Document:

Prepared by MERRILL CORPORATION www.edgaradvantage.com

QuickLinks
 -- Click here to rapidly navigate through this document
  

EXHIBIT 10.34  

  
 

    EMPLOYMENT AGREEMENT    
  

    AGREEMENT by and between Park Place Entertainment Corporation, a Delaware corporation (the "Company"), and Thomas Gallagher (the "Executive"), dated as of
October 23, 2000. 

    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 employ the Executive as the
President and Chief Executive Officer of the Company, and the Executive desires to serve in that capacity; 

    NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 

    1.  Employment Period.  The Company shall employ the Executive, and the Executive shall serve the
Company, on the terms and conditions set forth in this Agreement, for the period beginning on the date of this Agreement and ending on December 31, 2005 (the "Employment Period"). The
Employment Period shall automatically renew beginning on January 1, 2006, for periods of one year unless one party gives written notice to the other, at least 60 days prior to the end of any
one-year renewal period, that the Agreement shall not be further extended. Otherwise, the Agreement may be terminated as specifically provided below,. 

    2.  Position and Duties.  

    (a) During
the Employment Period, the Executive shall be employed as the President and Chief Executive Officer of the Company and, when applicable, the Company shall
recommend that the Executive be reelected as a member of the Board. In his executive capacities, the Executive shall report to the Board as appropriate to the duties assigned by the Board. During the
Employment Period, the Executive shall have such reasonable and customary powers as are generally associated with the positions of President and Chief Executive Officer. 

    (b) During
the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such attention and
time during normal business hours to the business and affairs of the Company to the extent necessary to discharge the responsibilities assigned to the Executive under this Agreement and Executive
shall use reasonable efforts to carry out such responsibilities faithfully and efficiently. 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 could create a conflict of interest), (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with
this Agreement. 

    3.  Compensation.  

    (a)  Base Salary.  

    (1) During
the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary") of $975,000, payable in accordance with the regular payroll
practices of the Company; provided, however, that the portion of such Annual Base Salary during any taxable year of the Company which, when added to any otherwise deductible compensation and benefits
paid or provided to the Executive by the Company during such taxable year, would not be deductible by the Company in the taxable year such Annual Base Salary is paid or accrued because of the
applicable limitations under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), shall be deferred annually in accordance with Section 3(a)(2) herein, unless the
Compensation Committee of the Company's Board of Directors, in its discretion, determines otherwise, and be paid to the Executive (i) pursuant to the terms of the Park Place Entertainment
Corporation Executive Deferred Compensation Plan (the "Deferral Plan"), if applicable, or (ii) for his Contractual Deferral Account, as 

1

 

defined below, in a lump sum, on that date (the "Deferral Date") which is 30 days after the earlier of (i) the last day of the Company's taxable year in which the Executive ceases to be a
"covered employee" within the meaning of Section 162(m)(3) of the Code or (ii) the date upon which the Company's deduction with respect to all deferred Annual Base Salary shall no longer
be subject to limitation under Section 162(m) of the Code or any successor section thereto. Any Deferred Compensation shall be paid on the Deferral Date by wire transfer to an account designated by
the Executive prior to the Deferral Date without setoff or offset for any claim whatsoever against the Executive or any of his affiliates. During the Employment Period, the Annual Base Salary shall be
reviewed for possible increase at least annually but shall not be reduced after any such increase. The term "Annual Base Salary" shall thereafter refer to the Annual Base Salary as so increased. 

    (2) Any
amounts of Annual Base Salary deferred as provided above (plus any Annual Bonus, as defined below, deferred pursuant to Section 3(a) or 3(b)) shall, at
the option of the Executive and in amounts elected by the Executive, be credited: 

    (A) To
an account maintained by the Company on its books (the "Contractual Deferral Account"), with interest, from the date it would otherwise have been paid to the
date the deferred amounts are paid, 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; and/or 

    (B) To
the Executive's Deferral Account in the Deferral Plan in a manner consistent with the Executive's Participant Agreement (as defined in the Deferral Plan) and
Deferral Election Form (as defined in the Deferral Plan) in effect at the time of the deferral. 

    Deferred
Annual Base Salary, deferred Annual Bonus, and interest, if any, shall hereinafter be collectively referred to as the "Deferred Compensation" 

    (b)  Annual Bonus.  In addition to the Annual Base Salary, the Executive shall be eligible to receive,
for each fiscal or portion of a fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") pursuant to the Company's Executive Incentive Plan or otherwise (as adjusted pro-
rata for any fiscal year in which the Executive is employed for only a portion of such fiscal year). Each Annual Bonus may be deferred consistent with the provisions of Sections 3(a)(1) and
3(a)(2) above, and, at the option of the Executive and in amounts elected by the Executive, shall be credited consistent with the provisions of Section 3(a)(2) above. The term "Annual
Bonus" shall be broadly interpreted to include bonus income received under the Company's Executive Incentive Plan, as well as bonus income received under any other determination of the Company's
Compensation Committee. 

    (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; (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; and (iii) the Executive shall be entitled to, and the Company shall provide the
Executive with, the use of an appropriate automobile of the Executive's choosing and payment of related expenses. 

