SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARRAH'S ENTERTAINMENT, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
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[HARRAHS LOGO]
HARRAH'S ENTERTAINMENT, INC.
The Premier Name in Casino
Entertainment
1023 Cherry Road
Memphis, TN 38117 USA
March 14, 1996
To Our Stockholders:
You are cordially invited to attend the Harrah's Entertainment, Inc. Annual
Meeting of Stockholders which will be held on April 26, 1996, at 11:00 a.m. in
the Convention Center, Harrah's Reno, 219 North Center Street, Reno, Nevada. All
stockholders of record as of March 12, 1996, are entitled to vote at the Annual
Meeting.
The meeting will be held to: (a) elect four Class III directors, and (b)
ratify the appointment of independent public accountants for 1996.
This will be the Company's first annual meeting as Harrah's Entertainment,
Inc., as well as the first held outside of Memphis. We hope you will join us in
Reno, where the original Harrah's casino opened in 1937.
Whether or not you expect to attend the meeting, please complete, sign, date
and return the enclosed proxy card promptly to ensure that your shares will be
represented at the meeting. If you attend the meeting, you may vote in person
even if you have sent in your proxy card.
Sincerely,
/s/ Michael D. Rose
-------------------
Michael D. Rose
Chairman of the Board
HARRAH'S ENTERTAINMENT, INC.
NOTICE OF MEETING
The Annual Meeting of Stockholders of Harrah's Entertainment, Inc. will be
held in the Convention Center, Harrah's Reno, 219 North Center Street, Reno,
Nevada, on Friday, April 26, 1996, at 11:00 a.m. to:
1. elect four Class III directors;
2. ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the 1996 calendar year; and
3. transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on March 12, 1996, are
entitled to vote. The list of stockholders will be available for examination at
the Convention Center, Harrah's Reno, on April 26, and for the ten days prior to
the meeting at the office of the Associate General Counsel for Harrah's Northern
Nevada, Harrah's Reno, 219 North Center Street, Reno, Nevada 89501.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
/s/ Rebecca W. Ballou
---------------------
Rebecca W. Ballou
Secretary
March 14, 1996
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Harrah's Entertainment, Inc. ("Harrah's
Entertainment" or the "Company") from the holders of record of Harrah's
Entertainment common stock ("Common Stock") as of the close of business on March
12, 1996 for use at the Annual Meeting of Stockholders to be held on April 26,
1996 at 11:00 a.m. in the Convention Center, Harrah's Reno, 219 North Center
Street, Reno, Nevada, and at any adjournment or postponement thereof (the
"Annual Meeting").
The principal executive offices of Harrah's Entertainment are located at
1023 Cherry Road, Memphis, Tennessee 38117. A copy of the Company's 1995 Annual
Report to Stockholders, this Proxy Statement and accompanying proxy card are
first being mailed to stockholders on or about March 19, 1996.
VOTING RIGHTS AND PROXY INFORMATION
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to complete, sign, date and return the proxy card in the
accompanying envelope, which is postage paid if mailed in the United States. You
have three choices on each of the matters to be voted upon at the Annual
Meeting. Concerning the election of directors, by checking the appropriate box
on your proxy card, you may: (a) vote for all of the director nominees as a
group; (b) withhold authority to vote for all director nominees as a group; or
(c) vote for all director nominees as a group except those nominees you identify
on the appropriate line. Concerning the proposal to ratify the appointment of
the Company's independent public accountants, by checking the appropriate box
you may: (a) vote "For" the proposal; (b) vote "Against" the proposal; or (c)
"Abstain" from voting on the proposal. As discussed below, if you "Abstain" from
voting, it will have the effect of a vote "Against" the proposal if a quorum is
present.
Stockholders may vote by either completing and returning the enclosed proxy
card prior to the meeting, voting in person at the meeting, or submitting a
signed proxy card at the meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
You may revoke your proxy at any time before it is voted at the Annual
Meeting by (i) filing with the Corporate Secretary of Harrah's Entertainment, at
or before the Annual Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a subsequent proxy relating to the same
shares of Common Stock and delivering it to the Corporate Secretary of Harrah's
Entertainment at or before the Annual Meeting, or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy). You may also be
represented by another person present at the meeting by executing a form of
proxy designating such person to act on your behalf. Any written notice revoking
a proxy should be sent to the Corporate Secretary of Harrah's Entertainment at
1023 Cherry Road, Memphis, Tennessee 38117.
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. Unless otherwise specified on the proxy, the shares
represented by a signed proxy card will be voted FOR items 1 and 2 on the proxy
card and will be voted in the discretion of the persons named as proxies on
other business that may properly come before the meeting.
Under the Company's Bylaws and Delaware law, shares represented by proxies
that reflect either abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee which are represented at the Annual Meeting, but with respect
to which such broker or nominee is not empowered to vote on a particular
proposal) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Because shares with respect to
which stockholders abstain are deemed to be present and entitled to vote for
purposes of calculating the number of affirmative votes required to constitute a
majority of the outstanding shares present in person or represented by proxy at
the Annual Meeting and entitled to vote, abstentions as to a proposal will have
the same effect as votes against such proposal. Broker non-votes, however, will
be treated as unvoted for purposes of determining approval of a proposal and
will not be counted as votes for or against a proposal.
For participants in the Company's Employee Stock Ownership Plan, an
appointed Plan Trustee will vote any shares held for a participant's account in
accordance with the confidential voting instructions returned by the
participant. If the instructions are not returned by the participant, shares
held by the Company's Employee Stock Ownership Plan for such participant will
not be voted.
The Company's transfer agent, The Bank of New York, will tabulate the votes.
A representative of the transfer agent will be appointed as inspector at the
Annual Meeting to count all votes and ballots and perform the other duties
required of an inspector.
SHARES ENTITLED TO VOTE AND REQUIRED TO VOTE
Only holders of record of shares of Common Stock as of the close of business
on March 12, 1996 (the "Annual Meeting Record Date") will be entitled to notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
At that date, there were 102,814,800 shares of Common Stock outstanding and
entitled to vote at the meeting. Such holders of shares of Common Stock are
entitled to one vote per share on any matter which may properly come before the
Annual Meeting. The presence, either in person or by properly executed proxy, of
a majority of the shares of Common Stock outstanding on the Annual Meeting
Record Date will constitute a quorum and such quorum is necessary to permit
action to be taken by the stockholders at such meeting. The affirmative vote of
the holders of at least a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote is required to approve each of the proposals.
In the event that a quorum is not present at the time the Annual Meeting is
convened, or if for any other reason the Company believes that additional time
should be allowed for the solicitation of proxies, the Company may adjourn the
Annual Meeting with or without a vote of the stockholders. If the Company
proposes to adjourn the Annual Meeting by a vote of the stockholders, the
persons named in the enclosed proxy will vote all shares of Common Stock for
which they have voting authority in favor of such adjournment.
2
BOARD OF DIRECTORS
GENERAL INFORMATION--ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of Directors
of not less than three nor more than seventeen directors and authorizes the
Board to determine the number within that range from time to time by the
affirmative vote of a majority of the directors then in office. The current
Board of Directors consists of eleven directors.
In accordance with the Certificate of Incorporation, the Company's Board of
Directors is divided into three classes with staggered terms. Each class of
directors is elected for a term of three years. Four Class III directors are to
be elected at the 1996 Annual Meeting for a three-year term ending in 1999.
Ralph Horn was elected a director on July 28, 1995, by the Board of
Directors to fill a vacancy in Class II, subject to his qualification by the New
Jersey Casino Control Commission. The Company filed a petition with the
Commission seeking this qualification and on November 29, 1995, the Commission
issued an order temporarily approving Mr. Horn to serve as a director. That
approval continues in effect.
NOMINEES
Upon recommendation of the Human Resources Committee of the Board of
Directors (the "Human Resources Committee"), the following individuals have been
nominated by the Board of Directors for election to Class III positions with
their term in office expiring in 1999: James L. Barksdale, Susan Clark-Johnson,
James B. Farley and Walter J. Salmon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
FOREGOING NOMINEES AS DIRECTORS OF HARRAH'S ENTERTAINMENT.
In the event any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxy will be voted for any substitute nominee
selected by the current Board of Directors. Management has no reason to believe,
at this time, that the persons named will be unable or will decline to serve if
elected, and each nominee has informed the Company that he or she consents to
serve and will serve if elected.
OWNERSHIP OF HARRAH'S ENTERTAINMENT SECURITIES
Set forth in the following table is the beneficial ownership of Common Stock
as of January 31, 1996, for all current directors, including all nominees to the
Board of Directors, the five executive
3
officers of the Company named in the Summary Compensation Table on page 10, and
all directors and executive officers as a group.
% OF SHARES
SHARES OF OUTSTANDING (NET
COMMON STOCK OF TREASURY
BENEFICIALLY OWNED SHARES) AS OF
ON JANUARY 31, JANUARY 31,
NAME 1996(A) 1996
---- ------------------ ----------------
James L. Barksdale........................................... 35,200 *
Susan Clark-Johnson.......................................... 2,150 *
James B. Farley.............................................. 17,818 *
Joe M. Henson................................................ 225,000 *
Ralph Horn................................................... 20,100 *
Charles A. Ledsinger, Jr..................................... 222,038 *
Ben C. Peternell............................................. 305,101 *
Colin V. Reed................................................ 151,759 *
Michael D. Rose.............................................. 1,368,599(b)(c) 1.3%
Walter J. Salmon............................................. 14,601 *
Philip G. Satre.............................................. 513,035 *
Boake A. Sells............................................... 18,000 *
Eddie N. Williams............................................ 5,050 *
Shirley Young................................................ 14,750 *
All directors and executive officers as a group.............. 3,017,459 2.9%
- ------------
* Indicates less then 1%
(a) The amounts shown include the following shares that may be acquired within 60 days
pursuant to outstanding stock options: Mr. Ledsinger, 76,605 shares; Mr. Peternell,
54,786 shares; Mr. Reed, 94,101 shares; Mr. Rose, 152,210 shares; Mr. Satre, 172,747
shares; all directors and executive officers as a group, 609,558 shares. Shares listed
include shares allocated to accounts under the Company's Savings and Retirement Plan as
of December 31, 1995.
