              Schedule I
of the Agreement is hereby amended and restated in its entirety to read as set
forth in Schedule I attached hereto.

 

2

 

SECTION 3.  Representations
and Warranties.  The Borrower
hereby represents and warrants to the Agent and the Banks as follows:

 

(a)                                  Each of the
representations and warranties of the Borrower in the Agreement is true and
correct in all material respects on and as if made as of the date hereof after
giving effect to this Amendment.

 

(b)                                 As of the date
hereof, and after giving effect to this Agreement, no Default or Event of
Default exists.

 

(c)                                  No consent,
approval or authorization of, or registration with any Person is required in
connection with the execution, delivery or performance by the Borrower of this
Amendment.

 

SECTION 4.  Fees.  The Borrower shall pay to the Agent for the
account of the Banks pro  rata in accordance with Section 2.16
of the Agreement a closing fee in the amount of $17,500 payable upon the
parties’ execution of this Amendment.

 

SECTION 5.  Binding Effect.  This Amendment shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.

 

SECTION 6.  Execution in
Counterparts.  This Amendment
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument, and any of the parties hereto may
execute this Amendment by signing any such counterpart.

 

SECTION 7.  Agreement in Effect.  Except as hereby amended, the Agreement shall
remain in full force and effect.

 

SECTION 8.  Governing Law.  This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to its principles of conflict of laws, all rights and remedies being governed
by Delaware’s substantive laws.

 

 

[Signature Page Follows]

 

 

3

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Amendment as of the date first above
written.

 

	
   

  	
  DOVER DOWNS GAMING & ENTERTAINMENT,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy R. Horne

  	
   

  
	
   

  	
   

  	
  Name: Timothy R. Horne

  
	
   

  	
   

  	
  Title: Sr. Vice President – Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WILMINGTON TRUST COMPANY, as Agent
  and as a Bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael B. Gast

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael B. Gast

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  PNC BANK, DELAWARE, as a Bank

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Warren C. Engle

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Warren C. Engle

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
  Acknowledged and Agreed as
  of

  	
   

  	
   

  
	
  November 5, 2004

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DOVER DOWNS, INC., as
  Guarantor

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Timothy R. Horne

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Timothy R. Horne

  	
   

  	
   

  
	
   

  	
  Title: Sr. Vice President
  – Finance

  	
   

  	
   

  
										

 

4

 

SCHEDULE I

 

BANK AND COMMITMENT INFORMATION

 

	
  Bank and Address

  	
   

  	
  Commitment

  	
   

  	
  Swing Line

  Commitment

  
	
  Wilmington Trust
  Company

  121 South State Street

  Dover, DE19901

  Attn: Commercial Banking Department

  	
   

  	
  $43,125,000 through
  December 30, 2005, then $37,500,000 from December 31, 2005 through
  December 30, 2006 and $30,000,000 from December 31, 2006 and
  thereafter

  	
   

  	
  $

  	
  5,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PNC Bank Delaware

  222 Delaware Avenue

  18th Floor Wilmington, DE19801

  Attn: Theodore J. Prushinski

  	
   

  	
  $14,375,000 through
  December 30, 2005, then $12,500,000 from December 31, 2005 through
  December 30, 2006, and $10,000,000 from December 31, 2006 and
  thereafter

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $57,500,000 through
  December 30, 2005, then $50,000,000 from December 31, 2005 through
  December 30, 2006, and $40,000,000 from December 31, 2006 and
  thereafter

  	
   

  	
  $

  	
  5,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00079-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00079-of-00352.parquet"}]]