    (d)  Expenses.  During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in carrying out the Executive's duties under this Agreement, provided that the Executive complies with the generally applicable
policies, practices and procedures of the Company for submission of expense reports, receipts, or similar documentation of such expenses. 

2

 

    (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, 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 pay to the
Company the cost 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 Services.  During the Employment Period, the Executive shall be entitled to
office space, and to secretarial and other support services, 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, the Executive shall at all times have a personal secretary and a personal assistant of his choosing. 

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

    (h)  Stock Options and Restricted Shares:  

     (i) On
November 10, 2000, the Executive shall be granted non-statutory stock options (the "Incentive Options") under the Company's Stock Incentive Plan (the
"Stock Plan) covering 2,000,000 shares of the Company's common stock. The exercise price of the shares subject to the Incentive Option shall be equal to the closing price of the Company's common
shares on the New York Stock Exchange on the date granted. The Incentive Options shall be exercisable for 10 years after grant except as otherwise specifically provided in this Agreement. The
Incentive Options shall vest and become exercisable on a cumulative basis according to the following schedule if the Executive continues in the employment of the Company through the applicable vesting
date(s): 

    (1) 25%:on
the first anniversary of the grant date. 

    (2) 50%:on
the second anniversary of the grant date. 

    (3) 75%:on
the third anniversary of the grant date. 

    (4) 100%:on
the fourth anniversary of the grant date. 

Notwithstanding
the foregoing, all shares subject to the Incentive Options 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; or 

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

    (ii) If
a Triggering Event occurs, any portion of the Incentive Options that have become vested on or before the date of such Event (including without limitation, any
portion that becomes exercisable due to such Triggering Event) shall remain exercisable for the balance of their term. 

    (iii) The
Executive may assign the right to exercise the Incentive Options to his spouse, children, grandchildren, or parents of a recipient, to trusts for the benefit
of the Executive's immediately family, to a family partnership or limited liability company designated by the 

3

 

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. 

    (iv) The
Incentive Options shall be subject to the terms of the Stock Plan in all respects not described herein but only to the extent not inconsistent with the terms
of this Agreement, to the extent not inconsistent with the provisions of this Section 3(h). 

    (v) Subject
to the provisions of clauses (iii) and (iv) above, at the annual meeting of the Company's stockholders in 2001, the Company shall submit an
amendment to the Stock Plan to increase the number of authorized shares. If the stockholders approve the amended Stock Plan, on the day following the meeting, Executive will be granted additional
non-statutory stock options (the "Replacement Options") under the Stock Plan. The Replacement Options shall compensate the Executive for the Hilton Hotels Corporation options that the Executive
forfeited by reason of assuming employment hereunder. The number of shares of the Company's common stock subject to the Replacement Options shall be determined by equating the Black Scholes value of
the Hilton options forfeited, at the time forfeited, to an equivalent value for options to purchase shares of the Company, at the time of grant. The exercise price of the shares shall be equal to the
closing price of the Company's common shares on the New York Stock Exchange on the date the Replacement Options are granted. The Replacement Options shall be exercisable for the same term as the
Hilton options replaced and shall be fully vested and nonforfeitable upon grant. Executive shall be also be granted, at the first meeting of the Compensation Committee of the Board of Directors in
2001, restricted shares of the Company's common stock (the "Replacement Shares"). The Replacement Shares shall compensate the Executive for the Hilton Hotels Corporation shares under that company's
supplemental retirement and retention plan that the Executive forfeited by reason of assuming employment hereunder. The number of restricted shares shall be determined by equating the Hilton shares
forfeited to an equivalent value for shares of the Company. The Replacement Shares shall be subject to terms similar to those under the Hilton plan. 

    (i)  Temporary Living and Moving Expenses.  The Company shall provide temporary housing for the Executive
in a suitable residence in the vicinity of its offices and shall pay the cost of the Executive commuting between such residence and his current residence in Los Angeles, California until the Executive
relocates his residence to Las Vegas, Nevada. The Company shall also reimburse Executive for moving and home seeking and buying expenses incurred by Executive in accordance with its relocation policy
for senior level executives, including at least all brokerage commissions, transfer taxes and closing costs incurred in both purchasing a new residence and selling the Executive's current residence.
If the Executive is unable to sell residence in Los Angeles, California, within six months of placing it on the market, for its appraised fair market value as determined in accordance with the
Company's normal policy for senior level executives, the Company shall purchase that residence; provided, however, that in no event shall such purchase be at a price less than the Executive's
documented cost for such residence including all renovations and improvements. In the event that the Executive purchases a residence in Las Vegas prior to the sale of the Los Angeles residence
referred to above, the Company shall provide the Executive at his request with an interest free relocation loan of up to $1.0 million to be repaid within a period of twelve months. The Company shall
also pay Executive a tax equivalency bonus in an amount such that all federal, state and local income taxes (calculated at the highest marginal rate) which may be due by reason of any such expenses
and the tax equivalency bonus being included in Executive's taxable income will not reduce the net amount of reimbursement that Executive is to receive hereunder. 