(b) Includes 93,700 shares held by a charitable foundation of which Mr. Rose serves as a
director. Mr. Rose has shared voting and investment power over these shares, but
disclaims any other beneficial interest.
(c) Includes 74,000 shares held by a charitable lead trust. Mr. Rose disclaims any
beneficial interest in such shares.
4
NOMINEES: CLASS III, TERM EXPIRES 1999
[Picture] JAMES L. BARKSDALE
Mr. Barksdale, 53, has been President and Chief Executive Officer and a director
of Netscape Communications Corp. since January 1995. He was President and Chief
Operating Officer and a director of McCaw Cellular Communications, Inc. from
January 1992 to January 1995. He was also Chief Executive Officer of AT&T
Wireless Services, Inc. from September 1994 to January 1995. He served as
Executive Vice President and Chief Operating Officer of Federal Express
Corporation from 1983 to October 1991. Mr. Barksdale is also a director of 3Com
Corporation. He has been a director of the Company since February 1991. He is a
member of the Executive Committee and the Human Resources Committee.
[Picture] SUSAN CLARK-JOHNSON
Ms. Clark-Johnson, 49, has been Senior Group President, Pacific Newspaper Group,
Gannett Co., Inc. since July 1994. She has been publisher of the Reno
Gazette-Journal since 1985. She was President of Gannett West Newspaper Group
from 1985-1994. She has been a director of the Company since July 1994. She is
Chairperson of the Audit Committee.
[Picture] JAMES B. FARLEY
Mr. Farley, 65, has been a trustee of Mutual Of New York since October 1988. He
was Chairman of the Board of Mutual Of New York from April 1989 to July 1993, was
Chief Executive Officer of that company from April 1989 to January 1993 and was
President from October 1988 to January 1991. Mr. Farley is also a director of
Ashland, Inc. and Walter Industries, Inc. Mr. Farley has been a director of the
Company since February 1990. He is a member of the Human Resources Committee.
[Picture] WALTER J. SALMON
Mr. Salmon, 65, has been the Stanley Roth, Sr. Professor of Retailing, Harvard
University since 1980. Mr. Salmon is also a director of Hannaford Brothers
Company, Luby's Cafeterias, Inc., The Neiman Marcus Group, The Quaker Oats
Company and Circuit City Stores, Inc. He has been a director of the Company since
February 1990. He is a member of the Human Resources Committee.
5
DIRECTORS: CLASS II, TERM EXPIRES 1998
[Picture] RALPH HORN
Mr. Horn, 55, has been Chairman of the Board of First Tennessee National
Corporation since January 1996 and Chief Executive Officer since April 1994. He
has been a director and President of that company since July 1991, and was Chief
Operating Officer from 1991 to 1994. Prior to 1991 he was Manager of the Bond
Division of First Tennessee Bank N. A. He has been a director of Harrah's
Entertainment since July 1995. He is a member of the Executive Committee and the
Audit Committee.
[Picture] PHILIP G. SATRE
Mr. Satre, 46, has been President of the Company since April 1991 and Chief
Executive Officer since April 1994. He was President of Harrah's (the Company's
Gaming Group) from 1984 to August 1995 and was Chief Executive Officer of
Harrah's from 1984 to April 1991. He was a Senior Vice President of the Company
from November 1989 to April 1991. He has been a director of the Company since
November 1989. He is a member of the Executive Committee. He also is a member of
the Executive Committee of Harrah's Jazz Company and a director and President of
Harrah's Jazz Finance Corp., both of which filed petitions under Chapter 11 of
the United States Bankruptcy Code in November 1995.
[Picture] BOAKE A. SELLS
Mr. Sells, 58, a private investor, was Chairman of the Board and Chief Executive
Officer of Revco D.S., Inc. from September 1987 to October 1992 and was President
of that company from April 1988 to June 1992. He has been a director of the
Company since February 1990. He is a member of the Executive Committee and the
Audit Committee.
[Picture] SHIRLEY YOUNG
Ms. Young, 60, has been Vice President-Consumer Market Development, General
Motors Corporation since June 1988. She is also a director of Bell Atlantic
Corporation and Bombay Company. Ms. Young has been a director of the Company
since February 1990. She is a member of the Audit Committee.
6
DIRECTORS: CLASS I, TERM EXPIRES 1997
[Picture] JOE M. HENSON
Mr. Henson, 62, a private investor, was a director and Chairman of the Board of
LEGENT Corporation from October 1989 until January 1995 and was a director of
that company and Chairman of its Executive Committee from January 1995 to May
1995. He was Chief Executive Officer of LEGENT Corporation from October 1989 to
April 1992. Mr. Henson is also a director of Policy Management Systems. He has
been a director of the Company since April 1991. He is Chairman of the Human
Resources Committee.
[Picture] MICHAEL D. ROSE
Mr. Rose, 54, has been Chairman of the Board of the Company since November 1989
and was Chief Executive Officer from November 1989 to April 1994. He was
President of the Company from November 1989 to April 1991. Mr. Rose is also a
director and Chairman of Promus Hotel Corporation and a director of Ashland,
Inc., First Tennessee National Corporation, General Mills, Inc. and Darden
Restaurants, Inc. He has been a director of the Company since November 1989. He
is Chairman of the Executive Committee.
[Picture] EDDIE N. WILLIAMS
Mr. Williams, 63, has been President and Chief Executive Officer of the Joint
Center for Political and Economic Studies in Washington, D.C. since 1972. He is a
director of Riggs National Bank of Washington, D.C. Mr. Williams has been a
director of the Company since October 1992. He is a member of the Audit
Committee. He also is a member of the Executive Committee of Harrah's Jazz
Company and a director of Harrah's Jazz Finance Corp., both of which filed
petitions under Chapter 11 of the United States Bankruptcy Code in November 1995.
7
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met eight times during 1995. During the year,
attendance at Board meetings averaged 97% and attendance at Committee meetings
averaged 89%. James L. Barksdale attended 74% of the meetings of the Board and
of Committees on which he served.
The Harrah's Entertainment Board has three standing committees: (i)
Executive, (ii) Audit and (iii) Human Resources.
During the intervals between meetings of the Board of Directors, the
Executive Committee, subject to specified limitations, may act on behalf of the
Board. Action taken by the Executive Committee is reported to the Board of
Directors at its first meeting following such action. Without specific delegated
authority, the Executive Committee may not declare dividends except current
quarterly dividends not in excess of those last declared by the Board of
Directors and may not increase or decrease the number of directors or appoint
new directors. Unless within an overall plan previously approved by the Board of
Directors, action taken by the Executive Committee approving a transaction in
excess of $75,000,000 is subject to revision or rescission by the Board of
Directors at the Board's first meeting following such action. The Executive
Committee met twice during 1995.
The Audit Committee, which met four times in 1995, (1) recommends annually
to the Board of Directors the independent public accountants for the Company and
for its direct or indirect subsidiaries; (2) meets with the independent public
accountants concerning their audit, their evaluation of the Company's financial
statements, accounting developments that may affect the Company and their
nonaudit services; (3) meets with management and the internal auditors
concerning similar matters; and (4) makes recommendations to all of the
aforesaid groups that it deems appropriate.
The Human Resources Committee met nine times during 1995. The Human
Resources Committee acts as the nominating committee of the Board of Directors.
It considers and makes recommendations to the Board of Directors concerning the
size and composition of the Board, the number of nonmanagement directors, the
qualifications of members and potential nominees for membership, the
compensation of directors, membership of committees of the Board and certain
administrative matters. The Human Resources Committee considers nominees
recommended by stockholders. Detailed resumes of business experience and
personal data of potential nominees may be submitted to the Corporate Secretary
at the address shown on the front page of this Proxy Statement.
The Human Resources Committee also approves the annual compensation of
corporate officers who are members of the Board of Directors and administers the
Company's bonus, restricted stock, stock option and other incentive compensation
plans. The Committee also makes various decisions and policy determinations in
connection with the Company's Savings and Retirement Plan and Employee Stock
Ownership Plan.
COMPENSATION OF DIRECTORS
Directors who are not employees of Harrah's Entertainment or its direct or
indirect subsidiaries are paid a monthly fee of $2,500 plus $1,500 for each
Board meeting and $1,200 for each committee meeting they attend. Committee
chairmen are paid an additional $800 for each committee meeting attended. These
fees are reviewed every three years by the Board to determine if they are
competitive. Under the provisions of the Company's two unfunded compensation
deferral programs, directors may defer the receipt of all or a portion of their
directors' fees payable in cash. Amounts deferred under
8
either plan may be paid in a lump sum or in installments, as selected by the
director when making the deferral election. Under the first plan, amounts, while
deferred, earn interest at a rate based on a calculated average prime interest
rate. Under the second plan, the Harrah's Entertainment Executive Deferred
Compensation Plan, amounts, while deferred, earn interest at a termination rate
(which cannot be lower than the Citibank prime rate) or at a retirement rate
(which cannot be lower than a specified formula rate), both of which are
approved annually by the Human Resources Committee. The termination rate for
1995 was 8.5% and the retirement rate was 15.5%. In October 1995, the Human
Resources Committee approved a fixed retirement rate of 15.5% and a fixed
termination rate of 8.5% which will accrue on account balances under the
Executive Deferred Compensation Plan as of December 31, 1995 (subject to plan
minimum rates). The interest rates on post-1995 deferrals will continue to be
approved annually by the Committee. The termination rate that will be earned
during 1996 for 1996 deferrals has been approved at 8.5% and the retirement rate
that will be earned during 1996 for 1996 deferrals has been approved at 13%.
