AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1998.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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/ / Preliminary Proxy Statement
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to 240.14a-11(c) or 240.14a-12
HARRAH'S ENTERTAINMENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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[LOGO]
HARRAH'S ENTERTAINMENT, INC.
THE PREMIER NAME IN CASINO
ENTERTAINMENT-REGISTERED TRADEMARK-
1023 CHERRY ROAD
MEMPHIS, TN 38117 USA
March 13, 1998
To Our Stockholders:
You are cordially invited to attend the Harrah's Entertainment, Inc. Annual
Meeting of Stockholders which will be held on May 1, 1998, at 11:30 a.m. in the
Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue, Memphis,
Tennessee. All stockholders of record as of March 12, 1998, are entitled to vote
at the Annual Meeting.
The meeting will be held to: (a) elect three Class II directors, (b) approve
amendments to the Company's Stock Option Plan, (c) approve amendments to the
Company's Restricted Stock Plan, and (d) ratify the appointment of independent
public accountants for 1998.
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,
[SIGNATURE]
Philip G. Satre
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
HARRAH'S ENTERTAINMENT, INC.
NOTICE OF MEETING
The Annual Meeting of Stockholders of Harrah's Entertainment, Inc. will be
held in the Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue,
Memphis, Tennessee, on Friday, May 1, 1998, at 11:30 a.m. to:
1. elect three Class II directors;
2. approve amendments to the Company's 1990 Stock Option Plan;
3. approve amendments to the Company's 1990 Restricted Stock Plan;
4. ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the 1998 calendar year; and
5. transact such other business as may properly be brought before the
meeting or any adjournments or postponements thereof.
Stockholders of record at the close of business on March 12, 1998, are
entitled to vote. The list of stockholders will be available for examination for
the ten days prior to the meeting at the office of the Corporate Secretary,
Harrah's Entertainment, Inc., 1023 Cherry Road, Memphis, Tennessee 38117.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
[SIGNATURE]
Rebecca W. Ballou
SECRETARY
March 13, 1998
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, 1998. The proxies are for use at the Annual Meeting of Stockholders to be
held on May 1, 1998, at 11:30 a.m. in the Winegardner Auditorium - Dixon Gallery
and Gardens, 4339 Park Avenue, Memphis, Tennessee, 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 1997 Annual
Report to Stockholders, this Proxy Statement and accompanying proxy card are
first being mailed to stockholders on or about March 19, 1998.
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 other matters to be voted upon, 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.
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 the proposals 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. Under the Company's Bylaws,
abstentions will not be counted as votes for or against the proposals to be
voted upon at the Annual Meeting.
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 may be
voted by the Plan Trustees pursuant to the Plan document and applicable law.
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, 1998 (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 101,082,935 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. Under the rules of the New York Stock
Exchange, the minimum vote required to constitute shareholder approval of
additional shares proposed to be authorized for the Company's Stock Option and
Restricted Stock Plans (Proposals 3 and 4) is a majority of votes cast on each
of those proposals, provided a quorum is present. 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,
excluding abstentions, is required to approve each of the other 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.
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 nine 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. Three Class II directors are to
be elected at the 1998 Annual Meeting for a three-year term ending in 2001.
Shirley Young, who was a director in Class II, retired from the Board
effective April 25, 1997. James L. Barksdale, who was a director in Class III,
retired as a director effective July 25, 1997.
The number of Class II directors is currently set at four. The Board has
named three nominees for election to Class II rather than four due to the fact
that no other individuals have been currently selected and are available for
election at this time. Proxies cannot be voted for a greater number of persons
than the number of nominees named. It is expected that the Board will at a
future date appoint J. Kell Houssels, III, President and Chief Executive Officer
of Showboat, Inc. ("Showboat"), to fill the vacancy in Class II
2
when the Company completes the acquisition of Showboat. The Company entered into
an agreement in December, 1997 to acquire Showboat subject to various
conditions, including regulatory and third party approvals and approval by the
stockholders of Showboat.
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 re-election to Class II positions with
their term in office expiring in 2001: Ralph Horn, Philip G. Satre and Boake A.
Sells.
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,
as of the date of this Proxy Statement, that the persons named will be unable or
will decline to serve if elected, and each nominee has informed the Company that
he 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, 1998, for all current directors, including all nominees to the
Board of Directors, the five executive officers of the Company named in the
Summary Compensation Table on page 17, and all directors and executive officers
as a group.
SHARES OF COMMON % OF SHARES
STOCK OUTSTANDING (NET
BENEFICIALLY OF TREASURY
OWNED ON JANUARY SHARES) AS OF
NAME 31, 1998(A)(B) JANUARY 31, 1998
- ----------------------------------------------------------------------------- ----------------- -------------------
John M. Boushy............................................................... 77,250 *
Susan Clark-Johnson.......................................................... 5,740 *
James B. Farley.............................................................. 21,486 *
Joe M. Henson................................................................ 79,002 *
Ralph Horn................................................................... 23,520 *
R. Brad Martin............................................................... 23,268 *
Ben C. Peternell............................................................. 355,803 *
Colin V. Reed................................................................ 339,937 *
E. O. Robinson, Jr........................................................... 136,273 *
Walter J. Salmon............................................................. 17,863 *
Philip G. Satre.............................................................. 840,728 *
Boake A. Sells............................................................... 21,506 *
Eddie N. Williams............................................................ 11,698 *
All directors and executive officers as a group.............................. 2,077,827 2.0%
- ------------------------
* Indicates less than 1%
3
(a) Shares listed in the table include shares allocated to accounts under the
Company's Savings and Retirement Plan as of December 31, 1997. The amounts
shown also include the following shares that may be acquired within 60 days
pursuant to outstanding stock options: Mr. Boushy, 37,239 shares; Mr.
Peternell, 105,287 shares; Mr. Reed, 184,394 shares; Mr. Robinson, 59,725
shares; Mr. Satre, 360,715 shares; all directors and executive officers as a
group, 806,926 shares.
(b) The amounts shown include the following rights to shares pursuant to the
Non-Management Directors Stock Incentive Plan and deferred at the election
of the directors: Ms. Clark-Johnson, 3,590 shares; Mr. Farley, 3,668 shares;
Mr. Henson, 4,002 shares; Mr. Horn, 3,420 shares; Mr. Martin, 3,068 shares;
Mr. Salmon, 3,262 shares; Mr. Sells, 3,506 shares; Mr. Williams, 1,648
shares.
4
NOMINEES: CLASS II, TERM EXPIRES 2001
RALPH HORN
[LOGO] Mr. Horn, 57, 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. He
has been a director of Harrah's Entertainment since July 1995. He is a
member of the Executive and Audit Committees of the Company.
PHILIP G. SATRE
[LOGO] Mr. Satre, 48, has been Chairman of the Board of the Company since
January 1997, Chief Executive Officer since April 1994, and President
since April 1991. He was President of the Company's Gaming Group from
1984 to August 1995. He has been a director of the Company since
November 1989. He is a member of the Company's 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.
BOAKE A. SELLS
[LOGO] Mr. Sells, 60, 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 is also a director of NCS Healthcare. He has been a director of the
Company since February 1990. He is a member of the Executive and Human
Resources Committees of the Company.
DIRECTORS: CLASS I, TERM EXPIRES 2000
JOE M. HENSON
[LOGO] Mr. Henson, 64, a private investor, was a director and Chairman of the
Board of LEGENT Corporation from October 1989 until February 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. He is a director
of Marcam Solutions, Inc. He has been a director of the Company since
April 1991. He is Chairman of the Company's Human Resources Committee.
5
R. BRAD MARTIN
[LOGO] Mr. Martin, 46, has been Chairman of the Board and Chief Executive
Officer of Proffitt's, Inc. since 1989. He is a director of First
Tennessee National Corporation. Mr. Martin has been a director of the
Company since July 1996. He is a member of the Executive and Human
Resources Committees of the Company.
EDDIE N. WILLIAMS
[LOGO] Mr. Williams, 65, 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 Corporation of
Washington, D.C. Mr. Williams has been a director of the Company since
October 1992. He is a member of the Company's 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.
DIRECTORS: CLASS III, TERM EXPIRES 1999
SUSAN CLARK-JOHNSON
[LOGO] Ms. Clark-Johnson, 51, 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 to 1994. She has been a
director of the Company since July 1994. She is Chairperson of the
Company's Audit Committee.
JAMES B. FARLEY
[LOGO] Mr. Farley, 67, 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, and was Chief Executive Officer of that company
from April 1989 to January 1993. 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
Executive and Human Resources Committees of the Company.
6
WALTER J. SALMON
[LOGO] Mr. Salmon, 67, is Professor of Retailing, Emeritus at Harvard
University. He was the Stanley Roth, Sr. Professor of Retailing,
Harvard University from 1980 to June 1997. Mr. Salmon is also a
director of Hannaford Brothers Company, Luby's Cafeterias, Inc., The
Neiman Marcus Group, The Quaker Oats Company, Circuit City Stores,
Inc., Cole National Corporation and PetsMart, Inc. He has been a
director of the Company since February 1990. He is a member of the
Company's Audit Committee.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met six times during 1997. During the year, overall
attendance by incumbent directors averaged 96% at Board meetings and 98% at
Committee meetings. Walter J. Salmon attended 89% of regularly scheduled Board
and Committee meetings during 1997, but was unable to attend two special
meetings, and as a result for the year he attended 73% 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 million is subject to revision or rescission by the Board of
Directors at the Board's first meeting following such action. The Executive
Committee met once during 1997.
The Audit Committee, which met four times in 1997, (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 the Company's management and the internal
auditors concerning similar matters; (4) reviews the Company's compliance
policies and performance; and (5) makes recommendations to all of the aforesaid
groups that it deems appropriate.
The Human Resources Committee met six times during 1997. 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 non-management 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.
7
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 earn a monthly fee of $2,500 plus $1,500 for each Board
meeting and $1,200 for each committee meeting they attend. Committee
chairpersons are paid an additional $800 for each committee meeting attended.
These fees are reviewed every three years by the Human Resources Committee of
the Board to determine if they are competitive. In February 1998, the Committee
completed a three-year review of the compensation of boards of directors of
companies with revenues similar to Harrah's Entertainment. Based on this review,
the Committee recommended and the Board determined that commencing May 1, 1998
the fees of non-management directors should be as follows: monthly fee $3,167;
Board meetings fee, $1,600 for each meeting; Committee meetings fee, $1,300 for
each meeting; Committee chairperson, an additional $900 for each Committee
meeting.
Under the provisions of the Company's Non-Management Directors Stock
Incentive Plan, a director automatically receives 50% of his or her director
fees in Common Stock in lieu of cash fees. Under the plan, which has a five-year
term that began May 1, 1996, each director had the right to make a one-time
election to receive the remaining 50% of his or her director fees in Common
Stock in lieu of cash fees for the duration of the plan. All current
participants except one made this election.
Grants of stock under the plan are made every three months 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 elected 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 make an annual election to defer, until retirement, the grant of
shares to be made the ensuing plan year. Deferred shares are then granted upon
the director's retirement in a lump sum or in up to ten annual installments, as
may be elected by the director. These elections are made prior to each plan
year. However, a director may modify his or her choice as to a lump sum or
installments by submitting a request to change the election at least one full
fiscal year before retirement. This request is subject to approval of the Human
Resources Committee. The Company has created a trust to assure the payment of
benefits under the Non-Management Directors Stock Incentive Plan.
Directors may defer the receipt of all or a portion of their directors' fees
payable in cash pursuant to the provisions of the Company's Deferred
Compensation Plan, an unfunded compensation deferral program. Amounts deferred
may be paid in a lump sum or in installments, as selected by the director when
making the deferral election. Under this plan, amounts, while deferred, earn
interest at a rate based on a calculated average prime interest rate.