    (j)  Supplemental Retirement Benefit Joint and Survivor Annuity Benefit.  Subject to the terms and
conditions set forth herein, the Executive shall be entitled to a supplemental retirement benefit (the "Supplemental Benefit"), in the form of a 100% joint and survivor annuity, which shall provide
the Executive and his spouse with a lifetime annual benefit, commencing on the 

4

 

latest of (x) January 1, 2006, (y) the date the Executive elects in writing on or before January 1, 2005, and (z) the date of the Executive's termination from the employment of the
Company, (the "Distribution Date") equal to 3% of the Executive's total cash compensation (Annual Base Salary and Annual Bonus, without regard to the effect of any deferrals as provided above) for
each year of the Executive's service to the Company through the December 31, 2005. The Executive shall vest in such Supplemental Benefit in 20% increments on December 31 of each year, beginning
December 31, 2001 and be fully vested on December 31, 2005, provided that the Executive is employed by the Company on each such December 31; and, provided, further, that,
(i) after the occurrence of a Change of Control, as defined below, and as further consideration for the Executive's undertaking not to breach the terms of the covenants contained in Section 8
below, and (ii) in the event of the involuntary or Good Reason termination of the Executive's employment from the Company, including on account of death or, disability, the Executive shall be
fully vested in and have a nonforfeitable right to the Supplemental Benefit. 

    4.  Termination of Employment.  

    (a)  Death or Disability.  The Executive's employment and the Employment Period shall terminate
automatically upon the Executive's death during the Employment Period. The Company shall be entitled to terminate the Executive's employment because of the Executive's Disability during the Employment
Period. "Disability" means that (i) the Executive has been unable, for a period of 180 consecutive business days, to perform the Executive's duties under this Agreement, as a result of physical
or mental illness or injury, and (ii) a physician selected by the Company or its insurers, and acceptable to the Executive or the Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. The Executive agrees to reasonably cooperate with the Company in order to obtain the 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 ("Notice of Termination for Disability"), stating the date, time and place of a meeting of
the Board called and held specifically for the purpose of considering the Executive's termination for Disability, that takes place not less than five and not more than 25 business days after the
Executive receives the Notice of Termination for Disability. The Executive shall be given an opportunity, together with counsel, to be heard at such special Board meeting. The Executive's termination
for Disability shall be effective, if confirmed at the meeting, 30 days after the adoption of a resolution at such special Board meeting, stating that the Executive's employment shall be terminated
because of Disability (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. Subject to clause (ii) below, "Cause" means: 

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

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

    (C) a
material 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 

5

 

reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provision(s) of this Agreement on which it relies, and stating the date, time and place
of the Special Board Meeting. The "Special Board Meeting" means a meeting of the Board called and held specifically for the purpose of considering the Executive's termination for Cause, that takes
place not less than 30 and not more than 60 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, such conduct constitutes Cause under this Agreement and such conduct has not ceased or been cured
between the date the Executive receives the Notice of Termination for Cause and the date of the meeting. 

    (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, whether or not material, following a Change of Control) with
paragraph (a) or, if applicable, (b) of Section 2 of this Agreement, or any other action by the Company that results in a material diminution in the Executive's position or authority,
duty, titles, responsibilities, or reporting requirements other than an isolated, insubstantial and inadvertent action that is not taken in bad faith and is remedied by the Company within 30 days
after receipt of written notice thereof from the Executive; 

    (B) any
material failure (any failure, whether or not material, following a Change of Control, as defined below) by the Company to comply with any provision of Section
3 of this Agreement, other than an isolated, insubstantial and inadvertent 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
purported termination of the Executive's employment by the Company for a reason or in a manner not expressly permitted by this Agreement; 

    (D) any
relocation of the Executive's principal business location to a location other than Las Vegas, Nevada, Los Angeles, California (within 50 miles) or the New York
Metropolitan area (within 50 miles of Manhattan); 

    (E) the
Executive is not elected or reelected, as appropriate, to the Board; or 

    (F) any
failure by the Company to comply with and satisfy paragraph (c) of Section 9 of this Agreement. 

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

    (ii) A
termination of employment by the Executive for Good Reason shall be effectuated by giving the Company written notice ("Notice of Termination for Good Reason") of
the termination, setting forth in
reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day following the date when the Notice of Termination for Good Reason is given, 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. 

6

 