Both rates are subject to plan minimum rate provisions.
The retirement rate is established as an incentive to encourage long-term
service. Therefore, only those participants meeting the plan's service
requirements will receive interest at the retirement rate. A director generally
will receive the retirement rate when he or she retires from the Board. All
nonmanagement directors deferred all or part of their fees under the Executive
Deferred Compensation Plan during 1995. The directors' eligibility for further
deferrals under the Executive Deferred Compensation Plan will terminate upon
commencement of the Harrah's Entertainment, Inc. Nonmanagement Directors Stock
Incentive Plan (the "Nonmanagement Directors Stock Incentive Plan") on May 1,
1996.
In connection with the administration of the Executive Deferred Compensation
Plan, the Company has purchased company-owned life insurance policies insuring
the lives of certain directors, officers and key employees. In purchasing these
life insurance policies, certain assumptions have been made regarding mortality
experience, interest rates and policy dividends. Harrah's Entertainment expects
to recover policy premiums and the net cost of benefits paid under the Executive
Deferred Compensation Plan through the operation of these insurance contracts.
Participants in the plan have no rights in the insurance policies.
The Nonmanagement Directors Stock Incentive Plan referred to above has a
five-year term. It provides that a director will automatically receive 50% of
his or her director fees in Common Stock in lieu of cash fees. Each director may
make a one-time election to receive the remaining fifty percent of his or her
director fees in Common Stock in lieu of cash fees for the duration of the plan.
Grants will be made every three months, beginning August 1, 1996, for an amount
of stock, valued on the grant date, equal in value to 50% of the fees that the
director earned during the previous three-month grant period (or 100% of the
fees if the director elects to receive the remaining 50% of fees in stock).
Shares that are granted cannot be disposed of for six months after the grant. A
director may defer the grant of the shares until the director's retirement.
Deferred shares are then granted in a lump sum or in up to ten annual
installments, as may be elected by the director.
Each nonmanagement director is also provided with travel accident insurance
of $500,000 while traveling on behalf of the Company and the opportunity to
participate in the Company's standard group health insurance plans. During 1995
the total cost for these insurance benefits was approximately $1,671 per
director participating in the plans. Each director receiving these benefits
incurred taxable income equal to the cost of the group insurance.
9
In February 1990, each nonmanagement director in office at that time was
awarded 1,000 shares of restricted stock under the Company's Restricted Stock
Plan which replaced 1,000 shares of Holiday Corporation ("Holiday") restricted
stock awarded in April 1989. Each nonmanagement director elected thereafter also
received such an award. These awards, which were adjusted for stock splits
occurring after the grant date, vest in equal installments over ten years. If a
director who had prior service on the Holiday Board of Directors retires, he or
she will also receive vesting credit for each full year of such service prior to
April 28, 1989. Upon election to the Board of Directors, any new nonmanagement
director receives an award of 1,000 restricted shares vesting in equal
installments over ten years.
EXECUTIVE OFFICER COMPENSATION
The Summary Compensation Table below sets forth certain compensation
information concerning the Company's Chief Executive Officer and the four
additional most highly compensated executive officers.
HARRAH'S ENTERTAINMENT, INC.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- --------------------
($)(1) ($)(2) (#)(3) ($)(4)
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARD(S) OPTIONS COMPENSATION
------------------ ---- --------- -------- ------------ ---------- ---------- ------------
Philip G. Satre........... 1995 $ 477,000 $133,560 $ 3,869 258,268 $132,356
President and Chief 1994 425,385 421,131 7,659 51,511 143,747
Executive Officer 1993 345,639 342,183 3,288 105,336
Michael D. Rose........... 1995 457,000(5) 127,960 94,265 150,308 289,775
Chairman of the Board 1994 541,385 530,611 109,906 24,583 427,751
1993 509,233 504,141 96,840 310,201
Colin V. Reed............. 1995 297,904 69,018 2,283 124,976 45,039
Executive Vice President 1994 268,846 220,454 2,817 18,733 45,065
1993 244,231 200,269 3,202 $ 393,750 72,404 30,473
Charles A. Ledsinger, Jr.. 1995 267,500 62,863 3,199 110,290 28,342
Senior Vice President 1994 237,123 200,000 473 14,048 30,495
and Chief Financial 1993 210,576 172,672 1,161 22,621
Officer
Ben C. Peternell.......... 1995 229,000 53,815 2,814 77,376 141,002
Senior Vice President 1994 214,338 176,000 3,491 11,240 159,416
Human Resources and 1993 194,577 159,553 1,800 120,398
Communications
- ------------
(1) Other Annual Compensation for Messrs. Satre, Reed, Ledsinger and Peternell
consists of earnings in excess of market rates on deferred compensation paid
during the current year but deferred at the election of the executives.
Other Annual Compensation for Mr. Rose includes (a) earnings in excess of
market
(Footnotes continued on following page)
10
(Footnotes continued from preceding page)
rates on deferred compensation paid during the current year but deferred at
the election of Mr. Rose, (b) an allocated amount for aircraft usage, and
(c) household security. Such amounts, respectively, were as follows: for
1995: $5,525, $11,287 and $35,192; for 1994: $1,134, $31,570 and $37,468;
for 1993: $8,606, $22,349 and $28,707. For the years 1993-1995, amounts of
Other Annual Compensation for perquisites for each individual named above
(other than Mr. Rose) aggregated less than (a) 10% of the total annual
salary and bonus for each individual or (b) $50,000 whichever is lower.
Accordingly, no such amounts are included. In previous proxy statements,
earnings in excess of market rates on deferred compensation paid during the
current year were included in "All Other Compensation." The Company does not
provide a fixed benefit pension plan for its executives. The amounts set
forth above for deferred compensation earnings are retirement benefits which
are a function of deferred income voluntarily contributed by the executives.
(2) The 1993 award of restricted stock to Mr. Reed was 21,000 shares with
vesting in equal annual installments over the period 1994 to 1995. Dividends
are paid on restricted stock in the same manner and to the same extent as
dividends are paid on other shares of Common Stock. None of the named
individuals held unvested shares of restricted stock at December 31, 1995.
(3) The numbers shown reflect option grants as well as the adjustment of stock
options granted prior to June 30, 1995, as a result of the spin-off of the
Company's hotel business on that date and, in the case of Mr. Rose, the
cancellation of 41.67% of his outstanding options as part of the division of
his compensation between the Company and Promus Hotel Corporation in
connection with the spin-off of the Company's hotel business.
(4) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation other than such compensation paid during the current
year, and (b) matching contributions to the Company's Savings and Retirement
Plan. Such amounts, respectively, were as follows: for 1995: Mr. Satre,
$123,356 and $9,000; Mr. Rose, $282,160 and $7,615; Mr. Reed, $36,039 and
$9,000; Mr. Ledsinger, $19,342 and $9,000; and Mr. Peternell, $132,002 and
$9,000; for 1994: Mr. Satre, $135,439 and $8,308; Mr. Rose, $419,383 and
$8,368; Mr. Reed, $36,065 and $9,000; Mr. Ledsinger, $21,495 and $9,000; and
Mr. Peternell, $150,416 and $9,000; for 1993: Mr. Satre, $96,342 and $8,994;
Mr. Rose, $301,207 and $8,994; Mr. Reed, $21,479 and $8,994; Mr. Ledsinger,
$10,973 and $11,648; and Mr. Peternell, $111,642 and $8,756. As stated in
note (1), above, the Company does not provide a fixed benefit pension plan
for its executives, and the amounts set forth above are retirement benefits
which are a function of deferred income voluntarily contributed by the
executives.
(5) Mr. Rose entered into an employment agreement with Harrah's Entertainment
effective June 30, 1995 pursuant to which he agreed to spend at least 60% of
his time as Chairman of the Board. His employment agreement was amended on
December 19, 1995, to add other duties which will require an additional
commitment of his time on behalf of the Company. Pursuant to the amendment,
he currently receives an annual salary of $450,000 through December 31,
1996. Unless Mr. Rose and the Human Resources Committee otherwise agree,
after December 31, 1996, his salary will be reduced to $250,000 and he will
spend approximately 30% to 50% of his time on behalf of the Company as
Chairman of the Board. See "Certain Employment Arrangements."
The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during 1995, including information as to the potential realizable value of such
options at assumed annual rates of stock price appreciation for the ten-year
option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1995, and for all
Harrah's Entertainment stockholders. Options granted prior to June 30, 1995 were
adjusted pursuant to a formula approved by the Human Resources Committee in
connection with the spin-off of the Company's hotel business on that date.
11
HARRAH'S ENTERTAINMENT, INC.
OPTION GRANTS IN THE LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
------------------------------------------------------ --------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
---- ---------- ------------- ------------ ---------- ---- -------------- --------------
Philip G. Satre.......... 82,884 2.5% $22.5500 01/06/05 $-- $ 1,175,426 $ 2,978,759
82,884 2.5% 29.7200 06/16/05 1,549,164 3,925,886
92,500 2.8% 26.0625 12/16/05 1,516,127 3,842,164
Michael D. Rose.......... 40,154(3) 1.2% 22.5500 01/06/05 -- 569,447 1,443,090
40,154(3) 1.2% 29.7200 06/16/05 750,508 1,901,935
70,000 2.2% 24.7500 12/20/05 1,089,560 2,761,159
Colin V. Reed............ 34,988 1.1% 22.5500 01/06/05 -- 496,185 1,257,430
34,988 1.1% 29.7200 06/16/05 653,952 1,657,243
55,000 1.7% 26.0625 12/16/05 901,481 2,284,530
Charles A. Ledsinger, Jr. 32,395 1.0% 22.5500 01/06/05 -- 459,412 1,164,240
32,395 1.0% 29.7200 06/16/05 605,487 1,534,422
45,500 1.4% 26.0625 12/16/05 745,771 1,889,930
Ben C. Peternell......... 19,438 0.6% 22.5500 01/06/05 -- 275,661 698,580
19,438 0.6% 29.7200 06/16/05 363,311 920,701
38,500 1.2% 26.0625 12/16/05 631,037 1,599,171
All Stockholders(4)...... n/a n/a n/a n/a -- 1,673,131,918 4,240,044,780
All Optionees............ 3,250,443 100.00% 25.93(5) various -- 53,015,041 134,350,524
All Optionees as a n/a n/a n/a n/a n/a 3.17% 3.17%
percent of All
Stockholders Gain........