Until May 1, 1996, directors were eligible to participate in the Company's
other unfunded compensation deferral program, the Executive Deferred
Compensation Plan. Under that plan, amounts, while deferred, earn interest at a
rate approved annually by the Human Resources Committee. Seven current
non-management directors deferred part of their cash fees under the Executive
Deferred Compensation
8
Plan prior to May 1, 1996. The directors' eligibility for further deferrals
under the Executive Deferred Compensation Plan terminated upon commencement of
the Non-Management Directors Stock Incentive Plan on May 1, 1996. See "Certain
Employment Arrangements" on page 20 for more information about the Executive
Deferred Compensation Plan.
Each non-management director is also provided with travel accident insurance
of $500,000 while traveling on behalf of the Company and the opportunity to
participate, while serving as a director, in the Company's standard group health
insurance plans. During 1997 the total premium cost for these insurance benefits
was approximately $3,407 per director participating in the plans. Each director
receiving these benefits incurred taxable income equal to the premium cost of
the group insurance.
In February 1990, each non-management director in office at that time was
granted 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 non-management director elected thereafter has
also been granted an award of 1,000 shares of restricted stock upon his or her
election. The foregoing awards, which have been 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 leaves Board
service at the expiration of his or her term of office, he or she will also
receive vesting credit for each full year of such Holiday service prior to April
28, 1989. Upon election to the Board of Directors, any new non-management
director receives an award of 1,000 restricted shares vesting in equal
installments over ten years.
9
STOCK OPTION PLAN
DESCRIPTION OF PLAN
On November 5, 1989, the Company adopted the Harrah's Entertainment, Inc.
1990 Stock Option Plan (the "Stock Option Plan"). Under the Stock Option Plan,
the Human Resources Committee (the "Committee") determines the key management
employees who will be granted options under the plan. Approximately 250
employees are in the group of key management employees eligible for stock
options. The Committee may change eligibility rules by amending the plan.
Members of the Board of Directors who are not employees are not eligible to
receive stock options under the Plan.
As of January 31, 1998, the maximum number of shares authorized for the
issuance of new stock options or stock appreciation rights was 1,346,447. As
described below, it is proposed that an additional 3,500,000 shares be
authorized for options under the Plan. Any shares subject to an option which
expires for any reason, is forfeited or is terminated unexercised as to such
shares may again be subject to an option under the Stock Option Plan. The
maximum number of shares subject to stock options or stock appreciation rights
that can be granted to any individual is limited to 351,193 options in any one
year period. This number of shares can be adjusted by the Committee in the event
of certain corporate transactions or other events.
No stock option or stock appreciation right may be granted after ten years
following the adoption of the Stock Option Plan by the Company's Board of
Directors. As described below, it is proposed that the term of the plan be
extended through February 25, 2008. In general, except in case of death,
disability, or retirement, no stock option may be exercisable after the
expiration of ten years and one day (ten years in the case of an incentive stock
option) from the date of grant of the option.
An optionee with ten years of service has a two year period, and an optionee
with 20 years of service has a three year period, after retirement, death or
determination of disability to exercise any option to the extent it was
exercisable on the date of such event, provided that (1) for incentive stock
options, this two or three year period will not extend beyond the normal term of
the option and (2) for non-incentive options, the term of the option will be
extended up to a maximum term of thirteen years and one day to accommodate the
two or three year extension in cases where retirement, death or determination of
disability occurs within the three year prior to the end of the normal term of
the option.
The Stock Option Plan is administered by the Committee. The Committee has a
wide degree of flexibility in determining options to be granted and determining
the terms and conditions thereof. The expenses of administering the Stock Option
Plan are borne by the Company.
A stock option gives the holder the right to purchase Common Stock at a
fixed price over a specified period of time. Grants may consist of either
non-qualified stock options or incentive stock options. The option price of
stock options is set by the Committee and options cannot be issued at a price
less than 100% (110% in the case of an incentive stock option granted to a
person owning, within the meaning of Section 424(d) of the Internal Revenue Code
(the "Code"), more than 10% of the stock of the Company) of the fair market
value of the Common Stock on the date the option is granted. The consideration
for the grant of an option is the employee's service to the Company. In February
1998, the Stock Option Plan was amended to provide that, with respect to grants
of options using the 3,500,000 additional shares authorized by the Board on
February 26, 1998, the Committee will not authorize the amendment of any
outstanding options to reduce their exercise price or cancel any options and
replace them with options having a lower
10
exercise price without shareholder approval, except in connection with a price
adjustment permitted under the Plan upon the occurrence of certain corporate
events such as a stock split, merger or similar event. This amendment did not
affect the provisions of the Plan allowing the Committee to make pricing changes
with respect to grants of options using previously authorized shares. The
Committee has the right under the terms of the Stock Option Plan to accelerate
the vesting of any option, except to the extent that such action would cause the
plan to violate Section 422(b)(1) of the Code, Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or Rule 16b-3 under such
act, or would cause an option or stock appreciation right intended to qualify as
performance-based compensation under Section 162(m) of the Code to fail to so
qualify.
The option price may be paid in cash, by check, or in shares of Common Stock
having a total fair market value on the date of exercise equal to the option
price. The Company may also permit the option price payable by reason of the
exercise of an option to be satisfied by withholding shares (that would
otherwise be obtained upon such exercise) having a fair market value equal to
the aggregate option price of the exercised option. The Company may also permit
optionees to use cashless exercise methods that are permitted by law and in
connection therewith the Company has established a cashless exercise program
where the commissions on the sale of stock subject to an exercised option are
paid by the Company.
Stock appreciation rights, if granted, must pertain to, and be granted only
in conjunction with, a related underlying option granted under the Stock Option
Plan and can be exercisable and exercised only to the extent that the related
option is exercisable. Upon the exercise of a stock appreciation right and the
surrender of the exercisable portion of the related option, the optionee will be
awarded cash, shares of Common Stock or a combination of shares and cash at the
discretion of the Committee. The award will have a total value equal to the
product obtained by multiplying (i) the excess of the fair market value per
share on the date on which the stock appreciation right is exercised over the
option price per share by (ii) the number of shares subject to the exercisable
portion of the related option so surrendered. No outstanding options have stock
appreciation rights.
In the case of an optionee's death, the options may only be exercisable by
the optionee's legal representative or beneficiary if the Company is properly
assured and legally advised of the rights of such persons.
The Committee may terminate the Stock Option Plan or modify or amend the
Stock Option Plan in such respect as it may deem advisable; provided, that the
Committee may not, without further approval by the Company's stockholders, make
any amendment which would require approval of stockholders under Rule 16b-3
under Section 16(b) of the Exchange Act or Section 162(m) of the Code. No
amendment, modification or termination of the Stock Option Plan may adversely
affect a participant's rights under any previously granted option without the
participant's consent.
The Committee may adjust the number of shares subject to each outstanding
option, the option prices of outstanding options, and the maximum number of
shares subject to the Stock Option Plan and may take certain other actions in
the event of certain changes in Common Stock which occur because of corporate
changes described in the Stock Option Plan.
The Committee also has authority to approve administrative rules and
regulations to govern administration of the Stock Option Plan. The Committee has
adopted administrative regulations that generally provide that, unless otherwise
agreed by the Company, upon an optionee's termination of employment, all stock
options which at the time of termination are unvested will be forfeited, and
upon death or disability,
11
50% of unvested options will become exercisable and the balance will be
forfeited. Upon a change in control (as defined), 100% of unvested options will
become exercisable. The regulations provide that the Committee may approve
exceptions to the forfeiture provisions in the regulations for stock options
granted to officers who are subject to Section 16 of the Exchange Act (which
includes all executive officers), and the Chief Executive Officer may approve
exceptions to the forfeiture provisions for other employees.
FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO THE STOCK OPTION PLAN
Certain of the federal income tax consequences applicable to the Stock
Option Plan are set forth below. This discussion is intended to be general in
scope and does not specify all of the special tax rules that can apply to
various circumstances related to stock options.
(1) NON-INCENTIVE STOCK OPTIONS. Federal taxable income is generally not
recognized by an optionee when a non-incentive stock option is granted. On the
date a non-incentive stock option is exercised, the amount by which the fair
market value of the stock exceeds the exercise price of the option is taxed as
ordinary income to the optionee. Subject to Section 162(m) of the Code, the
amount of income taxed to the optionee will be allowed as a deduction for
federal income tax purposes to the Company in the same year. When an optionee
disposes of shares acquired by the exercise of the option, any amount received
in excess of the fair market value of the shares on the date of exercise will be
treated as long- or short-term capital gain to the optionee, depending upon the
holding period of the shares. If the amount received is less than the market
value of the shares on the date of exercise, the loss will be treated as long-
or short-term capital loss, depending upon the holding period of the shares.
(2) INCENTIVE STOCK OPTIONS. Federal taxable income is generally not
recognized by an optionee on the grant of an incentive stock option. When an
optionee exercises an incentive stock option within the term of such option, no
ordinary income will be recognized by the optionee at that time. However, the
excess of the fair market value of the stock over the exercise price is
considered a "preference item" for alternative minimum tax purposes in the year
of exercise.
If the shares acquired upon exercise are disposed of more than one year
after the date of transfer (and two years after grant date), the excess of the
sale proceeds over the aggregate option price of such shares will be taxed as
long-term capital gain to the optionee. The Company would not be entitled to a
tax deduction under such circumstances. In general, if the shares are disposed
of prior to such date(s) (a "Disqualifying Disposition"), the lesser of (a) the
excess of the fair market value of such shares at the time of exercise over the
aggregate option price or (b) the amount realized on such Disqualifying
Disposition over the basis of the shares would be taxed as ordinary income to
the optionee at the time of the Disqualifying Disposition. The Company generally
would be entitled to a federal tax deduction equal to the amount of ordinary
income recognized by the optionee as a result of the Disqualifying Disposition.
If a Disqualifying Disposition occurs in the year of exercise, the
"preference item" for alternative minimum tax purposes cannot exceed the gain on
disposition. For purposes of determining the alternative minimum tax gain or
loss in years following the year of exercise, the basis of the acquired shares
will be the exercise price increased by the amount of the "preference item"
previously included in the alternative minimum taxable income.
The Company believes that the terms and conditions of both the non-incentive
and incentive stock options granted under the Stock Option Plan currently meet
the requirements for performance-based
12
compensation under Section 162(m)(4)(C) of the Code and that therefore the
compensation attributable to the exercise of a stock option is not subject to
the deduction limit under Section 162(m) of the Code.
PROPOSED AMENDMENTS TO STOCK OPTION PLAN
The Stock Option Plan expires on November 5, 1999. In order to continue its
ability to grant incentives to employees and executives in the form of stock
options, the Committee has determined that the Stock Option Plan should be
amended, subject to stockholder approval, to extend the Plan's expiration date
until February 25, 2008.
The Committee has also determined that the Stock Option Plan should have an
additional reserve of shares so that the Company's policy of providing equity
incentives in the form of stock options to executive officers and key employees
can continue. Additional shares are also important in order to be able to
provide equity incentives to additional key employees who join the Company as a
result of possible future acquisitions. In December, 1997 the Company entered
into an agreement to acquire Showboat, Inc. Accordingly, the Committee has
approved a proposed amendment to the Stock Option Plan for stockholder approval
authorizing an increase in the number of shares covered by the Plan.
The proposed amendment provides that the total authorized shares that may be
issued under the Stock Option Plan for stock options and stock appreciation
rights is increased by 3,500,000 shares. If this amendment is approved by the
stockholders, the reserve of shares that will be available for the issuance of
new options will be a total of approximately 4,840,000 shares (representing
approximately 4.2% of the outstanding shares of Common Stock). All of these
options will be available for grants to executive officers as well as other key
employees.