    (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 without 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 pay the Executive in a single lump sum an amount equal to his Annual Base Salary under Section 3(a) hereof for the greater of (i) two years or
(ii) the balance of the then Employment Period as well as the Annual Bonus for the same period determined at the target rate under the Company's then annual incentive plan. 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 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 include but not be limited to, (1) any portion
of the Executive's Annual Base Salary through the Date of Termination that has not yet been paid and 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"), (2) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) that has not yet been paid; (3) any accrued but unpaid
vacation pay, and (4) similar unpaid items that have accrued or to which the Executive has become entitled as of the Date of Termination, including declared but unpaid bonuses and unreimbursed
employee business expenses, and the Company shall also pay all brokerage commissions, transfer taxes and closing costs incurred in selling the Executive's then current residence if the Executive is
unable to sell such property within 90 days of placing it on the market, for its appraised fair market value as determined in accordance with the Company's normal policy for senior level executives;
provided, however, that in no event shall such purchase be at a price
less than the Executive's documented cost for such residence including all renovations and improvements; and provided, further, that the Company's obligation to make any payments under this Section
5(a) to the extent any such payment shall not have accrued as of the day before the Date of Termination shall also be conditioned upon the Executive's execution, and non-revocation, of a
written release, substantially in the form attached hereto as Annex 1 (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of the
Executive's employment by the Company (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which the Executive participated and under
which the Executive has accrued or become entitled to 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(a) and (b) below, the Executive, in lieu of the amounts specified in the
first sentence of the prior paragraph other than the residence expenditures, shall receive in a lump sum in cash within 30 days after the Date of Termination equal to 2.99 multiplied by the sum of the
Executive's Annual Base Salary and Annual Bonus for the year in which the Change of Control occurs or the immediately preceding year, whichever produces the higher sum. Fifty percent of such amount
shall be consideration for the Executive's undertaking not to breach the terms of the covenants contained in Sections 8(a) and (b) below. In addition, the Executive shall also be
entitled to, in the case of compensation previously deferred by the Executive, a lump sum equal to all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the
Company, any accrued vacation pay not yet paid by 

7

 

the Company. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3 of this Agreement if the
Employee's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its
subsidiaries during the 90-day period immediately preceding the date on which the Change of Control occurs or, if more favorable to the Employee, as in effect at any time thereafter with respect to
other key employees and their families and for purposes of eligibility for retiree benefits pursuant to such plans, practices, programs and policies, the Employee shall be considered to have remained
employed until the end of the Employment Period and to have retired on the last day of such period. 

    (b)  Death or Disability.  If the Executive's employment is terminated by reason of the Executive's death
or Disability during the Employment Period, the Company shall (i) pay the Annual Base Salary to the Executive or the Executive's estate or legal representative, as applicable, for the remaining
portion of the Employment Period (determined without regard to the fact that the Employment Period otherwise terminates under this Agreement) and (ii) pay the Accrued Obligations to the
Executive or the Executive's estate or legal representative, as applicable, in a lump sum in cash within 30 days after the Date of Termination. In such event, the Company shall have no further
obligations under this Agreement other than for any entitlements under the terms of any other plans or programs of the
Company in which the Executive participated and under which the Executive has accrued or become entitled to 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 any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon), in each case to the extent not yet paid, and the amount of any earned but unpaid Annual Bonuses and vacation pay, and the Company shall have
no further obligations under this Agreement other than for any entitlements under the terms of any other plans or programs of the Company in which the Executive participated and under which the
Executive has accrued or become entitled to a benefit. If the Executive voluntarily terminates employment during the Employment Period, other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within 30 days of the Date of Termination, and the Company shall have no further obligations under this Agreement other than for any entitlements
under the terms of any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit. 

    6.  Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Vested benefits and other amounts that
the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Company or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with such plan, policy, practice, program, contract or agreement, as the case may be, except as explicitly modified by this Agreement. 

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

    8.  Confidential information; Non-solicitation; Non-competition; Licensing; No Conflict.  In exchange for
the Company agreeing to accelerated vesting and exercisability of the Incentive Options 

8

 

upon any of the Triggering Events and the payment to the Executive of a portion of the Annual Base Salary and Annual Bonus in the event of Executive's termination of employment, the Executive agrees
as follows: 

    (a) The
Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data, customer information,
supplier information, cost and pricing information, marketing and sales techniques, strategies and programs, computer programs and software and financial information relating to the Company or any of
its affiliated companies and their respective businesses that the Executive obtains during the Executive's employment by the Company or any of its affiliated companies and that is not public knowledge
(other than as a result of the Executive's violation of this paragraph (a) of Section 8) ("Confidential Information"). The Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after the Executive's employment with the Company, except in the good faith performance of his duties hereunder, with the prior written consent of the Company or as
otherwise required by law or legal process. In no event shall an asserted violation of the provisions of this paragraph (a) of Section 8 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement except as provided in paragraph (e) below. 

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

    (c) The
Executive represents that he is or will become, within an appropriate time, licensed by the gaming authorities in Nevada and New Jersey and knows of no reason
why a license necessary for him to perform his duties hereunder would not be granted to or maintained by him by those or similar authorities in the future. 

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

    (e) The
Executive acknowledges and agrees that the restrictions contained in this Section are reasonable and necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company, that the Company would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the
Company should the Executive breach any of those provisions. Executive represents and acknowledges that (i) the Executive has been advised by the Company to consult Executive's own legal
counsel in respect of this Agreement, and (ii) that the Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with the Executive's
counsel. The Executive further acknowledges and agrees that a breach of any of the restrictions in this Section cannot be adequately compensated by monetary damages. The Company agrees to give the
Executive written notice of any action taken by the Executive that it believes in good faith to constitute a violation of the Executive's undertakings 

9

 

under Sections 8(a) and (b) and to give the Executive at least 60 days thereafter to cease any such action which, if he complies with such request, will preclude any further action or
any recovery by the Company. In the event that the Executive fails to do so, the Executive agrees that the Executive's right to the Section 5 Lump Sum shall be forfeited (but only to the extent of
those portions not previously received) and the Executive's right to exercise the Incentive Options (but not to any shares already obtained upon a prior exercise of the Incentive Options or any cash
received upon a prior cashless exercise of the Incentive Options, if available) shall cease. In addition, in the case of any violation of the provisions of this Section 8, the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other
benefits arising from any violation of this Section (with appropriate credit for the amounts forfeited by the Executive and the non-exercisability of the Incentive Options), which rights shall be
cumulative and in addition to any other rights or remedies to which the Company may be entitled. 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 Nevada, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Las Vegas, Nevada, (ii) consents to the
non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which the Executive may have to the laying of venue of any such suit, action
or proceeding in any such court. The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 13 hereof. 