- ------------
(1) The dollar amounts under these columns are the result of calculations at
zero percent, and at five percent and ten percent rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of Harrah's Entertainment's
stock price. In the above table, Harrah's Entertainment did not use an
alternative formula for a grant date valuation, as Harrah's Entertainment is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors. In general,
vesting of options is dependent on continued employment. There is no
assurance that the value realized by an officer will be at or near the value
estimated above.
(2) Employees vest in the right to exercise these options over a four-year
period. Options are subject to certain conditions, including compliance with
terms and conditions of the options as approved by the Human Resources
Committee. Options are nontransferable except by will or the laws of descent
and distribution. See "Report of the Human Resources Committee on Executive
Compensation" for more information concerning stock option awards.
(3) The number shown reflects option grants as well as the cancellation of
41.67% of Mr. Rose's options as part of the division of his compensation
between the Company and Promus Hotel Corporation in connection with the
spin-off of the Company's hotel business on June 30, 1995.
(4) These amounts represent the appreciated value which common stockholders
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Common Stock outstanding at or near the option grant
dates.
(5) Represents the weighted average exercise price of options granted to all
optionees.
12
The following table sets forth certain information concerning stock option
exercises during 1995 by the executive officers named in the Summary
Compensation Table and information concerning option values.
HARRAH'S ENTERTAINMENT, INC.
AGGREGATED OPTION EXERCISES IN 1995 AND
DECEMBER 31, 1995 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1995(#)(1) AT DECEMBER 31, 1995($)(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
Philip G. Satre........... -- -- 60,689 450,541 $ 959,708 $ 2,289,697
Michael D. Rose........... -- -- 76,821 294,729 1,269,082 1,900,862
Colin V. Reed............. -- -- 41,915 221,826 636,458 1,133,264
Charles A. Ledsinger, Jr.. -- -- 34,769 178,073 575,582 879,109
Ben C. Peternell.......... -- -- 25,712 129,080 421,809 648,104
- ------------
(1) The numbers shown are net of the cancellation of options that occurred in
December 1994 (see "Report of the Human Resources Committee on Executive
Compensation") and, for Mr. Rose, the cancellation of 41.67% of Mr. Rose's
outstanding options as part of the division of his compensation between the
Company and Promus Hotel Corporation in connection with the spin-off of the
Company's hotel business on June 30, 1995.
(2) Amount represents the difference between the aggregated option price of
unexercised options and a $24.25 market price on December 29, 1995, which
was the closing price of the Common Stock on the last trading day of 1995.
13
The following table provides information about the replacement of options
held by executive officers of the Company, which options were cancelled in
December 1994. For more information concerning stock option cancellations and
grants, see "Report of the Human Resources Committee on Executive Compensation."
HARRAH'S ENTERTAINMENT, INC.
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF LENGTH OF
SECURITIES MARKET ORIGINAL
UNDERLYING PRICE OF EXERCISE OPTION TERM
OPTIONS/ STOCK AT PRICE AT REMAINING AT
SARS TIME OF TIME OF NEW DATE OF
NAME AND REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
PRINCIPAL POSITION DATE AMENDED($)(1)(2) AMENDMENT($)(1) AMENDMENT($)(1) PRICE($)(1) AMENDMENT
- ------------------------- ------- ---------------- --------------- --------------- ----------- ------------
Philip G. Satre.......... 1/05/95 70,240 22.55 35.19 22.55 9 years
President and Chief 1/05/95 12,644 22.55 35.59 22.55 9 years
Executive Officer 6/15/95 20,138 29.72 35.59 29.72 8.7 years
Michael D. Rose.......... 1/05/95 40,154(1) 22.55 35.19 22.55 9 years
Chairman of the Board 6/15/95 9,012(1) 29.72 35.19 29.72 8.6 years
Colin V. Reed............ 1/05/95 34,988 22.55 35.19 22.55 9 years
Executive Vice President 6/15/95 2,478 29.72 35.19 29.72 8.6 years
Charles A. Ledsinger, Jr. 1/05/95 28,096 22.55 35.19 22.55 9 years
Senior Vice President
and Chief Financial
Officer
Ben C. Peternell......... 1/05/95 19,438 22.55 35.19 22.55 9 years
Senior Vice President, 6/15/95 3,042 29.72 35.19 29.72 8.6 years
Human Resources and
Communications
E. O. Robinson, Jr....... 1/05/95 18,734 22.55 35.19 22.55 9 years
Senior Vice President
and General Counsel
John M. Boushy........... 1/05/95 15,200 22.55 35.19 22.55 9 years
Senior Vice President,
Information Technology
and Corporate
Marketing Services
- ------------
(1) The numbers and prices shown reflect the adjustment of stock options granted
prior to June 30, 1995, as a result of the spin-off of the Company's hotel
business on that date and, in the case of Mr. Rose, the cancellation of
41.67% of his outstanding options as part of the division of his
compensation between the Company and Promus Hotel Corporation in connection
with the spin-off.
(2) The total number of options (as adjusted) granted to each officer in the
grants made on 1/5/95 and 6/15/95 are as follows, respectively: Mr. Satre,
82,884 and 82,884; Mr. Rose, 40,154 and 40,154; Mr. Reed, 34,988 and 34,988;
Mr. Ledsinger, 32,395 and 32,395; Mr. Peternell, 19,438 and 19,438; Mr.
Robinson, 19,438 and 19,438; and Mr. Boushy, 19,438 and 19,438.
14
CERTAIN EMPLOYMENT ARRANGEMENTS
Pursuant to an employment agreement with Mr. Satre, the Company has agreed
to employ Mr. Satre as Chief Executive Officer from April 29, 1994, until
December 31, 1998 at a current annual salary of $486,000, subject to merit
increases as may be approved by the Human Resources Committee. During the term
of this employment agreement, Mr. Satre will be eligible for his current
benefits, including eligibility for bonus compensation and long-term incentive
compensation in the form of stock options and restricted stock awards as may be
approved by the Human Resources Committee. The Board of Directors reserves the
right to terminate the employment agreement with or without cause, and Mr. Satre
has the right to resign with good reason (as defined). If the agreement is
terminated without cause or if he resigns for good reason, Mr. Satre will
receive two years' salary continuation and his stock options and any shares of
restricted stock will continue in force during this period of time for vesting
purposes. If the agreement is terminated for cause, his unvested options and any
shares of restricted stock will be cancelled and his salary will end. He will be
entitled to the retirement rate for his account under the Executive Deferred
Compensation Plan if he is terminated without cause or if he resigns for good
reason. If a change in control were to occur during his employment agreement and
his employment terminated voluntarily or involuntarily within two years after
the change in control, Mr. Satre would be entitled to receive the severance
payments under his severance agreement (if then in force) in lieu of the salary
and rights under his employment agreement.
Pursuant to an employment agreement with Mr. Rose, the Company has agreed to
employ Mr. Rose as Chairman of the Board and to perform certain other duties,
subject to his election to the Board of Directors, until December 31, 1998, on
the following terms: The agreement originally provided that Mr. Rose would spend
at least 60% of his time as Chairman of Harrah's Entertainment at an annual
salary rate of $350,000 until April 30, 1996. On December 19, 1995, this
provision of his agreement was amended to increase his salary to $450,000
through December 31, 1996, due to a significant increase in his time commitment
on behalf of Harrah's Entertainment during 1996. Beginning January 1, 1997, or
earlier if the Human Resources Committee and Mr. Rose determine that the demands
on his time can be reduced to levels originally anticipated, Mr. Rose will spend
approximately 30% to 50% of his time as Chairman of the Board at an annual
salary of $250,000. The agreement can be extended on a year to year basis after
December 31, 1998, pursuant to mutual agreement. Until December 31, 1996 (or
earlier if agreed by the Human Resources Committee and Mr. Rose), Mr. Rose will
continue to be eligible for his current benefits, including eligibility for
bonus compensation and long-term incentive compensation in the form of stock
options and restricted stock awards as may be approved by the Human Resources
Committee. For periods after December 31, 1996 (or earlier if agreed by the
Human Resources Committee and Mr. Rose), he will not be eligible for any
incentive stock awards. He also will not be eligible for an annual bonus for
periods after December 31, 1996 unless a bonus were to be approved by the Board
of Directors acting upon the recommendation of the Chief Executive Officer. The
Board of Directors reserves the right to terminate the employment agreement at
any time with or without cause and Mr. Rose may resign for good reason (as
defined). If the agreement is terminated by the Board of Directors without cause
or if he resigns for good reason, his unvested stock options and any unvested
shares of restricted stock held by him will vest at that time and he will
receive two years' salary continuation. If the agreement is terminated for cause
or if he resigns without good reason, his unvested stock options and any
unvested shares of restricted stock held by him will be cancelled and his salary
will end. The agreement further provides that such options and restricted shares
will vest if he retires after April 30, 1996 or on December 31, 1998, if his
employment continues to that date. If a change in control were to occur during
his employment agreement and his employment terminated voluntarily or
15
involuntarily within two years after the change in control, Mr. Rose would be
entitled to receive the severance payments under his severance agreement (if
then in force) in lieu of the salary and rights under his employment agreement.