It is not presently determinable who will receive these options since stock
option awards are granted by the Committee in its discretion from time to time
including grants to executive officers as well as other key employees. However,
it is anticipated that all of the authorized options, including those authorized
by this amendment, will be granted prior to the proposed extended expiration of
the Stock Option Plan. See "Report of the Human Resources Committee on Executive
Compensation" for a discussion of the factors that the Committee may consider in
determining the grant of stock options to executive officers. The Plan provides
that the options granted using shares authorized by this amendment will not be
amended to reduce the exercise price or canceled and replaced with options
having a lower exercise price without shareholder approval, except in connection
with a price adjustment permitted under the Plan upon the occurrence of certain
corporate events such as a stock split, merger or similar event.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING AMENDMENTS TO THE
STOCK OPTION PLAN AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR THE AMENDMENTS UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
RESTRICTED STOCK PLAN
DESCRIPTION OF PLAN
Under the Harrah's Entertainment, Inc. 1990 Restricted Stock Plan (the
"Restricted Stock Plan"), shares of Common Stock are awarded on a periodic basis
to key employees who are selected by the Chief Executive Officer of the Company
and approved by the Committee as making significant contributions to
13
the Company. The Committee may also approve special awards to employees
nominated by the Chairman of the Board in recognition of the employee's superior
past performance.
Approximately 250 key employees are eligible to participate in the
Restricted Stock Plan. This is the only class of employees currently eligible to
participate. The Committee may change eligibility rules by amending the Plan.
In addition, a non-management director is entitled to an award of 1,000
shares under the plan upon first being elected to the Board. Eight current
non-management directors have received specified awards provided by the plan.
Any new non-management director is eligible to receive this award. It is not
determinable how many new non-management directors will be eligible since this
depends on the future make-up of the Company's Board of Directors and future
elections of directors. The awards to non-management directors vest in annual
installments over ten years.
The shares of Common Stock which are awarded are restricted as to transfer
and subject to forfeiture during a specified period or periods. The
consideration for the grant of restricted stock is the employee's service to the
Company. Each award is subject to such conditions, terms and restrictions as are
determined by the Committee. The Committee also has the power to permit
acceleration of the expiration of the applicable restriction period with respect
to any part or all of the shares awarded to a participant; provided, however,
that with respect to any award of restricted shares intended to qualify as
performance-based compensation under Section 162(m) of the Code or any successor
provisions thereto, no such acceleration shall be authorized to the extent that
such acceleration would cause such restricted shares to fail to so qualify.
Generally, in the event of a participant's termination of employment (except for
death or disability) prior to the end of a restriction period, unless otherwise
agreed by the Company, any shares upon which restrictions have not yet lapsed
will be automatically forfeited and returned to the Company without any payment
to the participant or his successors, heirs, assigns, or personal
representatives. Restricted shares that are forfeited are returned to the Plan
and can be regranted by the Committee to any key employee. The Committee has
adopted administrative regulations which provide that the Committee may approve
exceptions to the forfeiture provisions for restricted stock granted to officers
who are subject to Section 16 of the Exchange Act (which includes all executive
officers), and the Chief Executive Officer may approve exceptions to the
forfeiture provisions for other employees.
Certain key executives have been granted restricted stock awards pursuant to
a Time Accelerated Restricted Stock Award Plan (the "TARSAP Program")
established by the Committee. TARSAP shares will vest on January 1, 2002,
provided the executive continues in active employment with the Company, and are
eligible for earlier annual performance vesting beginning March 1, 1999 for the
period 1999-2001 if the Company achieves certain financial performance targets
in the year preceding the accelerated vesting. See "Report of the Human
Resources Committee on Executive Compensation."
In general, shares awarded, and any right to vote such shares and to receive
dividends thereon, may not be sold, assigned or in any way transferred during
the restriction period applicable to such shares. During the restriction period,
the recipient has all other rights of a stockholder, including, but not limited
to, the right to receive dividends and vote such shares. Certificates for
restricted shares are deposited with the Company or its designee during the
restriction period.
In the Committee's discretion, an award of restricted shares may be designed
to qualify as performance-based compensation under Section 162(m) of the Code.
It is intended that such restricted shares will vest based upon the Company's
satisfaction of certain performance goals which are based on some or all of
14
the following business criteria: pretax income, operating income, cash flow,
earnings per share, return on equity, return on average invested capital, or a
division's operating income or opened units.
In the discretion of the Committee, the plan will remain in effect until all
shares awarded under the plan are free of restrictions, but no award may be made
more than ten years after the date the plan was approved by the stockholders
which was November 5, 1989. As described below, it is proposed that the term of
the plan be extended through February 25, 2008. Upon certain changes in the
number of outstanding shares of common stock which occur as a result of
corporate changes described in the Restricted Stock Plan, the Committee may
adjust the number of shares to be issued under the plan, make equitable
adjustments in restricted shares previously awarded and take other action
specified in the Restricted Stock Plan.
The Committee may discontinue or amend the Restricted Stock Plan at any
time, except that without stockholder approval the Committee may not make any
amendment that would require stockholder approval under Rule 16b-3. The
termination or any modification or amendment of the Restricted Stock Plan may
not, without the consent of a participant, adversely affect a participant's
rights under an award previously granted. A maximum of 1,600,000 shares have
been authorized for issuance under the plan. As of January 31, 1998, there were
24,661 shares remaining in the plan that could be granted. The proposed
amendment to the Restricted Stock Plan would increase this by 3,100,000 shares.
The Committee has authority to adopt policies and procedures regarding
various administrative matters arising under the Restricted Stock Plan.
Amendments can be made to the Restricted Stock Plan that can increase the
cost of the plan to the Company and can alter the allocation of benefits as
between executive officers, employees, and directors. However, the Committee may
not modify the eligibility requirements of the Plan or otherwise amend the Plan
in a manner requiring stockholder approval as a matter of Section 16, Rule 16b-3
or Section 162(m) or other applicable law, regulation or rule without approval
of the Company's shareholders. In addition, the provisions of the plan that deal
with eligibility and benefits for non-management directors cannot be amended
more than once every six months other than to comply with changes in Federal law
or regulations.
FEDERAL INCOME TAX CONSEQUENCES OF RESTRICTED STOCK PLAN
Participants in the Company's Restricted Stock Plan must include in ordinary
income the fair market value of the stock at the time it vests. The Company has
not permitted participants to make an election under Section 83(b) of the Code
with respect to restricted stock awards and no such elections are in effect.
Upon the sale of restricted stock after it vests, a participant will recognize
either short-term or long-term capital gain (or loss) to the extent of any
appreciation (or depreciation) in the value of the stock after the vesting date.
Subject to Section 162(m) of the Code, the Company is entitled to a tax
deduction in an amount equal to the participant's ordinary income recognized on
the vesting date. The tax deduction is taken by the Company in the same year
that the participant recognizes ordinary income by reason of the vesting of the
stock.
The foregoing is a brief summary of the tax consequences relating to
restricted stock and is not intended to be complete. It does not describe state
or local tax consequences.
15
PROPOSED AMENDMENTS TO RESTRICTED STOCK PLAN
The Restricted Stock Plan expires on November 5, 1999. In order to continue
its ability to grant incentives to employees and executives in the form of
restricted stock, the Committee has determined that the Restricted Stock Plan
should be amended, subject to stockholder approval, to extend the Plan's
expiration date until February 25, 2008.
The Committee has further determined that the Restricted Stock Plan should
have an additional reserve of shares available so that restricted stock can
continue to be used as an equity incentive for executive officers and key
employees for the extended years of the Plan and to provide equity incentives to
additional key employees who join the Company as a result of possible future
acquisitions. Accordingly, the Committee has approved a proposed amendment to
the Restricted Stock Plan for stockholder approval authorizing an increase in
the number of shares covered by the Plan.
The proposed amendment provides that the total authorized shares that may be
issued under the Plan is increased by 3,100,000 shares. If this amendment is
approved by the stockholders, the reserve of shares that will be available for
the issuance of new awards of restricted stock will be a total of approximately
3,124,000 shares (representing approximately 2.7% of the outstanding shares of
Common Stock on a fully-diluted basis). All of these shares of restricted stock
will be available for grants to executive officers as well as other key
employees.
It is not presently determinable who will receive these shares of restricted
stock since restricted stock awards are granted by the Committee in its
discretion from time to time including grants to executive officers as well as
other key employees. However, it is anticipated that all of the authorized
shares of restricted stock, including those authorized by this amendment, will
be granted prior to the proposed extended expiration of the Restricted Stock
Plan. See "Report of the Human Resources Committee on Executive Compensation"
for a discussion of the factors that the Committee may consider in determining
grants of restricted stock awards to executive officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING AMENDMENTS TO THE
RESTRICTED STOCK PLAN AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR THE AMENDMENTS UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
16
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)
NAME AND OTHER RESTRICTED SECURITIES ALL
PRINCIPAL ANNUAL STOCK UNDERLYING OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARD(S) OPTIONS COMPENSATION
- ---------------------------- --------- --------- --------- ----------- --------- ----------- -----------
Philip G. Satre............. 1997 $ 797,577 $ 350,934 $ 75,336 $ 238,130 $ 205,395
Chairman, President and 1996 511,500 6,478 2,050,000 350,271 189,406
Chief Executive Officer 1995 477,000 133,560 3,869 82,884 132,356
Colin V. Reed............... 1997 381,019 200,000 8,614 100,000 70,634
Executive Vice President 1996 330,625 3,366 1,025,000 152,484 65,300
and Chief Financial 1995 297,904 69,018 2,283 34,998 45,039
Officer
John M. Boushy.............. 1997 236,988 100,000 387 101,094 50,000 24,209
Senior Vice President, 1996 215,622 30 512,500 98,268 22,939
Information Technology 1995 198,464 45,646 14 19,191
and Marketing Services
Ben C. Peternell............ 1997 254,948 92,000 7,255 202,188 50,000 210,700
Senior Vice President, 1996 242,500 3,617 512,500 98,121 194,291
Human Resources and 1995 229,000 53,815 2,814 19,438 141,002
Communications
E. O. Robinson, Jr.......... 1997 255,937 80,000 5,922 202,188 50,000 78,953
Senior Vice President 1996 241,375 2,598 410,000 90,159 60,217
and General Counsel 1995 219,125 51,494 2,580 19,438 30,249
- ------------------------
(1) Other Annual Compensation for Messrs. Reed, Boushy, Peternell and Robinson
and for Mr. Satre in the years 1995 and 1996 consists of earnings in excess
of market rates on deferred compensation payable during the current year but
deferred at the election of the executives. Other Annual Compensation for
Mr. Satre in 1997 includes (a) earnings in excess of market rates on
deferred compensation paid during the current year but deferred at the
election of Mr. Satre in the amount of $16,167, (b) a rollover amount on
deferred compensation in the amount of $38,455, and (c) an allocated amount
for aircraft usage of $14,420. Other Annual Compensation for perquisites for
each other individual named above and for Mr. Satre for the years 1995 and
1996 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. The Company does not provide a fixed benefit pension
17
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 based on an
interest rate approved by the Human Resources Committee.
(2) Awards of restricted stock were granted to the executives in 1997 and 1996
under a Time Accelerated Restricted Stock Award Program. The numbers of
shares awarded to Messrs. Boushy, Peternell and Robinson in 1997 were 5,000,
10,000, and 10,000, respectively. The numbers of shares awarded to Messrs.