    9.  Successors.  

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

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

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

    10.  Change of Control.  

    (a) For
the purpose of this Agreement, a "Change of Control" shall mean: 

    (i)  The
acquisition by any person, entity or "group", within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act
of 1934 (the "Exchange Act"). (excluding, for this purpose, (A) the Company or its subsidiaries or (B) any employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company, 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 

10

 

combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or 

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

    (iii) Approval
by the stockholders of the Company of (A) a reorganization, merger, consolidation, in each case, with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or (B) a liquidation or dissolution of the Company or (C) the sale
of all or substantially all of the assets of the Company. 

    (b) Upon
a Change of Control, the right to purchase all shares subject to the Incentive Options shall vest and become exercisable; provided, however, that such
immediate vesting and exercisability shall be conditioned upon the Executive not breaching the terms of the covenants contained in Section 8(a) and 8(b). 

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

    (d) All
determinations to be made under this Section 10 shall be made by the Company's independent public accountant immediately prior to the Change of Control (the
"Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the Termination Date. Any such determination by
the Accounting Firm shall be binding upon the Company and the Executive. Within five days after the Accounting Firm's determination, the Company shall pay (or cause to be paid) or distribute (or cause
to be distributed) to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement. 

    (e) The
Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the
Gross-Up Payment. 

11

 

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

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

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

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

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

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

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

    (g) All
of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company 

12

 

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 willful misconduct of the Accounting Firm. 

    (h) Following
a Change of Control and for a period of not less than three years after the Date of Termination, the Executive be entitled to indemnification and, to the
extent available on commercially reasonable terms, insurance coverage therefor, with respect to the various liabilities as to which the Executive has been customarily indemnified prior to the Change
of Control. 

    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, to be held in Las Vegas, Nevada, 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 shall pay the fees and costs of the arbitrator and all other costs in connection with any arbitration, including reasonable legal fee and expenses. 

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

    13.  Miscellaneous.  

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

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

If to the Executive:

405
Tracy Court

Incline Village, NV 89451 

If to the Company:

3930
Howard Hughes Parkway

Las Vegas, NV 89109

    Attention: General Counsel 

With a required copy to:

Morgan,
Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

    Attention: Robert J. Lichtenstein 

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

    (c) The
invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If
any provision of this Agreement 

13

 

shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full
force and effect to the fullest extent consistent with law. 

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

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

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

    14. The
respective rights and obligations of the parties hereunder shall survive any termination of the Executive's employment or arrangements to the extent necessary
to the intended preservation of such rights and obligations, including, but not by way of limitation, those rights and obligations set forth in Sections 3, 5, 6, and 10. 

    15. The
Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation
or benefit payable hereunder following the Executive's death by giving the Company written notice thereof. In the event of the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. 

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

	PARK PLACE ENTERTAINMENT

CORPORATION	 	 
	

By	
 	

/s/ Stephen F. Bollenbach
 Stephen F. Bollenbach	
 	

/s/ Thomas Gallagher
 Thomas Gallagher

14

 
 
 

ANNEX 1
  
    GENERAL RELEASE    
  

    1.  I,
Thomas Gallagher, for and in consideration of certain payments to be made and the benefits to be provided to me under Section 5(a) of my Employment
Agreement dated as of November __, 2000 (the "Employment Agreement") with Park Place Entertainment Corporation (the "Company"), and conditioned upon such payments and provisions, do hereby
REMISE, RELEASE, AND FOREVER DISCHARGE the Company and each of its subsidiaries and affiliates, their officers, directors, shareholders, partners, employees and agents, their respective successors and
assigns, heirs, executors and administrators (hereinafter collectively included within the term the "Company"), acting in any capacity whatsoever, of and from any and all manner of actions and causes
of actions, suits, debts, claims and demands whatsoever in law or in equity, which I ever had, now have, or hereafter may have, or which my heirs, executors or administrators hereafter may have, by
reason of any matter, cause or thing whatsoever from the beginning of my employment with Park Place Entertainment Corporation to the date of these presents arising from or relating in any way to my
employment relationship and the termination of my employment relationship with Park Place Entertainment Corporation, including but not limited to, any claims which have been asserted, could have been
asserted, or could be asserted now or in the future under any federal, state or local laws, including any claims under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §621 et
seq., Americans with Disabilities Act ("ADA"), 42 U.S.C. §2000e et seq., Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., any contracts between the Company
and me and any common law claims now or hereafter recognized and all claims for counsel fees and costs; provided, however, that this General Release shall not apply
to any entitlements under the terms of the Employment Agreement or under any other plans or programs of the Company in which I participated and under which I have accrued or become entitled to a
benefit. 