After the termination of their employment with the Company, both Mr. Rose
and Mr. Satre will be entitled to receive group insurance benefits at the
Company's cost for their respective lifetimes similar to the benefits provided
to other retired management directors of the Company.
If Mr. Rose's employment were terminated without cause or if he resigned for
good reason, the two year noncompete covenant in his employment contract would
commence on the termination of his active employment.
The Company has entered into severance agreements with each of the executive
officers named in the Summary Compensation Table above. Each severance agreement
provides for a compensation payment of 2.99 times the average "annual
compensation" paid to such executive for the five preceding calendar years (the
"Compensation Payment"), as well as accelerated payment or accelerated vesting
of any compensation or awards payable to such executive under any incentive plan
of the Company if the executive is terminated subsequent to a change in control
of the Company, as defined in the severance agreements (the "Accelerated
Payments") (collectively, the "Severance Payments"), with certain exceptions
described below. With respect to any restricted stock and stock options, such
stock awards vest automatically upon a change of control regardless of
termination of the employee. The "annual compensation" for purposes of
determining the Compensation Payment under the severance agreement excludes
restricted stock vestings and compensation or dividends related to restricted
stock or stock options. A change in control is defined to occur whenever: (i)
any person becomes the beneficial owner of 25% or more of the Company's then
outstanding voting securities regardless of comparative voting power of such
securities, (ii) within a two-year period, members of the Board of Directors at
the beginning of such period and approved successors no longer constitute a
majority of such board, or (iii) holders of securities entitled to vote thereon
approve a merger or consolidation (with certain exceptions) or a plan of
complete liquidation.
The executives are not entitled to the Compensation Payments subsequent to a
change in control if their termination is: (i) by the Company for cause (as
defined), (ii) a result of retirement or disability, or, except for Mr. Rose and
Mr. Satre, (iii) voluntarily and not for good reason (as defined). In the event
that an executive becomes entitled to Severance Payments which are subject to a
federal excise tax (the "Excise Tax"), the severance agreements provide that the
Company shall pay the executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the executive after deduction of any Excise
Tax on the Severance Payments and all Excise Taxes and other taxes on the
Gross-Up Payment, shall equal the initial Severance Payments.
Mr. Rose and Mr. Satre are entitled to the Compensation Payments if, after a
change in control of the Company, such executive's employment terminates
involuntarily or he resigns. The other executives are entitled to the
Compensation Payments subsequent to a change in control of the Company if the
executive's employment is terminated involuntarily or if the executive resigns
with good reason (as defined).
In addition, the severance agreements each provide that in the event of a
potential change in control of the Company (as defined below): (i) the Company
will deposit in escrow a sum of money sufficient to fund the Severance Payments
in the event of a change in control of the Company, and
16
(ii) each executive will agree to remain in the employ of the Company for a
certain period of time. A potential change in control of the Company is defined
to occur whenever (i) the Company enters into an agreement which would result in
a change in control of the Company, (ii) any person publicly announces an
intention to take action which would result in change of control of the Company,
(iii) any person, other than the trustee of an employee benefit plan of the
Company, who is or becomes a beneficial owner of 9.5% of the combined voting
power of the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage previously owned
on the date of the severance agreement, or (iv) the Board of Directors adopts a
resolution to the effect that a potential change in control of the Company has
occurred.
Each severance agreement has a term of one calendar year and is renewed
automatically each year starting January 1 unless the Company gives notice of
the non-renewal of any such agreement by the preceding September 30. Each
severance agreement provides that if a change in control occurs during the
original or extended term of the agreement, then the agreement will
automatically continue in effect for a period of 24 months beyond the month in
which the change in control occurred.
The Compensation Payments and Accelerated Payments, respectively, that would
have been payable to the executive officers named in the Summary Compensation
Table for the Company on January 1, 1996, if a change in control occurred and if
such executives had been terminated as of that date, would have been
approximately: Mr. Satre, $1,866,232 and $3,249,405; Mr. Rose, $2,449,779 and
$3,169,944; Mr. Reed, $1,017,517 and $1,769,722; Mr. Ledsinger, $1,017,397 and
$1,454,691; and Mr. Peternell, $913,652 and $1,069,913. Such Accelerated
Payments include the value of any unvested stock options that would accelerate
upon a change in control.
The Company's executive officers participate in the Executive Deferred
Compensation Plan which provides for two alternative interest rates, a
termination rate and a retirement rate. See "Compensation of Directors" for more
information concerning these rates. In the event of a change in control, as
defined in the Executive Deferred Compensation Plan, a participant who is not
yet entitled to the retirement rate will receive such rate if his or her
employment is terminated within a 24 month period after the change in control.
Messrs. Satre, Ledsinger, Reed and Peternell are not yet entitled to the
retirement rate. Consequently, if a change in control as defined in the
Executive Deferred Compensation Plan were to occur, these executive officers
will be entitled to such rate on their Executive Deferred Compensation Plan
account balances if their employment were to terminate within 24 months after
the change in control.
The Company has established an escrow fund and has deposited insurance
policies and cash proceeds received from insurance policies into the escrow
fund. This escrow fund assures the payment of benefits, as they accrue, to,
among others, the executive officers and nine nonmanagement directors which will
be payable under the Executive Deferred Compensation Plan or other deferred
compensation plans. Upon occurrence of a potential change in control of the
Company, the Company also will place into this escrow fund the severance
payments which become payable to the executive officers and certain other
executives only following a change in control. The Company intends to increase
the escrow fund, if necessary, to assure payment of future deferrals and also
has the right to increase the escrow fund to pay premiums on the insurance
policies and interest on policy loans. The escrow fund is subject to the claims
of the Company's creditors in the case of the Company's insolvency or
bankruptcy.
17
REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
The Human Resources Committee (referred to in this section as the
"Committee") is composed entirely of independent outside directors. The
Committee is responsible for approving the compensation of the management
directors (Mr. Rose and Mr. Satre), reviewing the compensation of other
executive officers, including the executive officers named in the Summary
Compensation Table, and approving stock awards, including stock options, for
each such officer.
Executive Compensation Policy. The Company's executive compensation policy
is designed to attract and retain high caliber executives and motivate them to
superior performance for the benefit of the Company's stockholders. Under this
policy: (i) salaries are linked to competitive factors and salary increases
are based primarily on merit, (ii) the annual bonus program is
competitively-based and, subject to certain discretionary rights of the
Committee, provides incentive compensation based on the Company's annual
financial performance, and (iii) long-term compensation is tied solely and
directly to performance of the Company's stock.
In summary, the Company's executive compensation policy is primarily
performance based, with a large portion of executive compensation at risk. This
policy not only extends to executive officers but also to key managers and
professional staff. Approximately 300 key employees participate in the Company's
Stock Option and Restricted Stock Plans.
The following discussion describes the basic components of executive
compensation in further detail.
Cash Compensation Competitively-Based. Cash compensation for executive
officers (salary and annual bonus) is approximately comparable to the median
ranges of amounts paid to executives who are employed in similar positions in
companies primarily in service and entertainment industries with revenues
comparable to the Company's revenues. Various surveys prepared by national
compensation specialists are considered for purposes of company salaries and
cash bonus. There is no specific list of companies that are used to make the
comparison.
Salary. Salaries are reviewed each year and merit increases are based
primarily on (i) an executive's accomplishment of various performance objectives
and standards and (ii) the current salary of the executive within the salary
range for his or her grade level. Greater weight is normally given to the
accomplishment of objectives and standards than to the executive's current
salary level within the range of his or her grade level, although specific
weights for each factor have not been established. In addition, salary can be
substantially increased if an executive officer is promoted to a higher position
with greater responsibilities.
The objectives of the Chief Executive Officer are approved annually by the
Committee and the full Board. These objectives vary from year to year but in
general relate to such matters as ensuring that the Company is competitively
positioned and organized to provide a high quality experience for its guests,
continuing to build Harrah's, through marketing and development efforts, as a
leading brand in the casino entertainment industry, and achieving the Company's
annual business plan and its various financial goals. The Committee's assessment
of the Chief Executive Officer's performance is based on a subjective review of
performance against these objectives. Specific weights are not assigned to any
particular objective.
18
In general, the objectives of the other executive officers are approved by
the Chief Executive Officer. These objectives generally relate to achieving
functional goals and financial objectives within the officer's assigned area of
responsibility. For example, an objective could relate to completion of a
project assigned to that executive's area of responsibility. The Chief Executive
Officer's assessment of the performance of the other executive officers is based
on a subjective review of each officer's performance. Specific weights are not
given to each objective in this assessment.
The Committee approves merit salary increases for the Chairman and the Chief
Executive Officer. In general, the Chief Executive Officer approves merit salary
increases for the other executive officers and such increases are reviewed by
the Committee. During the year 1995, the Committee approved an 8% merit salary
increase for Mr. Satre and merit salary increases were also approved for the
other executive officers during 1995.
Key Executive Officer Annual Incentive Plan. Certain senior executive
officers of the Company are eligible to participate in the Company's Key
Executive Officer Annual Incentive Plan (the "Key Executive Plan"), an annual
bonus plan designed to provide participating executive officers with incentive
compensation based upon the achievement of pre-established performance goals.
Executive officers at the corporate senior vice president level or above may be
eligible for the Key Executive Plan. Prior to, or at the time of, establishment
of the performance objectives for a calendar year, the Committee approves the
specific executive officers who will participate in the Key Executive Plan that
year. For the plan year 1995, Messrs. Rose, Satre and Reed were selected to
participate. The Committee has determined that no executives will participate in
the Key Executive Plan for the plan year 1996. As a result, all executive
officers will participate in the Company's annual management bonus plan during
1996. See "Annual Management Bonus Plan" below.
The Key Executive Plan, which has been approved by the Company's
stockholders, is designed to comply with Section 162(m) of the Internal Revenue
Code which limits the tax deductibility by the Company of compensation paid to
officers named in the compensation tables of the Proxy Statement to $1,000,000.