Satre, Reed, Boushy, Peternell and Robinson in 1996 were 100,000, 50,000,
25,000, 25,000 and 20,000, respectively. The shares will vest on January 1,
2002, provided the executive continues in active employment with the
Company, and are eligible for earlier annual vesting beginning March 1,
1999, if the Company achieves certain financial performance targets. See
"Report of the Human Resources Committee on Executive Compensation." The
number of unvested shares held by Messrs. Satre, Reed, Boushy, Peternell and
Robinson as of December 31, 1997 was 100,000, 50,000, 30,129, 35,000 and
30,150, respectively. The market value of the unvested restricted stock
awards held by Messrs. Satre, Reed, Boushy, Peternell and Robinson as of
December 31, 1997 was $1,887,500, $943,750, $568,685, $660,625 and $569,081,
respectively. 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.
(3) The numbers shown are net of the cancellation of stock options in November
1996.
(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 1997: Mr. Satre,
$195,895 and $9,500; Mr. Reed, $61,134 and $9,500; Mr. Boushy, $14,709 and
$9,500; Mr. Peternell, $201,200 and $9,500; and Mr. Robinson, $36,706 and
$9,500; For 1996: Mr. Satre, $180,406 and $9,000; Mr. Reed, $56,300 and
$9,000; Mr. Boushy, $13,939 and $9,000; Mr. Peternell, $185,291 and $9,000;
and Mr. Robinson, $33,804 and $9,000; For 1995: Mr. Satre, $123,356 and
$9,000; Mr. Reed, $36,039 and $9,000; Mr. Boushy, $9,951 and $9,240; Mr.
Peternell, $132,002 and $9,000; and Mr. Robinson, $21,249 and $9,000. For
Mr. Robinson such compensation also includes reimbursements outside the
Company's group insurance plan in the amount of $32,747 in 1997 and $17,413
in 1996. As stated in note (1) above, the Company does not provide a fixed
benefit pension plan for its executives, and the amounts set forth above are
retirement benefits which are a function of deferred income voluntarily
contributed by the executives based on an interest rate approved by the
Human Resources Committee.
18
The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during 1997, including information as to the potential realizable value of such
options at assumed annual rates of stock price appreciation for the ten-year
option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1997, and for all
Harrah's Entertainment stockholders.
HARRAH'S ENTERTAINMENT, INC.
OPTION GRANTS IN THE LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED ANNUAL
SECURITIES TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ---------------------------------------
NAME GRANTED(#)(2) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
- -------------------------------- ------------- ------------- ----------- ----------- --- ------------- -------------
Philip G. Satre................. 38,130 1.5% $ 18.5000 01/16/07 $ -- $ 443,625 $ 1,124,234
200,000 8.0% 18.9375 12/12/07 -- 2,381,938 6,036,300
Colin V. Reed................... 100,000 4.0% 18.9375 12/12/07 -- 1,190,969 3,018,050
John M. Boushy.................. 50,000 2.0% 18.9375 12/12/07 -- 595,485 1,509,075
Ben C. Peternell................ 50,000 2.0% 18.9375 12/12/07 -- 595,485 1,509,075
E. O. Robinson, Jr.............. 50,000 2.0% 18.9375 12/12/07 -- 595,485 1,509,075
All Stockholders(3)............. n/a n/a n/a n/a -- 1,202,619,508 3,047,673,952
All Optionees................... 2,495,903 100.00% 18.93(4) various -- 29,721,355 75,319,749
All Optionees as a percent of
All
Stockholders Gain............. n/a n/a n/a n/a n/a 2.47% 2.47%
- ------------------------
(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) 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.
(4) Represents the weighted average exercise price of options granted to all
optionees.
19
The following table sets forth certain information concerning stock option
exercises during 1997 by the executive officers named in the Summary
Compensation Table and information concerning option values.
HARRAH'S ENTERTAINMENT, INC.
AGGREGATED OPTION EXERCISES IN 1997 AND
DECEMBER 31, 1997 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1997(#) AT DECEMBER 31, 1997($)(1)
ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------------- ------------- ----------- ------------- ------------ -------------
Philip G. Satre..................... -- $ -- 217,607 655,129 $ 1,830,369 $ 512,175
Colin V. Reed....................... -- -- 119,425 288,079 943,700 266,339
John M. Boushy...................... -- -- 11,513 149,427 127,109 115,489
Ben C. Peternell.................... -- -- 68,520 165,215 624,193 149,222
E. O. Robinson, Jr.................. -- -- 29,313 152,889 164,490 99,304
- ------------------------
(1) Amount represents the difference between the aggregated option price of
unexercised options and a $18.875 market price on December 31, 1997, which
was the closing price of the Common Stock on the last trading day of 1997.
CERTAIN EMPLOYMENT ARRANGEMENTS
Pursuant to an employment agreement with Mr. Satre, the Company has agreed
to employ Mr. Satre as Chairman of the Board, President and Chief Executive
Officer from January 1, 1997 until December 31, 1998 at a current annual salary
effective January 1, 1998, of $800,000, subject to merit increases as may be
approved by the Human Resources Committee. During the term of this employment
agreement, Mr. Satre is entitled to participate in incentive compensation
programs and other benefits accorded to senior officers, including eligibility
for bonus compensation and long-term incentive compensation in the form of stock
options and restricted stock awards as 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 other than unvested TARSAP shares
will continue in force during this period of time for vesting purposes. Any
unvested TARSAP shares would be forfeited upon termination of the agreement
unless the Human Resources Committee of the Board of Directors were to approve
an exception based on its review of the circumstances at that time.
If the agreement is terminated for cause, Mr. Satre's unvested options and
any shares of unvested 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.
20
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 benefits
under his severance agreement (if then in force) in lieu of the salary and
rights under his employment agreement.
After the termination of his employment with the Company, Mr. Satre will be
entitled to receive group insurance benefits at the Company's cost for his
lifetime similar to the benefits provided to other retired management directors
of the Company.
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 (the "Compensation Payment") of three times
the "annual compensation" (as defined in the severance agreements) of such
executive as well as a pro rata amount of the executive's target bonus for the
current bonus plan year and an accelerated payment in cash of the value of all
stock options and payment of any compensation or awards payable to such
executive under any incentive plan of the Company (the "Accelerated Payments"),
if the executive's employment is terminated subsequent to a change in control
(collectively, the "Severance Payments"), with certain exceptions described
below. With respect to any unvested restricted stock and stock options, such
stock awards vest automatically upon a change in control regardless of
termination of the employee.
The "annual compensation" for purposes of determining the Compensation
Payment under the severance agreement includes salary and bonus amounts but
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.
Mr. Satre is entitled to the Compensation Payments if, within two years
after a change in control of the Company, his employment terminates voluntarily
or involuntarily. The other executives are entitled to the Compensation Payments
after a change in control if, within two years of the change in control, the
executive's employment is terminated involuntarily, or the executive resigns
with good reason (as defined). Additionally, the executives are entitled to the
Compensation Payments if the executive's employment terminates voluntarily
during a 30 day period following the first anniversary of the change in control.
For the purpose of such voluntary termination, a change in control is defined to
occur whenever: (i) any person becomes the beneficial owner of a majority of the
Company's then outstanding voting securities (rather than 25% or more)
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 after a change
in control if their termination is: (i) by the Company for cause (as defined),
or, except for Mr. Satre, (ii) voluntary and not for good reason (as defined)
other than as described in the preceding paragraph.
In the event that an executive becomes entitled to Severance Payments which
are subject to a federal excise tax imposed on the executive (the "Excise Tax"),
the severance agreements provide that the
21
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 less normal taxes.
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 (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 resulting in 14.5% or more ownership, 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, 1998, if a change in control occurred and if
such executives had been terminated as of that date, would have been
approximately: Mr. Satre, $3,225,043 and $4,708,590; Mr. Reed, $1,653,106 and
$2,363,349; Mr. Boushy, $1,043,410 and $927,614 ; Mr. Peternell, $1,137,683 and
$1,561,514; and Mr. Robinson, $1,057,741 and $958,532. Such Accelerated Payments
include the value of any unvested restricted stock and unexercised stock options
that would accelerate upon a change in control, based on the market price of the
Common Stock on December 31, 1997.
The Company's executive officers participate in the Executive Deferred
Compensation Plan under which 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. With respect to
deferrals made during 1997, the termination rate earned on these deferrals for
1997 was 8.5% and the retirement rate earned on these deferrals was 13.0%. 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 1998 for post- 1995 deferrals has been approved at 8.5% and the
retirement rate 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.
22
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 terminates within a 24 month
period after the change in control. Messrs. Satre, Reed, Boushy 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 non-management 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, upon the request of an executive, place into
this escrow fund the severance payments which become payable to the executive
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.
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 non-employee directors. The
Committee is responsible for approving the compensation of management directors,
reviewing the compensation of other executive officers, including the executive
officers named in the Summary Compensation Table, and approving stock awards,
including stock options and restricted stock, 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 discretionary rights of the Committee, provides incentive
compensation based on the Company's annual financial performance, and (iii)
long-term compensation is tied to enhanced shareholder value and to the
Company's financial performance.
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 250 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
23
considered for purposes of determining 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, strategically and operationally, as a leading
brand in the casino entertainment industry, achieving the Company's annual
business plan and its various financial goals, and increasing total long-term
shareholder value. 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.
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 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. Mr. Satre's salary was increased effective January 1, 1997, when he
was elected Chairman of the Board. See "Certain Employment Arrangements" on page
20. Merit salary increases were approved for the other executive officers during
1997.
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.
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 million. 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. No
executives participated in the Key Executive Plan for the plan year 1997, and
the Committee has determined that no executives will participate in 1998. As a
result, all executive officers participated in the Company's annual management
bonus plan during 1997, and all will do so in 1998. See "Annual Management Bonus
Plan" below.
24
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 participating in 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 1997 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 as defined in the plan.
A Bonus Matrix, which has been approved by the Committee, 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 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 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 50% to 60% of their base salary. For performance above target, the bonus is
increased on a graduated scale to a maximum bonus of 100% to 120% of their base
salary.
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 objective 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.
The executive officers received bonuses for 1997 performance. Because of the
significant profit realized by the Company in the sale of its equity interest in
the New Zealand casino, the Committee exercised its discretion authorized under
the bonus plan to include the gain from this sale in the bonus calculations. No
bonuses were paid to executive officers for the 1996 plan year.
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
25
date. The Committee may grant a combination of restricted stock and/or stock
options to officers and other key employees. Awards vest upon a change in
control (as defined).
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.
The executive officers participate in a Time Accelerated Restricted Stock
Award Plan designed to motivate and retain the Company's key executives in the
Company's current competitive environment and with a view to enhancing
shareholder value. Under the TARSAP Program, certain key executives, including
all executive officers, were granted restricted stock awards (the "Restricted
Shares") under the Company's Restricted Stock Plan. The Restricted Shares will
vest 100% on January 1, 2002 provided the executive continues in active
employment with the Company.
The Restricted Shares are eligible for earlier annual performance vesting
beginning March 1, 1999 if the Company achieves financial performance targets
recommended by the Committee and approved by the Board of Directors. The
performance vesting schedule, which has been approved by the Committee and the
Board of Directors, provides for a potential cumulative vest of 20% to 40% of
the Restricted Shares by March 1, 1999; 50% to 70% by March 1, 2000; and 80% to
100% by March 1, 2001. The performance schedule can be modified upon
recommendation of the Committee and approval of the Board. The performance
targets for 1998 approved by the Committee and the Board relate to earnings per
share. Performance targets for future years will be established by the Committee
and approved by the Board at later dates.
The Restricted Shares will vest upon a change in control (as defined) in the
same manner as other grants under the Restricted Stock Plan.
The Committee has broad flexibility to oversee and amend the TARSAP Program
and, with Board approval, can modify performance criteria and specific financial
targets. The Committee also has the right to make exceptions based on unusual
factors or events. However, the mandatory vesting date of January 1, 2002 cannot
be extended. See Summary Compensation Table, page 17, for more information on
grants under the TARSAP Program to named executive officers.