    2.  Subject
to the limitations of paragraph 1 above, I expressly waive all rights afforded by any statute which expressly limits the effect of a release with respect to
unknown claims. I understand the significance of this release of unknown claims and the waiver of statutory protection against a release of unknown claims which provides as follows: 

    A
general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor. 

    3.  I
hereby agree and recognize that my employment by the Company was permanently and irrevocably severed on             ,
     and the Company has no obligation, contractual or otherwise to me to hire, rehire or re-employ me in the future. I acknowledge that the terms of the
Employment Agreement provide me with payments and benefits which are in addition to any amounts to which I otherwise would have been entitled. 

    4.  I
hereby agree and acknowledge that the payments and benefits provided by the Company are to bring about an amicable resolution of my employment arrangements and
are not to be construed as an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by the Company and that this Agreement and General Release is made
voluntarily to provide an amicable resolution of my employment relationship with the Company and the termination of the Employment Agreement. 

    5.  I
hereby certify that I have read the terms of this General Release, that I have been advised by the Company to discuss it with my attorney, and that I understand
its terms and effects. I acknowledge, further, that I am executing this General Release of my own volition with a full understanding of its terms and effects and with the intention of releasing all
claims recited herein in exchange for the consideration described in the Employment Agreement, which I acknowledge is 

1

 

adequate and satisfactory to me. None of the above-named parties, nor their agents, representatives, or attorneys have made any representations to me concerning the terms or effects of this General
Release other than those contained herein. 

    6.  I
hereby acknowledge that I have been informed that I have the right to consider this General Release for a period of 21 days prior to execution. I also understand
that I have the right to revoke this General Release for a period of seven days following execution by giving written notice to the Company at
                           , Attention: General Counsel. 

    7.  I
hereby further acknowledge that the terms of Section 8 of the Employment Agreement continue to apply for the balance of the time periods provided therein and that
I will abide by and fully perform such obligations. 

    Intending
to be legally bound hereby, I execute the foregoing General Release this          day of
                      ,           . 

	
	 	

	Witness	 	Thomas Gallagher

2

QuickLinks

EMPLOYMENT AGREEMENT

ANNEX 1 GENERAL RELEASE<PAGE>

                                                                Exhibit (10)(k)

                              MODIFICATION NUMBER 1

                                       TO

                             DISTRIBUTION AGREEMENT

                            DATE: SEPTEMBER 27, 2000

         WHEREAS, an agreement having been made and entered into on September 1,
1998 between ELASTIC NETWORKS, INC. ("Elastic"), and Northern Telecom Inc.
(which has subsequently changed its corporate name and now does business as
NORTEL NETWORKS INC.), on behalf of itself, its parent, Nortel Networks Limited
and any Affiliates (collectively, "Nortel") and providing among other things for
Nortel to be a distributor to resell and maintain Elastic's products
("Agreement"), and

         WHEREAS, it is now desired by both parties that the Agreement be
modified to further permit and establish a new co-marketing arrangement whereby
Nortel will qualify, refer and bill customers for Elastic Hardware and Software
(together, "Products" for the purposes of this Modification 1) and that Nortel
be compensated in the event of sales to such customers,

         NOW, THEREFORE, it is mutually agreed as follows:

1. "END-USER" as used herein shall mean the person or entity who purchases
Products from Elastic or Elastic's other authorized resellers through the
co-marketing effort that is addressed by this Modification 1 to the Agreement.

2. QUALIFICATION. In return for fees as described below, Nortel shall qualify
and refer to Elastic, according to mutually agreed upon criteria, viable
candidates for the purchase of Products. Nortel shall qualify such candidates to
Elastic by completing and delivering to Elastic a Customer Qualification Form as
set forth in Exhibit A. Elastic reserves the right to disqualify or reject any
referral made by Nortel. However, such disqualification shall be based on: 1.) a
previous, documented relationship between the proposed End-User and Elastic
which customers are set forth in Exhibit B; or 2.) Elastic's determination in
its sole discretion that the potential End-User is not a viable candidate for
financial, technical, business, or other reasonable factors. Elastic shall
promptly review and advise Nortel of any disqualified End-Users upon receipt by
Elastic of a Customer Referral Form. Nortel shall not be liable for default by
an End User.

3. REFERRAL. A valid Referral requires a completed and accepted Qualification
Form as set forth in Exhibit A and an End-User Purchase Order.

4.  FEES.
(a.) Upon receipt of an order from an End-User based upon an Elastic quote,
Nortel shall submit purchase orders to Elastic that withhold a one-time fee of
seven and one-half percent (7.5%) from

                                      1
<PAGE>

the final quoted contract price of Products ("Fee") for that particular
Referral. Elastic may submit an invoice to Nortel upon shipment of the
Products. Nortel shall submit payment to Elastic 10 days after receipt of
End-User payment. In the event an End User defaults on a contract resulting
in non-payment to Nortel wherein Nortel's accounts payable system has already
submitted payment to Elastic for such End User's contract, Elastic shall
refund such monies to Nortel within 10 days following written notice by
Nortel of such End User's default in payment. Elastic is not obligated to pay
Nortel a Fee or other compensation for any purchases by End-Users which do
not result directly from a Referral, however, Elastic shall be obligated to
pay Nortel the Fee in the event a Referral chooses to order directly from
Elastic.