Compensation paid pursuant to a plan approved by stockholders that meets the
requirements of Section 162(m) is exempted from the $1,000,000 limitation and is
fully deductible. The Company's stockholders approved the Key Executive Plan in
order to provide a plan that would allow the full deductibility of compensation
paid to executive officers.
Under the Key Executive Plan, prior to March 30 of each year, the Committee
approves a performance goal including a specific objective relating to the
approved goal for that calendar year (a plan year). The goal may consist of any
one or more of the following corporate business criteria for the year (or a
combination of any of these criteria): pre-tax income, operating income, cash
flow, earnings per share, return on equity, return on average invested capital,
a division's operating income or a division's opened units. These criteria and
the specific objectives are determined in accordance with generally accepted
accounting principles ("GAAP") unless certain exceptions are approved by the
Committee as further explained below. At or after the end of a plan year, the
Committee certifies in writing the extent of the achievement of the performance
objective(s) for the approved goal based on the Company's performance during the
year.
When establishing objectives and approving the achievement of objectives,
the Committee (unless an exception is pre-approved as discussed below) ignores
extraordinary items, minority interests, property transactions, changes in
accounting standards and losses or gains arising from discontinued operations.
The Committee may, in any year, include property transactions and/or
discontinued
19
operations (either specifically or generally or both) and may further include or
exclude any specified interest expense items, corporate expense items and/or
development expense items when determining the pre-established objectives.
The actual results of property transactions and/or discontinued operations
that are included in the objectives are then included, in accordance with GAAP,
in the calculation of the achievement of the objectives. Similarly, any included
or excluded items of interest expense, corporate expense, and/or development
expense are included or excluded, as the case may be, in the calculation of
achievement of the objectives. If the objectives approved by the Committee
include operations or businesses (including those being accounted for as
discontinued operations) that are subsequently spun-off or disposed of during
the plan year, the objectives and the calculated results will be appropriately
adjusted to exclude such operations or businesses subsequent to the spin-off.
The actual award for a participant is determined by multiplying the
participant's eligible earnings by a percentage adjacent to a points column on a
bonus matrix that has been approved by the Committee. Points are awarded based
on achievement of a specified percentage of the approved objective. No award may
exceed 200% of an individual's eligible earnings. The maximum per participant
award under the plan in any year is $1,000,000. The Committee has the discretion
to pay an award that is lower than the calculated award. The bonus matrix for
the Key Executive Plan is different than the matrix for the Annual Management
Bonus Plan in that the matrix under the Key Executive Plan provides for higher
bonuses and provides a lower minimum of the percentage of the target objective
that would result in not awarding a bonus.
Eligible earnings means a participant's annual base salary, including any
deferrals of such salary, as in effect on the date the performance objectives
are established by the Committee.
Approved awards are paid by March 15 of the year after the plan year to
which such payment relates, unless the participant elects to defer the payment
pursuant to the terms of a Company deferred compensation plan. Awards that are
otherwise payable to a participant who is no longer an employee will be
prorated, or the individual will be ineligible for an award, pursuant to
specified rules in the Key Executive Plan. The participant will recognize
ordinary taxable income upon receipt of payments under the Key Executive Plan.
The previous sentence is a brief summary of the tax consequences relating to
this plan; it does not describe state or local tax consequences, and it is not
intended to be complete.
For the 1995 plan year, the Committee approved operating income as the
performance goal under the Key Executive Plan and approved a specific target
objective for this goal. Operating income for this purpose is the Company's
operating income before taxes, interest, extraordinary items, property
transactions, minority interests and variances from budgeted development
expenses. In February 1996, the Committee certified that a specific percentage
of the targeted operating income had been achieved which entitled the
participating executives to a specific bonus amount under the bonus matrix
previously approved by the Committee for the Key Executive Plan. Pursuant to
authority granted to the Committee under the Key Executive Plan and after
considering certain factors affecting the Company's business including the New
Orleans project, the Committee exercised its discretion and approved a lower
bonus amount for such executives than provided for by the terms of the bonus
matrix. This bonus was 50% of the bonus that would have been paid if the
participants had been covered under the annual management bonus plan applicable
to other executive officers and other participants (see "Annual Management Bonus
Plan" below) and if the Committee had exercised the same discretion that the
Committee exercised in determining bonuses for the participants under that plan
for 1995. The final
20
bonus amounts were less than 50% of the amounts the executive officers under the
Key Executive Plan would have received if the Committee had not exercised such
discretion.
Annual Management Bonus Plan. Under the Company's annual management bonus
plan (referred to in this subsection of the proxy statement as the "plan"), at
or near the beginning of each calendar year (a plan year) the Committee approves
a corporate bonus objective for the Company's executive officers (other than
those covered by the Key Executive Plan) and other participants in the plan.
This objective can pertain to operating income, pre-tax earnings, return on
sales, a combination of objectives, or another objective approved by the
Committee. The objective may change annually to support the business mission of
the Company. For the 1995 plan year, the objective approved by the Committee was
a specified target for operating income. This is defined as the Company's
operating income calculated before interest expense, extraordinary items,
property transactions, minority interests and variances from budgeted
development expenses. This target was the same as the target objective under the
Key Executive Plan.
A bonus schedule has been established for the grade levels of participating
executive officers and other plan participants that will result in the payment
of a specified percentage of the participant's salary if the target objective is
achieved. This percentage of salary increases or decreases on a matrix (the
"Bonus Matrix") in relation to bonus points achieved. Bonus points are allocated
according to a percentage of the target objective achieved, with maximum bonus
points awarded if a specified percentage over target is achieved and no bonus
points are awarded if less than a specified percentage of target is achieved.
For the executive officers currently participating in the annual bonus plan, the
bonus for achieving target ranges from 45% to 50% of their base salary. For
performance above target, the bonus is increased on a graduated scale to a
maximum bonus of 90% to 100% of their base salary. The Chairman, the Chief
Executive Officer and the Executive Vice President did not participate in the
plan in 1995. See "Key Executive Officer Annual Incentive Plan" above.
After the end of the plan year, the Committee determines the extent to which
the target objective has been achieved. A bonus pool for all corporate
management employees in the bonus plan is then established by multiplying (a) an
amount equal to the specific percentage of salary hypothetically payable to each
individual in the plan based on the objective achieved, by (b) each individual's
salary. These amounts are then added to create a corporate bonus pool for plan
participants.
The Committee has authority under the plan to adjust any objectives or bonus
points if the Committee determines such adjustment is necessary or appropriate.
This is a subjective decision by the Committee.
The calculated bonuses of the executive officers participating in the plan
depend on the percentage of salary payable on the Bonus Matrix as well as an
assessment of their achievement of personal objectives (personal performance).
The personal objectives for bonuses are the same objectives that are evaluated
for purposes of merit salary increases as discussed above. The assessment of
personal objectives is a subjective evaluation by the Chief Executive Officer.
As a result of the assessment of personal objectives, the bonus of an executive
officer participating in the plan may be higher or lower than shown on the Bonus
Matrix. However, the total bonus pool established for all corporate employees
eligible for the plan cannot be exceeded.
In February 1996, for purposes of calculating bonuses under the plan for the
plan year 1995, all operating losses of the New Orleans project for 1995 were
included in the calculation of operating income. However, in view of the
Company's overall excellent performance, the Committee exercised its
21
discretion authorized under the plan to make adjustments in bonus points by
excluding certain one-time write-offs and charges from the bonus calculation,
including the New Orleans write-off. This adjusted calculation resulted in the
achievement of sufficient bonus points to pay bonuses under the Bonus Matrix
that were less than target bonus. The Committee further exercised its discretion
to reduce bonuses for all of the five executive officers in the plan and three
other plan participants by 50% of what was achieved using the adjusted
calculation described above.
Stock Awards. Awards of stock options and restricted stock are specifically
approved by the Committee for each executive officer and other plan participants
and are granted in the sole discretion of the Committee. Awards are currently
granted with a vesting period extending four years from the initial grant date.
The Committee may grant a combination of restricted stock and/or stock options
to officers and other key employees.
Each executive officer is granted a stock award that will give such officer
an estimated dollar value of stock compensation vesting each year targeted to
equal a specific percentage of the officer's salary. This percentage increases
in line with the higher grade level of the officer. Based on a subjective
assessment of competitive and business factors, the Committee determines an
award that is suitable for providing an adequate incentive for both performance
and retention purposes. The dollar value of the award is based on estimated
annual increases in the market value of the Company's Common Stock in the future
to reach the targeted level of compensation. There is no certainty or assurance
that such increases will occur.