The amount of a stock option or restricted stock 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.
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
26
executive, or where achieving full tax deductibility would be considered
disadvantageous to the best interests of the Company. The Company's Key
Executive Plan 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 performance, his responsibilities and the compensation levels for comparable
positions in other companies in the casino entertainment industry. Under his
employment agreement, he is entitled to merit salary increases and to
participate in the incentive programs provided to senior officers. Mr. Satre's
merit salary increase and his incentive awards for 1997 were determined in
accordance with the Committee's policies described in this report. The stock
options awarded to Mr. Satre in 1997 are described in the table titled "Option
Grants in the Last Fiscal Year," on page 19. The options were awarded in
accordance with the Committee's policies as described in this report.
Human Resources Committee
Joe M. Henson (Chairman)
James B. Farley
R. Brad Martin
Boake A. Sells
27
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"), and (b) the Dow Jones Casinos Index. The graph assumes reinvestment
of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG HARRAH'S ENTERTAINMENT, INC., THE S & P 500 INDEX, AND
THE DOW JONES CASINOS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS
HARRAH'S ENTERTAINMENT, INC. S & P 500 DOW JONES CASINOS
12/92 100 100 100
12/93 250 110 153
12/94 168 112 117
12/95 186 153 155
12/96 153 189 170
12/97 145 252 150
*$100 INVESTED ON DECEMBER 31, 1992 IN STOCK OR INDEX - INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDED DECEMBER 31.
- ------------------------------
(1) 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, 1992. 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 hotel business, at which time Promus changed its name to
Harrah's Entertainment, Inc.
(2) The Dow Jones Casinos Index was formerly referred to as the Dow Jones
Entertainment & Leisure-Casinos Index.
28
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 1.36% share of the
total commitment covered by the Bank Facility. As of December 31, 1997,
$9,640,229 of this $15,000,000 was outstanding in loans and in unfunded standby
letters of credit. In connection with this commitment, First Tennessee received
interest and fees of $493,905 during 1997. 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 at the end of each month during 1997 was
$13,638,083. As of December 31, 1997, the amount was $7,239,000. Interest
received on such investment during 1997 was approximately $726,798.
Certain direct and indirect subsidiaries of the Company maintained deposit
accounts with First Tennessee during 1997. The average ledger balance during
1997 was $2,282,457. Deposit account service fees paid to First Tennessee in
excess of the earning credit assigned to these accounts were approximately
$94,630 during 1997. First Tennessee provides ATM services to the Company's
Tunica, Mississippi casino and received revenues of $94,300 during 1997. First
Tennessee also received fees and revenues of approximately $54,128 on other
miscellaneous transactions with Harrah's Entertainment in 1997.
After reviewing proposals from several vendors, the Company selected First
Tennessee to offer a co-branded credit card program for Harrah's customers. The
program was launched in late 1997. First Tennessee pays the Company a new card
fee for each new card issued. The Company estimates that First Tennessee will
pay the Company fees ranging from approximately $180,000 to $360,000 during
1998.
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 $340,550 for retail and
classified newspaper advertising during 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file with the SEC initial reports of ownership and reports of
changes in ownership of Company common stock and to furnish the Company with
copies of all forms filed. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, during the past fiscal year all Section
16(a) filing requirements applicable to the Company's officers and directors
were met, except that an amendment was filed to Judy T. Wormser's initial
statement of beneficial ownership to correct an inadvertent omission of 367
shares of unvested restricted stock.
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 1998. Representatives of Arthur Andersen LLP will be
present at the Annual
29
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 1998 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, excluding abstentions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS FOR THE YEAR 1998.
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, 1997.
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
- ------------------------------------------------------------------------------------- ----------------- -----------
Trustees of the Harrah's Entertainment, Inc.......................................... 6,399,758(a) 6.3%
Savings and Retirement Plan
1023 Cherry Road
Memphis, TN 38117
Mackay-Shields Financial Corporation................................................. 7,109,100(b) 7.0%
9 West 57th Street
New York, NY 10019
Massachusetts Financial Services Company............................................. 5,980,044(c) 5.9%
500 Boylston Street
Boston, MA 02116
Oppenheimer Capital.................................................................. 7,728,843(d) 7.7%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Trimark Financial Corporation........................................................ 6,041,700(e) 6.0%
One First Canadian Place, Suite 5600
P.O. Box 487
Toronto, Canada M5X 1E5
- ------------------------
(a) 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 and to direct
the trustees in writing as to how to respond to a tender offer evidenced by
the filing of a statement on Schedule 14D-1 or similar transaction. No one
participant
30
has such rights with respect to more than 5% of the Company's Common Stock.
The sources of this information are official plan documents and a Schedule
13G filed by the trustees of the Plan with the Securities and Exchange
Commission and dated February 10, 1998. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1997.
(b) Mackay-Shields Financial Corporation ("Mackay-Shields") is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940
and has reported beneficial ownership of the shares listed, including shared
voting power and shared dispositive power with respect to such shares.
Mackay-Shields has reported that clients of the investment manager have the
right to receive and the ultimate power to direct the receipt of dividends
from, or the proceeds of the sale of, such shares, and that no interest of
any such clients relates to more than 5% of the class. The source of this
information is a Schedule 13G filed by MacKay-Shields with the Securities
and Exchange Commission and dated February 13, 1998. Ownership (number of
shares and percent of shares outstanding) is reported as of December 31,
1997.
(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 5,959,344 shares and has
sole dispositive power as to the 5,980,044 shares listed. The source of this
information is a Schedule 13G filed by MFS with the Securities and Exchange
Commission and dated February 12, 1998. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1997.
(d) Oppenheimer Capital ("Oppenheimer"), a registered investment adviser, has
reported, on behalf of itself and/or certain investment advisory clients or
discretionary accounts, collective beneficial ownership of the shares
listed, including shared voting power and shared dispositive power with
respect to all such shares. The source of this information is a Schedule 13G
filed by Oppenheimer with the Securities and Exchange Commission and dated
February 27, 1998. Ownership (number of shares and percent of shares
outstanding) is reported as of December 31, 1997.
(e) Trimark Financial Corporation ("Trimark"), a corporation incorporated under
the laws of Ontario, Canada, has reported beneficial ownership, including
sole voting power and sole dispositive power, of the shares listed. Trimark
has reported that certain Trimark mutual funds (the "Funds"), which are
trusts organized under the laws of Ontario, Canada, are owners of record of
a portion of the shares listed, and that Robert C. Krembil, a Canadian
citizen and Chairman and shareholder of Trimark, and Arthur S. Labatt, a
Canadian citizen and President and shareholder of Trimark, are also owners
of a portion of the securities listed. Trimark Investment Management Inc.
("TIMI"), a corporation incorporated under the laws of Canada, is a manager
and trustee of the Funds. TIMI is qualified to act as an investment adviser
and manager of the Funds in the province of Ontario pursuant to a
registration under the Securities Act (Ontario). Trimark owns 100% of the
voting equity securities of TIMI. The source of this information is a
Schedule 13G filed by Trimark with the Securities and Exchange Commission
and dated February 11, 1998 and related correspondence dated February 13,
1998. Ownership (number of shares and percent of shares outstanding) is
reported as of December 31, 1997.
31
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.
STOCKHOLDER PROPOSALS FOR 1999 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 1999 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 13, 1998. 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
[SIGNATURE]
Rebecca W. Ballou
Secretary
Memphis, Tennessee
March 13, 1998
32
[LOGO]
HARRAH'S ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 1, 1998
The undersigned hereby appoints Colin V. Reed, 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, at the Annual
Meeting of Stockholders of Harrah's Entertainment, Inc. (the "Company") to be
held on May 1, 1998 at 11:30 a.m. in the Winegardner Auditorium--Dixon Gallery
and Gardens, 4339 Park Avenue, Memphis, Tennessee and at any adjournment or
postponement 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) and in accordance with their discretion on any other matters
that may properly come before the meeting or any adjournment or postponement
thereof. 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
instructions 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.
PLEASE SIGN AND DATE ON REVERSE SIDE
(LOGO)
HARRAH'S ENTERTAINMENT, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1998 AT 11:30 A.M.
WINEGARDNER AUDITORIUM
DIXON GALLERY AND GARDENS
4339 PARK AVENUE
MEMPHIS, TENNESSEE
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR:
1. Election of Class II directors for three-year terms expiring at the 2001
Annual Meeting.
FOR all nominees WITHHOLD AUTHORITY to vote for all nominees listed
listed below / / below / /
*EXCEPTIONS / /
NOMINEES: Ralph Horn, Philip G. Satre and Boake A. Sells
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" 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.)
*Exceptions
--------------------------------------------------------------------------
2. Approval of amendments to the Company's 1990 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
3. Approval of amendments to the Company's 1990 Restricted Stock Plan.
FOR / / AGAINST / / ABSTAIN / /
4. Ratification of the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the 1998 calendar year.
FOR / / AGAINST / / ABSTAIN / /
If you plan to attend the Annual Meeting of Stockholders, please mark the
following box and promptly return this Proxy Card. / /
Change of Address Mark Here / /
Signature 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. Joint owners should both
sign.
Dated_____________________, 1998
Signature_______________________
Signature_______________________
VOTES MUST BE INDICATED (X) IN
BLACK OR BLUE INK.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
EXHIBIT INDEX
EXHIBIT NO.
- -------------
1. The Promus Companies Incorporated 1990 Stock Option Plan (as amended July 29 , 1994)
2. Amendment to The Promus Companies Incorporated 1990 Stock Option Plan dated April 5, 1995
3. Amendment to The Harrah's Entertainment, Inc. 1990 Stock Option Plan dated February 26, 1998
4. The Promus Companies Incorporated 1990 Restricted Stock Plan (as amended July 29 , 1994)
5. Amendment to The Promus Companies Incorporated 1990 Restricted Stock Plan dated April 5, 1995
6. Amendment to The Harrah's Entertainment, Inc. 1990 Restricted Stock Plan dated February 26,
1998
Exhibit 1
THE PROMUS COMPANIES INCORPORATED
1990 STOCK OPTION PLAN
(AS AMENDED JULY 29, 1994)
A. PURPOSE
The purpose of The Promus Companies Incorporated 1990 Stock Option Plan (the
"Plan") is to attract and retain outstanding key employees and to provide an
incentive to, and encourage stock ownership in The Promus Companies
Incorporated, a Delaware corporation (the "Company"), by those employees
responsible for the policies and operations of the Company or its Subsidiaries.
As used herein, "Subsidiary" means any domestic or foreign corporation, at least
50% of the outstanding voting stock or voting power of which is beneficially
owned, directly or indirectly, by the Company.
B. ADMINISTRATION
1. This Plan shall be administered by the Human Resources Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall consist of not less than three members of the Board of
Directors. No person shall be appointed to the Committee (i) who is (or has been
during the one-year period prior to such appointment) eligible to receive an
award under the Plan or any other stock, stock option or stock appreciation
right plan of the Company, a Subsidiary or a Parent Company other than a plan or
provision of a plan specifically developed for, or made available to, members of
the Board who are not employees and which otherwise complies with subsection
(b)(1)(iii) of Rule 16b-3 ("Rule 16b-3") under Section 16 ("Section 16") of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor provision; or (ii) who has received options under the Plan if at the
time of such appointment, the options have not been exercised. As used herein,
"Parent Company" means any domestic or foreign corporation that beneficially
owns, directly or indirectly, at least 50% of the outstanding voting stock or
voting power of the Company.