(b.). In the event the End-User contract specifies separately priced phases or
increments, a separate Fee shall be earned upon shipment in accordance with such
phases or increments. Invoices from Elastic and payment by Nortel to Elastic
shall also be separate in accordance with the phases identified in the End User
contract.

(c.) In the event that any Product is returned by an End-User resulting in a
decision to refund any portion of the contract price to the End User; then
Elastic shall reimburse Nortel for any associated payments made within 10 days
after verification of returned equipment, and any associated Fee previously
earned by and paid to Nortel shall be deducted from future commissions earned or
to be earned by Nortel.

5. QUARTERLY REPORTS. By the 15th business day after the close of the preceding
calendar quarter, Elastic shall provide to Nortel a listing of all active End
User accounts associated with Nortel Referrals (See Exhibit C). This listing
shall include: 1.) List of all forecasted referral orders (completed and
accepted Customer Referral Form) with status and expected timing of associated
Purchase Order, 2.) the status of contracted End-User accounts for which the
total Fee has not yet been paid, including shipments made by Elastic to
contracted End Users during the previous quarter. For accounts where the
End-User contract specifies separately priced phases or increments, Elastic
shall report shipments in accordance with such phases or increments. Said
listing shall include as appropriate, End-User name, Product description,
contract price, shipment date, and Fees due.

6. NORTEL SALES FORCE COMPENSATION AND QUOTA FULFILLMENT. In accordance with
Section 4.8 of the Agreement, Nortel agrees that its standard sales force
compensation and quota fulfillment rules will apply to Products sold under the
co-marketing arrangement established in this Modification 1, so that Nortel's
sales force will receive compensation and quota fulfillment credit for sales of
Products hereunder which is substantially the same as that received by the
Nortel sales force for sales of Nortel Networks products.

7. RECORDS AND AUDIT. Elastic and Nortel shall maintain complete and accurate
records of all amounts due and of payments made to Nortel and Elastic
hereunder in accordance with generally accepted accounting practices. Elastic
and Nortel shall retain all such records for a period of three (3) years from
the date of the final payment for any individual Referral covered by this
Agreement. Elastic and Nortel agree to provide reasonable supporting
documentation concerning any disputed amounts within thirty (30) days after
written notification of the dispute. Both Nortel and Elastic shall have the
right, through independent third party representatives (provided such
representatives are bound by confidentiality provisions at least as
restrictive as those in Section 16. of the

                                   2
<PAGE>

Agreement), and at their own expense, to make an examination and audit during
normal business hours, of all such records and accounts as may, under
recognized accounting practices, contain information bearing upon the amount
of Fee payable to Nortel or Elastic hereunder. Prompt adjustment shall be
made by the proper party to compensate for any errors or omissions disclosed
by such examination or audit and verified by the other party. Neither such
right to examine and audit, nor the right to receive such adjustment, shall
be affected by any statement to the contrary, appearing on checks or
otherwise, unless such statement appears in a letter, executed by the party
having such right and addressed and delivered to the other party, expressly
waiving such right.

8. FORECAST. Nortel shall provide non-binding Forecast information for
anticipated Referrals in accordance with Section 8. of the Agreement.

9.  NORTEL INDEMNIFICATION AND WARRANTY DISCLAIMER.

(a.) Nortel agrees to indemnify, defend, and hold harmless Elastic from and
against any claims, liabilities, losses, damages, causes of action, or injuries,
together with all costs and expenses, including reasonable attorney's fees
arising out of or resulting from any statements, claims, representations or
warranties made by Nortel relating to the Products other than as authorized by
Elastic in writing or made in Elastic's own writings.

(b.) NORTEL DOES NOT AND SHALL NOT OFFER ANY WARRANTY OF ANY KIND FOR THE
PRODUCTS WHICH ELASTIC PROVIDES TO AN END-USER, ELASTIC AUTHORIZED RESELLER OR
OTHER PERSON OR ENTITY AS A RESULT OF A REFERRAL MADE TO ELASTIC IN ACCORDANCE
WITH THIS MODIFICATION 1 TO THE AGREEMENT. ANY WARRANTY OBLIGATION SET FORTH IN
AN END-USER'S AGREEMENT WITH ELASTIC OR ELASTIC'S AUTHORIZED RESELLER WITH
REGARD TO SUCH REFERRAL PRODUCTS SHALL BE UNDERTAKEN SOLELY BY ELASTIC OR
ELASTIC'S AUTHORIZED RESELLER. EXCEPT AS SPECIFICALLY SET FORTH IN THE AGREEMENT
OR THIS MODIFICATION NUMBER 1 THERETO, NORTEL SHALL IN NO EVENT BE LIABLE TO
ELASTIC'S END-USER, OR TO ANY PERSON OR ENTITY USING SUCH PRODUCTS, IN WHOLE OR
IN PART, OR TO ANY PERSON OR ENTITY TO WHOM ELASTIC FURNISHES SUCH REFERRAL
PRODUCTS, FOR LOSS OF REVENUES, LOSS OF PROFITS, LOSS OF TIME, INCONVENIENCE,
LOSS OF USE OR FOR ANY OTHER INCIDENTAL, SPECIAL, DIRECT, INDIRECT OR
CONSEQUENTIAL LOSS OR DAMAGE ARISING OUT OF SUCH REFERRAL, OR THE USE OR
PERFORMANCE OF THE SUCH REFERRAL PRODUCT, IN WHOLE OR IN PART, WHETHER IN AN
ACTION FOR OR ARISING OUT OF ALLEGED BREACH OF WARRANTY, ALLEGED BREACH OF
CONTRACT, DELAY, NEGLIGENCE, STRICT TORT LIABILITY OR OTHERWISE BY ELASTIC. THIS
CLAUSE SHALL SURVIVE FAILURE OF AN EXCLUSIVE REMEDY.