In December 1994, the Committee determined that the three-year awards made
earlier in 1994 did not appropriately align the compensation of key executives
with the interests of the Company's stockholders. In addition, in view of the
retention purposes of the Plan, the Committee was concerned about the option
price of the three year award in relation to the market price of the Common
Stock in December 1994. Therefore, to insure the retention of key executives in
order that the Company's competitive strength was not compromised, the Committee
decided in December 1994 to return to the past practice of making annual grants
to certain employees. As a part of this decision, the Committee decided to
cancel two-thirds of the three-year awards granted to such employees in early
1994, subject to each employee's consent. Each employee consented to the
cancellation. As a result, a total of 654,718 options for all officers and key
managers were cancelled in December 1994 (the equivalent of approximately
919,748 options after adjustment for the hotel spin-off). The options cancelled
for Mr. Rose covered 60,000 shares (the equivalent of 84,289 shares after
adjustment for the hotel spin-off) and the options cancelled for Mr. Satre
covered 73,333 shares (the equivalent of 103,022 shares after adjustment
for the hotel spin-off). The shares which were subject to the cancelled
options became available for re-grant under the Plan. On January 5, 1995,
the Committee implemented its decision to return to annual grants and
approved one year grants for all eligible employees including the Company's
executive officers. Pursuant to such approval, a total of 627,239 options
(approximately 881,145 options after adjustment for the hotel spin-off) were
granted to those employees whose options were cancelled in December 1994, and
135,810 options (approximately 190,786 options after adjustment for the hotel
spin-off) were granted to other key employees. Pursuant to this Committee
action, Mr. Satre was awarded 59,000 stock options (82,884 options after
adjustment for the hotel spin-off) and Mr. Rose was awarded 49,000 stock options
(68,840 options after adjustment for the hotel spin-off) under the normal annual
award procedures previously followed by the Committee. Under these procedures,
the grants were valued utilizing a base value equal to the market value of the
Company's Common Stock on the award date. The exercise price of the annual stock
option awards granted by the Committee on January 5, 1995 was the market price
22
of the Company's Common Stock on that date. These awards become exercisable in
four equal annual installments starting January 1, 1996. See "Ten-Year
Option/SAR Repricings" Table, on page 14.
In June 1995, the Committee, after considering the Company's business
environment, approved an annual stock compensation target range of 170-200% of
salary for the Chief Executive Officer. The annual stock compensation target
ranges of the other executive officers and key employees were also increased.
These new target ranges resulted in an additional grant of stock options in June
1995 to the Company's executive officers to supplement the annual grant that was
made in January 1995. The annual grant in December 1995 to the Company's
executive officers and other key employees also reflected the increased annual
stock compensation target ranges.
The amount of a stock option award is not dependent on past corporate
performance nor on the amount of options or restricted stock previously granted
to an executive officer. The actual value of the stock compensation vesting each
year is dependent on the market value of Common Stock. For executive officers,
the Company has no other long-term incentive plans under which future awards
will be made, so that long-term stock market performance is the sole determinant
of long-term incentive compensation.
Policy Concerning Tax Deductibility. The Committee's policy with respect to
qualifying compensation paid to its executive officers for tax deductibility
purposes is that executive compensation plans will generally be designed and
implemented to ensure full tax deductibility. However, the Committee reserves
the right to approve the payment of non-deductible compensation to its executive
officers when the Committee deems such compensation necessary for competitive
reasons or to attract or retain a key executive, or where achieving full tax
deductibility would be considered disadvantageous to the best interests of the
Company. The Company's stockholders have approved the Key Executive Plan that is
intended to comply with Section 162(m) of the Code so that annual bonuses will
be fully tax deductible for the Company. See "Key Executive Officer Annual
Incentive Plan" above.
Chief Executive Officer's Compensation. Mr. Satre's base salary is based on
his rights under his employment agreement. Under his agreement, he is entitled
to merit salary increases and to participate in the incentive programs provided
to senior officers. These merit salary increases and incentive awards for 1995
were determined in accordance with the Committee's policies described in this
report. Mr. Satre was awarded stock options in 1995. These options are described
in the table titled "Option Grants in the Last Fiscal Year," on page 12, and
were awarded in accordance with the Committee's policies as described in this
report.
Human Resources Committee
Joe M. Henson (Chairman)
James L. Barksdale
James B. Farley
Walter J. Salmon
23
PERFORMANCE OF HARRAH'S ENTERTAINMENT COMMON STOCK AND DIVIDENDS
Set forth below is a line graph comparing the total cumulative return of the
Company's Common Stock to (a) the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), (b) the Dow Jones Entertainment & Leisure-Casinos Index and (c) a
group of peer issuers with similar businesses. See Notes (1) and (2). The graph
assumes reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG HARRAH'S ENTERTAINMENT, INC., THE S & P 500 INDEX,
THE DOW JONES ENTERTAINMENT & LEISURE-CASINOS INDEX(1) AND A PEER GROUP(2)
1,000 ------------------------------------------------------------
D 800
O
L
L 600
A
R
S 400
200
0 ------------------------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
----------------------------------------------------------
---O--- HARRAH'S ENTERTAINMENT, INC. .../\... PEER GROUP
- [] - DOW JONES ENTERTAINEMENT & ---/\--- S&P 500
LEISURE - CASINOS
---------------------------------------------------------------------------
---------------------------------------------------------------------------
HARRAH'S 100 153 367 915 618 682
DOW 100 147 237 362 278 368
PEER 100 130 170 210 189 244
S&P 100 129 140 155 157 215
---------------------------------------------------------------------------
* $100 INVESTED ON 12/31/90 IN STOCK OF INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
-------------
(1) The Dow Jones Entertainment & Leisure-Casinos Index (the "Leisure-Casinos
Index") has been selected to replace the Peer Group described in Note 2 for
comparison in future years. The Company believes the Leisure-Casinos Index
more closely approximates the Company's line of business after the spin-off
of the Company's hotel business on June 30, 1995, and provides a broader
basis for comparison than the Peer Group. Additionally, information is no
longer available about some of the companies that previously comprised the
Peer Group as explained in Note 2.
(2) The Peer Group companies consist of Bally Entertainment Corporation, Circus
Circus Enterprises, Inc., Hilton Hotels Corporation, Marriott International,
Inc., Mirage Resorts, Inc., and Showboat Inc. In previous years the Peer
Group also included Caesars World, Inc. and La Quinta Inns L.P. which can no
longer be included since they are no longer separate public companies.
(3) The line graph for Harrah's Entertainment, Inc. assumes that $100 was
invested in the common stock of The Promus Companies Incorporated ("Promus")
on December 31, 1990. It has been adjusted for stock splits. The line graph
also assumes reinvestment in shares of Harrah's Entertainment, Inc. of the
market value of shares of Promus Hotel Corporation which were distributed to
Promus stockholders in the form of a special dividend on June 30, 1995, in a
spin-off of Promus's hotel business, at which time Promus changed its name
to Harrah's Entertainment, Inc.
24
CERTAIN TRANSACTIONS
Mr. Ralph Horn, a director of Harrah's Entertainment, is Chairman, Chief
Executive Officer and President of First Tennessee National Corporation, the
parent company of First Tennessee Bank National Association ("First Tennessee").
First Tennessee is one of the lending banks under a loan agreement that Harrah's
Entertainment has with several banks (the "Bank Facility"). Pursuant to the Bank
Facility, First Tennessee has committed to loan to the Company's subsidiary,
Harrah's Operating Company, Inc., $15,000,000, representing a 2% share of the
total commitment covered by the Bank Facility. As of December 31, 1995,
$6,700,000 of this $15,000,000 commitment had been funded and $501,322 had been
provided in the form of unfunded standby letters of credit. In connection with
this commitment, First Tennessee received interest and fees of $920,808 during
1995. Also, the Company is party to a Master Repurchase Agreement whereby the
Company invests funds with First Tennessee on behalf of one of the Company's
joint ventures. The average amount invested pursuant to such Agreement during
1995 was $19,432,800; as of December 31, 1995, the amount was $13,695,000.
Interest paid on such investment during 1995 was approximately $167,200.
Certain direct and indirect subsidiaries of the Company maintained deposit
accounts with First Tennessee during 1995. The average ledger balance during
1995 was $469,055 and the ledger balance on December 31, 1995, was $1,270,832.
Deposit account service fees paid to First Tennessee in excess of the earning
credit assigned to these accounts were approximately $73,000 during 1995.
Certain hotels managed by subsidiaries of the Company prior to the spin-off of
the Company's hotel business on June 30, 1995 also maintained deposit accounts
with First Tennessee during 1995. The average ledger balance for such accounts
for the first six months of 1995 was $661,351. Deposit account service fees paid
to First Tennessee in excess of the earning credit assigned to these accounts
were approximately $41,500 during 1995. First Tennessee also received fees and
revenues of approximately $90,000 on other miscellaneous transactions with
Harrah's Entertainment in 1995.
Ms. Susan Clark-Johnson, a director of Harrah's Entertainment, is Senior
Group President, Pacific Newspaper Group, Gannett Co., Inc. The Company and its
subsidiaries paid Gannett's Pacific Newspaper Group $406,405 for retail and
classified newspaper advertising during 1995.
Mr. Michael D. Rose, Chairman of the Board of Harrah's Entertainment, is a
director and executive officer, and Mr. Ben C. Peternell, Senior Vice President
of Harrah's Entertainment, is a director, of Promus Hotel Corporation, the stock
of which was distributed on June 30, 1995 to all holders of the Company's
outstanding Common Stock in connection with the spin-off of the Company's hotel
business. The Company and Promus Hotel Corporation are parties to various
agreements entered into for the purpose of governing ongoing relationships
between the companies after the spin-off and to provide mechanisms for an
orderly transition. The Company believes that such agreements, which primarily
govern sharing of information technology, risk management allocation, employee
benefits allocation and transition matters, are fair to both parties and contain
terms which generally are comparable to those which would have been reached in
arms length negotiations with unaffiliated parties (although comparisons are
difficult with respect to certain agreements that related to the specific
circumstances of the spin-off transaction). Additionally, a subsidiary of the
Company is party to a license agreement with Promus Hotels, Inc., a subsidiary
of Promus Hotel Corporation, to operate a Hampton Inn hotel in Reno, Nevada
which opened October 1, 1995. Total payments by the Company to Promus Hotel
Corporation under the above-described agreements and other agreements between
the companies for the year ended December 31, 1995 were approximately
$2.6 million.
25
During 1995, Mr. Satre, a director and the Chief Executive Officer of the
Company, had indebtedness to the Company in the amount of $688,260.40 for
withholding taxes on his restricted stock vesting in January 1995. The rate of
interest on such indebtedness was 8.5%. Mr. Satre paid such indebtedness in full
on February 15, 1995.