2. The Committee shall have full authority and discretion to determine,
consistent with the provisions of this Plan other than with respect to
Replacement Options (as defined below): (1) the employees who should be granted
options; (2) whether the option or options shall be an incentive stock option or
a non-qualified stock option; (3) the times at which options shall be granted;
(4) subject to Section F, the option price of the shares subject to each option;
(5) the number of shares subject to each option; (6) subject to Section I, the
period during which each option becomes exercisable; and (7) other terms and
conditions of each option.
3. The Committee shall further have discretion at any time and from time to
time to accelerate the date or dates when outstanding options become exercisable
and to decrease the option price of outstanding options. The Committee may in
its discretion change any incentive stock option to a non-qualified stock option
without liability to any employee who has received options under this Plan (an
"Optionee"). The Committee shall also have full authority and discretion to
adopt such rules, regulations and procedures as it shall deem necessary for the
administration of the Plan and to interpret, amend or revoke any such rules,
regulations or procedures.
4. The Committee may in its discretion provide in the terms of any stock
option (other than a Replacement Option) that the number of Shares subject to
such option will be decreased if the participant's grade level is reduced by the
Company, any Subsidiary or any Parent Company, for performance, by
reason of change in job functions or responsibilities, or by reason of transfer
to a different position during the term of the option. Options that become
exercisable prior to the reduction in the option award shall not be affected.
5. The Committee's interpretation and construction of any provisions of this
Plan or any option granted hereunder shall be final, conclusive and binding upon
all Optionees, the Company and all other interested parties.
C. ELIGIBILITY
1. The Committee shall from time to time determine the key management
employees of the Company and any of its Subsidiaries who shall be granted
options (other than Replacement Options) under the Plan. No incentive stock
option shall be granted to any director of the Company who is not an employee of
the Company, any of its Subsidiaries or any of its Parent Companies. An employee
who has been granted an option may be granted an additional option or options
under this Plan if the Committee shall so determine. The granting of an option
under this Plan shall not affect any outstanding stock option previously granted
to an Optionee under this Plan or any other plan of the Company, a Subsidiary or
a Parent Company.
2. Each employee of the Company who prior to the merger (the "Merger") of
Bass (U.S.A.) Hotels, Incorporated, a Delaware corporation ("Merger Sub"), with
and into Holiday Corporation ("Holiday") pursuant to that certain Agreement and
Plan of Merger (the "Merger Agreement") among Holiday, Holiday Inns, Inc., the
Company, Bass plc, Merger Sub and Bass (U.S.A.) Hotels, Incorporated, a
Tennessee corporation, dated as of August 24, 1989, as amended, held options to
purchase Holiday common stock issued under Holiday's 1977 Incentive Stock Option
Plan or 1989 Stock Option Plan (collectively, "Holiday Stock Options") and which
options were not exercised prior to the Merger shall, in lieu and upon
cancellation of such Holiday Stock Options, be issued an option (a "Replacement
Option") to purchase shares of the $1.50 par value common stock ("Common Stock")
of the Company under the Plan subject to the following terms:
(1) Upon the consummation of the Merger each such employee shall hereby
be issued, without the requirement of any additional act of the Committee, a
Replacement Option to purchase the number of shares of Common Stock (rounded
upward to the nearest full share) with a per share exercise price, (rounded
downward to the nearest cent) determined to preserve each such Holiday Stock
Option's value as of the time of the Merger (such value being the product of
(A) the difference between (i) the sum of (x) the fair market value of a
share of Common Stock (as defined for purposes of this paragraph only,
below), (y) the fair market value of a share of Bass plc stock (as defined
for purposes of this paragraph only, below) multiplied by the number of
shares of Bass plc stock to be issued for each outstanding share of Holiday
common stock in the Merger (assuming all Holiday Stock Options have been
exercised) and (z) the amount of the special cash dividend to be paid with
respect to each share of Common Stock as contemplated in the Merger
Agreement and (ii) such Holiday Stock Option's exercise price per share, and
(B) the number of shares of Holiday common stock subject to such Holiday
Stock Options). For purposes of this paragraph, the fair market value of a
share of Common Stock shall be deemed to be equal to the average of the
closing prices of a share during the ten trading days following the
effective time of the Merger as reported on the New York Stock Exchange. If
the special cash dividend has not been paid on the date of the effective
time of the Merger, the above calculation will be adjusted to preserve the
intended reduction. For purposes of this
2
paragraph only, the fair market value of a share of Bass plc stock shall be
deemed to be equal to the "Market Value Per Bass Share," as defined in the
Merger Agreement.
(2) Replacement Options granted in exchange for vested Holiday Stock
Options shall be vested, and Replacement Options granted in exchange for
unvested Holiday Stock Options shall be unvested and subject to the same
vesting schedules as the Holiday Stock Options surrendered in exchange
therefor.
(3) Replacement Options shall be subject to the same terms as the
Holiday Stock Options they replace, including dates of expiration and the
inclusion of stock appreciation rights, if applicable, except that the
Replacement Options shall vest based on continued employment with the
Company and all references made to Holiday or any of its subsidiaries shall
be deemed references to the Company and its subsidiaries. The Replacement
Options shall comply in all other respects with the Plan.
(4) The Replacement Options shall be evidenced by option agreements or
certificates.
D. SHARES OF STOCK SUBJECT TO THIS PLAN
1. The number of shares which may be issued pursuant to the options granted
by the Committee under this Plan shall not exceed 1,200,000 shares of Common
Stock.* Such shares may be authorized and issued shares or shares previously
acquired or to be acquired by the Company and held in treasury. Any shares
subject to an option which expires for any reason, is forfeited, or is
terminated unexercised as to such shares may again be subject to an option under
this Plan. To the extent that a stock appreciation right shall have been
exercised and paid in cash, the number of shares subject to the related option,
or portion thereof, may again be subject to an option under this Plan.
2. If the outstanding shares of Common Stock of the Company are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, combination of shares or otherwise, appropriate
adjustments shall be made by the Committee in the number and kind of shares for
the purchase of which options may be granted, including adjustments of the
limitations in paragraph 1 on the maximum number and kind of shares which may be
issued on exercise of options. Adjustments made by the Committee shall be final,
conclusive and binding upon all Optionees, the Company and all other interested
parties.
3. Effective April 30, 1993, the number of authorized shares which may be
issued pursuant to the options granted by the Committee under the Plan is
increased by an additional 1,500,000 shares.
Effective April 29, 1994, the maximum number of options that can be granted
in any one year period to one employee shall be options for 250,000 shares,
provided that this limit shall be appropriately adjusted by the Committee in
accordance with Section D.2 hereof.
- --------------
* The number of shares available for the issuance of options immediately prior
to the March 8, 1993 record date of the 2 for 1 stock split was multiplied by
two pursuant to action taken by the Committee on February 25, 1993. The number
of shares available for the issuance of options immediately prior to the
November 8, 1993 record date of the 3 for 2 stock split was multiplied by 1.5
pursuant to action taken by the Committee on October 29, 1993.
3
E. ISSUANCE AND TERMS OF OPTION CERTIFICATES
Each key management employee to whom an option is granted under this Plan
shall be entitled to receive an appropriate certificate evidencing his option
and referring to the terms and conditions of this Plan.
F. OPTION PRICE
1. Each option shall state the number of shares to which it pertains and
shall state the option price. The option price for Replacement Options shall be
as set forth in Section C(2). Subject to the foregoing, the option price of
incentive stock options shall not be less than 100% (110% in the case of an
option granted to an individual owning (within the meaning of Section 425(d) of
the Internal Revenue Code of 1986, as amended (the "Code")) more than 10% of the
total combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Company) of the Fair Market Value of the Common Stock
on the date the option is granted. The option price of any option under the Plan
regardless of the date of the option shall not be less than the par value per
share of the Common Stock as provided in the Company's Certificate of
Incorporation as amended April 29, 1994. Provided, that non-qualified options
shall not be issued under this Plan at less than the average of the high and low
prices of the Company's Common Stock on the principal exchange or system where
the Common Stock is traded on the date that the option is granted or, if such
date is not a trading day, the preceding trading day. "Fair Market Value" of a
share of Common Stock as of a given date shall be: (i) the closing price of a
share of Common Stock on the principal exchange on which shares of Common Stock
are then trading, if any, on the day previous to such date, or if shares were
not traded on the day previous to such dates, then on the next preceding trading
day during which a sale occurred; or (ii) if such stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, (1) the last
sales price (if the stock is then listed as a National Market Issue under the
NASD National Market System) or (2) the mean between the closing representative
bid and asked prices (in all other cases) for the stock on the day previous to
such date as reported by NASDAQ or such successor quotation system; or (iii) if
such stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the stock, on the day previous to such date, as determined in good faith by
the Committee; or (iv) if Common Stock is not publicly traded, the fair market
value established by the Committee acting in good faith; provided that if there
has been no sale of Common Stock during the 30-day period prior to the date of
the calculation provided for in this sentence, then such stock shall not be
considered to be trading on an exchange or quoted on the NASDAQ or successor
quotation system.
2. The option price shall be payable in United States dollars upon the
exercise of the option and may be paid in cash, by check, or in shares of Common
Stock having a total Fair Market Value on the date of exercise equal to the
option price. The Company may also permit the option price incurred by reason of
the exercise of an option to be satisfied by withholding shares (that would
otherwise be obtained upon such exercise) having a Fair Market Value equal to
the aggregate option price of the exercised option. The Company may permit
Optionees to use cashless exercise methods that are permitted by law and in
connection therewith the Company may establish a cashless exercise program
including a program where the commissions on the sale of stock subject to an
exercised option are paid by the Company.
3. The proceeds received by the Company from the sale of Common Stock
subject to option are to be added to the general funds of the Company and used
for its corporate purposes.
4
G. TREATMENT OF CERTAIN OPTIONS; CERTAIN LIMITATIONS ON GRANT
1. Subject to the provisions of this Section G, the Committee may grant
under this Plan both incentive stock options under Section 422A of the Code and
non-qualified stock options not subject to Section 422A of the Code.
2. To the extent that the aggregate Fair Market Value (determined at the
time the option is granted) of the stock with respect to which incentive stock
options (within the meaning of Section 422A of the Code, but without regard to
Section 422A(d) of the Code) are exercisable for the first time by an Optionee
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, any Subsidiary and any Parent Company) shall exceed
$100,000, such options shall be taxed as non-qualified options. The rule set
forth in the preceding sentence shall be applied by taking options into account
in the order in which they are granted.
3. Incentive stock options granted hereunder shall at the time of grant
qualify as "incentive stock options" under Section 422A of the Code.
H. STOCK APPRECIATION RIGHTS
1. At the discretion of the Committee (other than with respect to
Replacement Options), any option granted under this Plan may include a stock
appreciation right. The Committee may impose conditions upon the grant or
exercise of the stock appreciation right which conditions may include a
condition that the stock appreciation right may only be exercised in accordance
with rules and regulations adopted by the Committee from time to time. Such
rules and regulations may govern the right to exercise the stock appreciation
right granted prior to the adoption or amendment of such rules and regulations
as well as stock appreciation rights granted thereafter. The Committee may amend
any outstanding option or options to grant stock appreciation rights with
respect to the shares covered by any such option or options if the original
option or options did not contain such rights.
2. A "stock appreciation right" is the right of an Optionee, without payment
to the Company (except for applicable withholding taxes), to receive the excess
of the Fair Market Value over the option price per share as provided in the
related underlying option. A stock appreciation right shall pertain to, and be
granted only in conjunction with, a related underlying option granted under this
Plan and shall be exercisable and exercised only to the extent that the related
option is exercisable. The number of shares of Common Stock subject to the stock
appreciation right shall be all or part of the shares subject to the related
option, as determined by the Committee. The stock appreciation right shall
either become all or partially non-exercisable and shall be all or partially
forfeited if the exercisable portion, or any part thereof, of the related option
is exercised and vice versa. A stock appreciation right may only be exercised if
the Fair Market Value per share of the Common Stock on the exercise date exceeds
the option price per share under the related underlying option.