10. APPLICABILITY OF AGREEMENT TO CO-MARKETING ARRANGEMENT. Under the
co-marketing arrangement established by this Modification Number 1, Nortel does
not take title to Products. Therefore, for Products sold as a result of
Referrals, Nortel does not have the support, licensing, warranty, or similar
obligations associated with the purchase and resale of Products as set forth in
the original Agreement and such provisions shall not apply to this co-marketing
arrangement, including the following sections of the Agreement:

                                     3

<PAGE>

5.  RECORDKEEPING AND REPORTING
6.  ORDERING. (EXCEPT THAT SECTION 6.2 SHALL APPLY TO THIS MODIFICATION
    NUMBER 1.)
7.  PRICES AND PAYMENTS.
9.  DELIVERY, TITLE AND ACCEPTANCE. (Except that standard delivery
    intervals for forecasted quantities shall be four (4) weeks per Section
    9.2 of the Agreement, and Elastic's obligations to meet delivery dates as
    noted in Section 9.3 and Section 9.4 shall also be applicable to Referrals.)
10. WARRANTY.
11. REPAIR AND REPLACEMENT PROCEDURES AND REPAIR SERVICES.
12. PRODUCT SUPPORT AND LIFECYCLES.
13. EMERGENCY REPLACEMENT PRODUCTS (SHIPMENT TO NORTEL IS THE ONLY PORTION
    OF THIS SECTION THAT IS NON-APPLICABLE. ELASTIC'S OBLIGATION TO SUPPORT
    END USERS IN ACCORDANCE WITH NOTED RESPONSE TIMES REMAINS).
17. LIABILITY. (Except that Section 17.2 shall apply to this Modification
    Number 1.)
21. SOFTWARE LICENSE AGREEMENT.
23. END USER AND/OR DISTRIBUTOR REQUIREMENTS.
24. GOVERNMENT SALES.

Elastic will be responsible for the products' configuration, pricing, proposals,
documentation, quality, delivery, licensing, installation, acceptance, proper
operation, warranty, returns (including shipping), repairs, technical support,
and contractual penalties where agreed to in advance. Nortel may do some overall
integration design and support directly for the End User and may do installation
work if contracted to either by the End User or Elastic. Risk of loss shall pass
to End-User when Elastic surrenders possession to the common carrier. No Elastic
inventory will be owned by Nortel. Elastic will retain title to the Products
until title passes to the End-User.

11. NON-EXCLUSIVE AGREEMENT. Consistent with Section 4.3 of the Agreement, it is
expressly understood and agreed that this Modification Number 1 to the Agreement
does not grant either party an exclusive privilege to co-market with the other
party any or all of the Products. Both parties expressly recognize that each
party is both a seller and reseller of products and services and that nothing
agreed to herein is intended to limit, prohibit or restrict either party's
merchandising activities in any way except as specified herein.

12. TERMINATION FOR CONVENIENCE. In addition to Default Termination as set forth
in Section 18. of the Agreement, either party may at any time, for its own
convenience and without cause, terminate this Modification Number 1 to the
Agreement and the co-marketing arrangement thereby established by giving the
other party at least thirty (30) days prior written notice and without any
charge, obligation or liability whatsoever except as set out herein. In the
event Modification Number 1 to the Agreement is separately terminated in
accordance with this Section 12., the terms and conditions of the Agreement
shall remain in full force and effect, and Elastic shall be liable to Nortel for
any and all Fees, as defined in Sections 3. and 4. above, resulting from
Referrals prior to such

                                       4
<PAGE>

termination; provided that End-User contracts with Elastic are executed
within six (6) months of such termination.

Except as modified herein, the terms and conditions of the Agreement remain in
full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective the day and year first above written.

<TABLE>
<S>                                    <C>
ELASTIC NETWORKS, INC.                 NORTEL NETWORKS INC.

By:                                    By:
    -------------------------------        ----------------------------
Name: /s/ Kevin Elop                   Name:
      -----------------------------          --------------------------
Title: Chief Financial Officer         Title:
       ----------------------------           -------------------------
Date:                                  Date:
      -----------------------------          ---------------------------
</TABLE>

                                    5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}]]