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to stockholder approval, the Board of Directors, acting on the
recommendation of its Audit Committee, has appointed Arthur Andersen LLP, a firm
of independent public accountants, as auditors, to examine and report to
stockholders on the consolidated financial statements of the Company and its
subsidiaries for the year 1996. Representatives of Arthur Andersen LLP will be
present at the Annual Meeting and will be given an opportunity to make a
statement. They will be available to respond to appropriate questions.
The action of the Board of Directors in appointing Arthur Andersen LLP as
the Company's auditors for the year 1996 is subject to ratification by an
affirmative vote of the holders of a majority of shares of Common Stock present
in person or represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS FOR THE YEAR 1996.
26
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The table below sets forth to the best of the Company's knowledge certain
information regarding the beneficial owners of more than 5% of the Common Stock
as of December 31, 1995.
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED CLASS
-------------------- ---------------- -------
The Capital Group Companies, Inc....................... 7,894,000(a) 7.7%
333 South Hope Street
Los Angeles, CA 90071
Trustees of the Harrah's Entertainment, Inc............ 6,517,826(b) 6.3%
Savings and Retirement Plan
1023 Cherry Road
Memphis, TN 38117
Massachusetts Financial Services Company............... 9,397,922(c) 9.2%
500 Boylston Street
Boston, MA 02116
Oppenheimer Group, Inc................................. 10,164,878(d) 9.9%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Julian H. Robertson, Jr., Tiger Management
Corporation, Panther Partners L.P. and
Panther Management Company L.P......................... 9,647,100(e) 9.4%
101 Park Avenue
New York, NY 10178
- ------------
(a) The Capital Group Companies, Inc. has reported that its operating
subsidiaries, Capital Guardian Trust Company and Capital Research and
Management Company, exercised as of December 31, 1995, investment discretion
with respect to 2,049,000 and 5,845,000 shares, respectively, or a combined
total of 7.7% of outstanding stock which was owned by various institutional
investors. The source of this information is a Schedule 13G filed with the
Securities and Exchange Commission and dated February 9, 1996 and
accompanying correspondence to the Company. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1995.
(b) The trustees of the Harrah's Entertainment, Inc. Savings and Retirement Plan
(the "Plan") have sole voting power of the shares listed except that each
participant in the Plan has the right, to the extent of shares of Common
Stock allocated to the participant's account in the Plan (including vested
and unvested amounts), to direct the trustees in writing as to how to
respond to a solicitation of proxies opposed by management of the Company.
The trustees do not have shared voting power, sole investment power, or
shared investment power over any of the shares listed. The participants in
the Plan have the right to direct the disposition of the securities held in
their respective accounts pursuant to the terms of the Plan. No one
participant has such rights with respect to more than 5% of the Company's
Common Stock. The source of this information is a Schedule 13G filed by the
trustees of the Plan with the Securities and Exchange Commission and dated
February 13, 1996. Ownership (number of shares and percent of shares
outstanding) is reported as of December 31, 1995.
(Footnotes continued on following page)
27
(Footnotes continued from preceding page)
(c) Massachusetts Financial Services Company ("MFS") is a registered investment
adviser and has reported beneficial ownership of the shares listed, which
shares are also beneficially owned by certain other non-reporting entities
as well as MFS. MFS has sole voting power as to 9,336,122 of the shares
listed and has no power to vote 61,800 of the shares listed. MFS has sole
dispositive power as to the 9,397,922 shares listed. The source of this
information is a Schedule 13G filed by MFS with the Securities and Exchange
Commission and dated February 12, 1996. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1995.
(d) Oppenheimer Group, Inc. ("Oppenheimer"), a holding and service company
owning, directly or indirectly, a variety of companies engaged in the
securities business, has reported ownership on behalf of itself and
Oppenheimer Capital ("Capital"). Oppenheimer has reported ownership of the
shares listed, including shared voting power and shared dispositive power
with respect to such shares, and has reported ownership by Capital of
10,093,213 of such shares, including shared voting power and shared
dispositive power with respect to such 10,093,213 shares. The source of this
information is a Schedule 13G filed by Oppenheimer with the Securities and
Exchange Commission and dated February 1, 1996. Ownership (number of shares
and percent of shares outstanding) is reported as of December 31, 1995.
(e) Tiger Management Corporation, Panther Partners L.P., Panther Management
Company L.P., and Julian H. Robertson, Jr. have reported beneficial
ownership of the shares listed. Tiger Management Corporation, a registered
investment adviser, has shared voting power and shared dispositive power
with respect to 9,080,900 of the shares listed; Panther Partners L.P., a
registered investment company, has shared voting power and shared
dispositive power with respect to 493,700 of the shares listed; Panther
Management Company L.P., a registered investment adviser, has shared voting
power and shared dispositive power with respect to 493,700 of the shares
listed; and Julian H. Robertson, Jr., an individual, has sole voting power
and sole dispositive power with respect to 25,000 of the shares listed and
has shared voting power and shared dispositive power with respect to
9,622,100 of the shares listed. The source of this information is a Schedule
13G filed with the Securities and Exchange Commission and dated February 12,
1996. Ownership (number of shares and percent of shares outstanding) is
reported as of December 31, 1995.
OTHER MATTERS AT THE MEETING
The Board of Directors does not know of any matters to be presented at the
meeting other than those mentioned in this Proxy Statement. If any other matters
are properly brought before the meeting, it is intended that the proxies will be
voted in accordance with the best judgment of the person or persons voting such
proxies.
COST OF SOLICITATION
The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid by
the Company. In addition to the use of mails, certain directors, officers or
employees of the Company and its subsidiaries, who receive no compensation for
their services other than their regular salaries, may solicit and tabulate
proxies. The Company has retained D.F. King & Co. to assist in the solicitation
of proxies with respect to shares of Common Stock held of record by brokers,
nominees and institutions. The estimated cost of the services of D.F. King & Co.
is $9,000, plus expenses.
28
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
For any proposal to be considered for inclusion in the Company's proxy
statement and form of proxy for submission to the stockholders at the Harrah's
Entertainment 1997 Annual Meeting, it must comply with the requirements of Rule
14a-8 under the Exchange Act and be submitted in writing by notice delivered or
mailed by first-class United States mail, postage prepaid, to the Corporate
Secretary, Harrah's Entertainment, Inc., 1023 Cherry Road, Memphis, Tennessee
38117, and must be received no later than November 16, 1996. The chairman of the
meeting may refuse to acknowledge the introduction of any stockholder proposal
not made in compliance with the foregoing procedures. In addition, the Company's
Bylaws provide for notice procedures to recommend a person for nomination as a
director and to propose business to be considered by stockholders at a meeting.
By Direction of the Board of Directors
/s/ Rebecca W. Ballou
---------------------
Rebecca W. Ballou
Secretary
Memphis, Tennessee
March 14, 1996
29
[HARRAHS CASINOS LOGO]
HARRAH'S ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD APRIL 26, 1996
The undersigned hereby appoints Charles A. Ledsinger, Jr., Ben C. Peternell,
E. O. Robinson, Jr. and Philip G. Satre, and each of them, his or her attorneys
and agents, with full power of substitution, to vote as proxy for the
undersigned, as herein stated, at the Annual Meeting of Stockholders of Harrah's
Entertainment, Inc. (the "Company") to be held on April 26, 1996 at 11:00 a.m.
at the Convention Center, Harrah's Reno, 219 North Center Street, Reno, Nevada
and at any adjournment thereof, according to the number of votes the undersigned
would be entitled to vote if personally present, on the proposals set forth on
the reverse side of this card (and as more particularly set forth in the Notice
of Meeting enclosed herewith). This proxy also constitutes confidential voting
instructions for the use of participants in the Company's Employee Stock
Ownership Plan.
ALL SHARES OF THE COMPANY'S COMMON STOCK THAT ARE REPRESENTED AT THE ANNUAL
MEETING BY PROPERLY EXECUTED PROXIES RECEIVED PRIOR TO OR AT THE ANNUAL MEETING
AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE
INSTRUCTION INDICATED ON THE REVERSE SIDE OF THIS CARD. IF NO INSTRUCTIONS FOR A
PROPOSAL ARE INDICATED ON AN EXECUTED PROXY CARD, SUCH PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS AS SET FORTH HEREIN
WITH RESPECT TO SUCH PROPOSAL(S) AND IN ACCORDANCE WITH THE DISCRETION OF THE
PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
PLEASE SIGN AND DATE ON REVERSE SIDE
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL
DIRECTOR NOMINEES AND FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
- --------------------------------------------------------------------------------
1. Election of Class III directors for three-year terms expiring at the 1999
Annual Meeting.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for all nominees listed below
/ / EXCEPTIONS
NOMINEES: James L. Barksdale, Susan Clark-Johnson, James B. Farley and Walter
J. Salmon
(INSTRUCTIONS: To withhold your vote for any individual nominee, mark the
Exception Box and write that nominee's name in the space provided below. IF
AUTHORITY TO VOTE FOR ANY NOMINEE IS NOT WITHHELD, THIS SIGNED PROXY WILL BE
DEEMED TO GRANT AUTHORITY TO VOTE FOR THE NOMINEE.)
- --------------------------------------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP as independent public
accountants of Harrah's Entertainment, Inc.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS, PLEASE MARK THE
FOLLOWING BOX AND PROMPTLY RETURN THIS PROXY CARD. / /
Signatures of stockholders
should correspond exactly
with the names shown on the
Proxy Card. Attorneys,
trustees, executors,
administrators, guardians and
others signing in a
representative capacity
should designate their full
titles. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
CHANGE OF ADDRESS MARK HERE / / Date ______________________, 1996
Signature ____________________________
VOTES MUST BE INDICATED
Signature ____________________________
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