3. Subject to any restrictions or conditions imposed by the Committee, a
stock appreciation right may be exercised by the Optionee as to a number of
shares of the Common Stock under its related option only upon the surrender of
exercise rights with respect to a like number of shares of the Common Stock
available to the exercisable portion of the related option. Upon the exercise of
a stock appreciation right and the surrender of the exercisable portion of the
related option, the Optionee shall be awarded cash, shares of the Common Stock
or a combination of shares and cash at the discretion of the Committee. The
award shall have a total value equal to the product obtained by multiplying (i)
the excess of the Fair
5
Market Value per share on the date on which the stock appreciation right is
exercised over the option price per share by (ii) the number of shares subject
to the exercisable portion of the related option so surrendered.
4. The portion of the stock appreciation right which may be awarded in cash
shall be determined by the Committee from time to time. The number of shares
awardable to an Optionee with respect to the non-cash portion of a stock
appreciation right shall be determined by dividing such non-cash portion by the
Fair Market Value per share on the exercisable date. No fractional shares shall
be issued.
I. TERM AND EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
Each option and stock appreciation right granted under this Plan shall be
exercisable on the dates and for the number of shares as shall be provided in
the option certificate evidencing the option granted by the Committee and the
terms thereof. An Optionee may exercise his option only by delivering to the
Company written notice of intent to exercise and by complying with all terms of
such option. No stock option shall be exercisable after the expiration of ten
years and one day (ten years in the case of an incentive stock option) from the
date of grant of the option or, in the case of an incentive stock option granted
to an Optionee owning (within the meaning of Section 425(d) of the Code), at the
time the option was granted, more than 10% of the total combined voting power of
all classes of stock of the Company, any Subsidiary or any Parent Company, the
expiration of five years from the date of grant of the option. Provided,
however, that where death, retirement for age or determination of disability
occurs during the one year period ending ten years and one day from the date of
grant of the option, no option that is not an incentive stock option shall be
exercisable after the expiration of eleven years and one day from the date of
grant of the option. With respect to persons subject to the provisions of
Section 16(b): (i) except in the case of death or disability (within the meaning
of Section 22(e)(3) of the Code) of the Optionee, no stock appreciation right
related to any stock option shall be exercisable earlier than six months from
the date of grant of the stock appreciation right, (ii) where an outstanding
option is subsequently amended to include the grant of a stock appreciation
right, no such stock appreciation right shall be exercisable earlier than six
months from the date of grant of such right and (iii) a stock appreciation right
may only be exercised during the period beginning on the third business day
following the date of the Company's release of its quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date.
J. NONTRANSFERABILITY
No option, stock appreciation right or interest or right therein or part
thereof shall be subject to liability for the debts, contracts or engagements of
the Optionee or his successors in interest or shall be subject to liability for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section J shall
prevent transfers by will or by the applicable laws of descent and distribution.
K. REQUIREMENTS OF LAW
The granting of options and the issuance of shares of Common Stock upon the
exercise of an option or of a stock appreciation right or the awarding of cash
upon the exercise of a stock appreciation right shall
6
be subject to all applicable laws, rules and regulations and shares shall not be
issued except upon approval of proper government agencies or stock exchanges as
may be required.
L. TERMINATION OF EMPLOYMENT
If an Optionee shall cease to be employed by the Company or its Subsidiaries
as a result of retirement for age or disability, he may (subject to Section I),
but only within a period of ninety days (one year in the case of options that
are not incentive stock options) beginning the day following the date of such
termination of employment (or the date of determination of disability for
options that are not incentive stock options), exercise his option or his stock
appreciation right, to the extent that he was entitled to exercise it at the
date of such termination of employment (or the date of determination of
disability for options that are not incentive stock options). Termination for
any other reason (other than death) shall result in cancellation of the option
or stock appreciation right as of the close of business on the date of such
termination. For purposes of this Plan, termination of employment means removal
from the Company's payroll unless otherwise agreed by the Company and the
Optionee.
M. DEATH OF OPTIONEE
In the event of the death of an Optionee while in the employ of the Company,
its Subsidiaries or its Parent Companies, the option or stock appreciation right
theretofore granted to him shall be exercisable within a period of one year
after the date of death and then only if and to the extent that he was entitled
to exercise it at the date of his death including any option that may have been
accelerated by reason of his death. Such exercise shall be made only by the
executor or administrator of his estate (upon presenting proper proof of
appointment and authority to act) or by the person or persons to whom his rights
under the option shall have passed by his will or by the applicable laws of
descent and distribution subject to the Company being properly assured and
legally advised of the rights of such beneficiaries.
Notwithstanding the provisions of Sections I, L and M herein or any other
provisions of the Plan, an Optionee with ten years of service shall have a two
year period, and an Optionee with twenty years of service shall have a three
year period, after retirement for age, death or determination of disability to
exercise any option to the extent it was exercisable on the date of such event,
provided that (1) for incentive stock options this two or three year period will
not extend beyond the normal term of the option, and (2) for non-incentive stock
options, the normal term of the option will be extended up to a maximum term of
thirteen years and one day to accommodate the two or three year extension in
cases where retirement, death or determination of disability occurs within the
three years prior to the end of the normal term of the option.
N. ADJUSTMENTS
If the outstanding shares of the Common Stock subject to options are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company or any other corporation by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend, combination of shares or otherwise, the Committee may:
(1) in its absolute discretion and on such terms and conditions as it
deems appropriate, make an appropriate and equitable adjustment in the
number and kind of shares as to which all outstanding options, or portions
thereof then unexercised, shall be exercisable; or
7
(2) in its absolute discretion and on such terms and conditions as it
deems appropriate, provide, coincident with, or after the grant of any
option, that such option cannot be exercised after the merger or
consolidation of the Company with or into another corporation, the
acquisition by another corporation or person of all or substantially all of
the Company's assets or 80% or more of the Company's then outstanding voting
stock or the liquidation or dissolution of the Company; and if the Committee
so provides, it may, in its absolute discretion and on such terms and
conditions as it deems appropriate, also provide, either by the terms of
such option or by a resolution adopted prior to the occurrence of such
merger, consolidation, acquisition, recapitalization, reclassification,
liquidation or dissolution, that, for some period of time prior to such
event, such option shall be exercisable as to all or any part of the shares
subject thereto, notwithstanding anything to the contrary in this Plan
and/or in any installment provisions of such option and that, upon the
occurrence of such event, any option that is not exercised shall terminate
and be of no further force and effect; or
(3) in its absolute discretion, provide that even if the option shall
remain exercisable after any such event, from and after such event, any such
option shall be exercisable only for the kind and amount of securities
and/or other property, or the cash equivalent thereof, receivable as a
result of such event by the holder of the number of shares of stock for
which such option could have been exercised immediately prior to such
event;provided, however, that if the Committee provides that any option
shall not be exercisable after such event, it shall provide written notice
to all holders of vested options of the occurrence of such event not less
than 10 days prior to the occurrence of such event. Any adjustment or
determination made by the Committee pursuant to this Section N shall be
conclusive, final and binding upon all Optionees, the Company and all other
interested parties.
O. CLAIM TO STOCK OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS
No employee or other person shall have any claim or right to be granted
options or stock appreciation rights under this Plan. No Optionee, prior to
issuance of the stock, shall be entitled to voting rights, dividends or other
rights of stockholders except as otherwise provided in this Plan or except as
may be approved by the Committee subject to applicable law. Neither this Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained in the employ of the Company, a Subsidiary or a Parent
Company, and any such employee may be terminated at any time, with or without
cause.
P. UNSECURED OBLIGATION
Optionees under this Plan shall not have any interest in any fund or
specific asset of the Company by reason of this Plan. No trust shall be created
in connection with this Plan or any award thereunder, and there shall be no
required funding of amounts which may become payable to any Optionee.
Q. TAX WITHHOLDING
The Company, a Subsidiary or a Parent Company, as appropriate, shall have
the right to deduct or withhold from all payments or distributions amounts
sufficient to cover any federal, state or local taxes required by law to be
withheld or paid with respect to such payments or distributions and, in the case
of stock appreciation rights for which the Optionee receives Common Stock as
payment, the participant or other person receiving such Common Stock may be
required to pay to the Company, a Subsidiary or a Parent Company, as
appropriate, the amount of any such taxes which the Company, Subsidiary or
Parent
8
Company is required to withhold with respect to such Common Stock. In the event
the cash portion of a stock appreciation right is insufficient to cover the
required withholding, the Optionee may be required to pay to the Company the
amount of such taxes. In the case of non-qualified options, the Company may
require that required withholding taxes be paid to the Company at the time the
option is exercised. The Company may also permit any withholding tax obligations
incurred by reason of the exercise of any stock option to be satisifed by
withholding shares (that would otherwise be obtained upon such exercise) having
a Fair Market Value equal to the aggregate amount of taxes which are to be
withheld. In the case of persons subject to Section 16(b), such withholding
shall be on terms consistent with Rule 16b-3.
R. EXPENSES OF PLAN
The expenses of administering the Plan shall be borne by the Company, its
Subsidiaries and its Parent Companies.
S. RELIANCE ON REPORTS
Each member of the Committee and each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company, its Subsidiaries and its Parent
Companies and upon any other information furnished in connection with the Plan
by any person or persons other than himself. In no event shall any person who is
or shall have been a member of the Committee or of the Board be liable for any
determination made or other action taken or any omission to act in reliance upon
any report or information or for any action, including the furnishing of
information taken or failure to act, in good faith.
T. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of the
Board or any other persons involved in the administration of this Plan shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit or proceeding to which
he may be a party or in which he may be involved by reason of any such action
taken or failure to act under the Plan and against and from any and all amounts
paid by him in settlement thereof, with the Company's approval, or paid by him
in satisfaction of judgment in any such action, suit or proceeding against him
provided he shall give the Company an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such person may be entitled under the
Company's articles of incorporation or bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify such person or hold him
harmless.
U. AMENDMENT AND TERMINATION
Unless this Plan shall theretofore have been terminated as hereinafter
provided, no options or stock appreciation rights may be granted after the tenth
anniversary of the adoption of the Plan by the Board. The Committee may
terminate, modify or amend the Plan in such respect as it shall deem advisable,
without obtaining approval from the Company's stockholders except as such
approval may be required pursuant to Rule 16b-3 or the Code. No termination,
modification or amendment of the Plan may, without
9
the consent of an Optionee to whom an option shall theretofore have been
granted, adversely affect the rights of such Optionee under such option.
V. GENDER
Any masculine terminology used in this Plan shall also include the feminine
gender.
W. EFFECTIVE DATE OF THE PLAN
This Plan was approved by the Board and the stockholders of the Company on
November 5, 1989 and became effective January 1, 1990.
THE PROMUS COMPANIES
INCORPORATED
By: /s/ Neil F. Barnhart
--------------------------------------
Neil F. Barnhart
Vice President
10
Exhibit 2
AMENDMENT TO
THE PROMUS COMPANIES INCORPORATED
1990 STOCK OPTION PLAN
The Promus Companies Incorporated, a Delaware corporation, hereby adopts
this Amendment to the 1990 Stock Option Plan (the "Plan"), effective upon the
consummation of the spin-off of the hotel business of this corporation into a
new corporation.
1. The Plan shall be amended to change the name of the Plan to The Harrah's
Entertainment, Inc. 1990 Stock Option Plan, to change each reference to
"Company" in the Plan to mean Harrah's Entertainment, Inc., to change each
reference to "Common Stock" to mean the common stock of Harrah's Entertainment,
Inc. and to delete each reference to "Replacement Options."
2. Section B(1) shall be amended to add the following as the last sentence
of such section:
In addition, each member of the Committee must be an "outside director"
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Section 162(m)").
3. Section B(2) shall be amended to delete the word "and" before "(7)" and
to add the following to the end of such section:
and (8) whether an option or stock appreciation right is intended to
qualify as performance-based compensation under Section 162(m).
4. Section (B)3 of the Plan shall be amended to add the phrase "Subject to
Section N(6)," to the beginning of the first and last sentences of such section.
5. Section B of the Plan shall be amended to add the following as paragraph
6 thereto:
6. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under the
Plan except with respect to matters which under Rule 16b-3, Section 16 or
Section 162(m) are required to be determined in the absolute discretion of
the Committee.
6. Section C(2) of the Plan shall be deleted in its entirety.
7. The Plan shall be amended to delete Section D(2) of the Plan in its
entirety, to redesignate Section D(3) as Section D(2), to change each reference
to such section accordingly and to amend Section D(3) (i.e. D(2) pursuant to
this amendment) to read in its entirety as follows:
3. Subject to the following paragraph, effective April 30, 1993, the
number of authorized shares which may be issued pursuant to the options and
stock appreciation rights granted by the Committee under the Plan is
increased by an additional 1,500,000 shares.
Effective June 30, 1995, the number of shares which may be issued upon
exercise of options or stock appreciation rights granted by the Committee
under this Plan is increased by an additional 4,500,000 shares.
Effective April 29, 1994, the maximum number of shares with respect to
which options or stock appreciation rights may be granted in any year to any
one employee shall be 250,000* (the "Award Limit"); provided that the Award
Limit shall be appropriately adjusted by the Committee in accordance with
Section N hereof. To the extent required by Section 162(m), options which
are canceled continue to be counted against the Award Limit and if, after
grant of an option, the price of shares subject to such option is reduced,
the transaction will be treated as a cancellation of the option and a grant
of a new option and both the option deemed to be canceled and the option
deemed to be granted will be counted against the Award Limit. To the extent
required by Section 162(m), if after the grant of a stock appreciation
right, the price of shares subject to the related underlying option is
reduced, the transaction is treated as a cancellation of the stock
appreciation right and a grant of a new stock appreciation right and both
the stock appreciation right deemed to be cancelled and the stock
appreciation right deemed to be granted are counted against the Award Limit.
8. The second sentence of Section F(1) of the Plan shall be deleted in its
entirety.
9. The third sentence of Section F(1) of the Plan shall be amended to read
in its entirety as follows:
Subject to the foregoing, the price of an option or stock appreciation
right intended to qualify as performance-based compensation under Section
162(m) and incentive stock options shall not be less than 100% (110% in the
case of an incentive stock option granted to an individual owning (within
the meaning of Section 424(d) of the Code more than 10% of the total
combined voting power of all classes of stock of the Company, any Subsidiary
or any Parent Company) of the Fair Market Value of the Common Stock on the
date the option is granted.
10. Section G of the Plan shall be amended to replace each reference to
"Section 422A" with the term "Section 422."
11. Section I of the Plan shall be amended to replace the reference to
"Section 425(d)" with the term "Section 424(d)."
12. Section N of the Plan shall be amended to read in its entirety as
follows:
N-ADJUSTMENTS
1. Subject to Section N5. but notwithstanding any other term of this Plan,
in the event that the Committee determines that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee's sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an option or stock appreciation
right, then the Committee shall, in such manner as it may deem equitable, adjust
any or all of
- ------------------------
* adjusted to 351,193 options, effective June 30, 1995, based on approval of
the Human Resources Committee on December 12, 1996 pursuant to Section D(2)
and N of the Plan due to the spin-off of the hotel business.
2
(a) the number and type of shares of Common Stock (or other securities
or property) with respect to which options and stock appreciation rights may
be granted under the Plan (including, but not limited to, adjustments of the
limitations in Section D or the maximum number and kind of shares which may
be issued and adjustments of the Award Limit),
(b) the number and type of shares of Common Stock (or other securities
or property) subject to outstanding options and stock appreciation rights,
and
(c) the grant or exercise price with respect to any option or stock
appreciation right.
2. Subject to Section N5. but notwithstanding any other term of this Plan,
in the event of any corporate transaction or other event described in Section
N1. which results in shares of Common Stock being exchanged for or converted
into cash, securities (including securities of another corporation) or other
property, the Committee will have the right to terminate this Plan as of the
date of the event or transaction, in which case all options and stock
appreciation rights granted under this Plan shall become the right to receive
such cash, securities or other property, net of any applicable exercise price.
3. Subject to Section N5. but notwithstanding any other term of this Plan,
in the event of any corporate transaction or other event described in Section
N1., or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicble laws, regulations, or
accounting principles, the Committee in its discretion is hereby authorized to
take any one or more of the following actions whenever the Committee determines
that such action is appropriate in order to prevent diultion or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to any option or stock appreciation right, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(a) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either automatically or upon the
optionee's request, for either the purchase of any such option or stock
appreciation right for an amount of cash equal to the amount that could have
been attained upon the exercise of such option or stock appreciation right
or realization of the optionee's rights had such option or stock
appreciation right been currently exercisable or payable or the replacement
of such option or stock appreciation right with other rights or property
selected by the Committee in its sole discretion;
(b) In its discretion, the Committee may provide, either by the terms of
such option or stock appreciation right or by a resolution adopted prior to
the occurrence of such transaction or event, that it cannot be exercised
after such event;
(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such option
or stock appreciation right or by a resolution adopted prior to the
occurrence of such transaction or event, that, for a specified period of
time prior to such transaction or event, such option or stock appreciation
right shall be exercisable as to all shares covered thereby;
(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such option
or stock appreciation right or by a resolution adopted prior to the
occurrence of such transaction or event, that upon such event, such option
or stock appreciation right be assumed by the successor corporation, or a
parent or subsidiary thereof, or shall
3
be substituted for by similar options, rights or awards covering the stock
of the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; and
(e) In its discretion, and on such terms and conditions as it deems
appreopriate, the Committee may make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject to
outstanding options and stock appreciation rights, and/or in the terms and
conditions of (including the grant or exercise price), and the criteria
governing, outstanding options and stock appreciation rights and options and
stock appreciation rights which may be granted in the future.
4. Subject to Section N5. but notwithstanding any other term of this Plan,
the Committee may, in its discretion, include such further provisions and
limitations in any option or stock appreciation right agreement or certificate,
as it may deem equitable and in the best interests of the Company.
5. With respect to incentive stock options and options and stock
appreciation rights intended to qualify as performance-based compensation under
Section 162(m), no adjustment or action described in this Section N or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option or stock appreciation right to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would violate Section 16 or Rule 16b-3. The
number of shares of Common Stock subject to any option or stock appreciation
right shall always be rounded to the next number.
6. Any decision of the Committee pursuant to the terms of this Section N
shall be final, binding and conclusive upon the participants, the Company and
all other interested parties.
13. Section U of the Plan shall be amended to read in its entirety as
follows:
SECTION U-AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Committee. However, no
action of the Committee may (except as provided in Section N), modify the Award
Limit modify the eligibility requirements of Section C, reduce the minimum
option and stock appreciation rights price requirements of Section F or
otherwise amend the Plan in a manner requiring stockholder approval as a matter
of Section 162(m), Rule 16b-3 or Section 16 of the Exchange Act or other
applicable law, regulation or rule without approval of the Company's
shareholders given within 12 months before or after the action by the Committee.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the option or stock appreciation right, impair any
rights or obligations under any option or stock appreciation right theretofore
granted. No option or stock appreciation right may be granted during any period
of suspension nor after termination of the Plan, and in no event may any option
or stock appreciation right be granted under this Plan after the expiration of
ten years from the date the Plan was adopted by the Board.
14. The Plan shall be amended to add Section X which should read in its
entirety as follows:
X. Consideration
4
The consideration for the issuance of any option or stock appreciation right
shall be the participant's past or future service with Promus or its
subsidiaries.
* * * *
I hereby certify that the foregoing amendment to the Plan was duly adopted
by the Board of Directors of The Promus Companies Incorporated as of April 5,
1995.
Executed on this 26th day of May, 1995.
/s/ E.O. Robinson, Jr.
--------------------------------------
Secretary
5
Exhibit 3
AMENDMENT TO
THE HARRAH'S ENTERTAINMENT, INC.
1990 STOCK OPTION
Harrah's Entertainment, Inc. (the "Company") hereby adopts this Amendment to
The Harrah's Entertainment, Inc. 1990 Stock Option Plan (the "Plan"), subject to
stockholder approval of paragraphs 2 and 3 of this Amendment which approval is
expected to occur on May 1, 1998.
1. The first sentence of Section B.3. of the Plan is amended to read as
follows:
"Subject to Section N(6), the Committee shall have further discretion at
any time and from time to time to accelerate the date or dates when
outstanding options become exercisable and to decrease the option price
of outstanding options, PROVIDED, HOWEVER, with respect to the 3,500,000
shares authorized under the Plan pursuant to the Plan amendment adopted
by the Board on February 26, 1998, the Committee shall not, without the
further approval of the stockholders of the Company by a majority of
votes cast: (a) authorize the amendment of any outstanding option to
reduce its exercise price or (b) authorize the cancellation of options
and the replacement thereof with option grants having a lower exercise
price; it being understood that nothing herein shall restrict or prohibit
adjustments in options (including a price adjustment) pursuant to the
provisions of Section N of Plan which deals with adjustments in the event
of certain corporate events as described in Section N."
2. Section D.2. of the Plan is amended by adding the following sentence
after the second sentence:
"Effective May 1, 1998, the number of authorized shares which may be issued
pursuant to the options and stock appreciation rights granted by the
Committee under the Plan is increased by an additional 3,500,000 shares."
3. Section U of the Plan is amended by adding the following proviso at the
end thereof:
"PROVIDED, HOWEVER, that with respect to the grant of non-qualified
options utilizing any authorized shares under this Plan and with respect
to the additional 3,500,000 shares authorized under the Plan pursuant to
the Plan amendment adopted by the Board on February 26, 1998, in no event
may any option or stock appreciation right be granted under this Plan
with respect to any such shares after February 25, 2008."
This Amendment was duly adopted by the Board of Directors of the Company on
February 26, 1998.
--------------------------------------
Rebecca W. Ballou
Secretary
Exhibit 4
THE PROMUS COMPANIES INCORPORATED
1990 RESTRICTED STOCK PLAN
1. PURPOSE. The purpose of The Promus Companies Incorporated 1990
Restricted Stock Plan (the "Plan") is to advance the interests of The Promus
Companies Incorporated, a Delaware corporation ("Promus"), and its subsidiaries
(the "Company") by awarding restricted shares of the common stock of Promus, par
value $1.50 per share ("Common Stock"), to key employees of the Company who make
significant contributions to the Company. The Company intends that the Plan
will closely associate the interests of key employees with those of Promus's
stockholders and will facilitate securing, retaining and motivating key
employees of high caliber and potential.
2. ADMINISTRATION
(a) COMMITTEE. The Plan shall be administered by the Human
Resources Committee (the "Committee") of the Board of Directors (the
"Board") of Promus. No person shall be appointed to the Committee (i) who
is (or has been during the one-year period prior to such appointment)
eligible to receive an award under the Plan (except as specifically
provided under Section 4(b) and (c)) or any other stock, stock option or
stock appreciation right plan of the Company, other than a plan or
provision of a plan specifically developed for, or made available to,
members of the Board who are not employees and which otherwise complies
with subsection (b)(1)(iii) of Rule 16b-3 ("Rule 16b-3") under Section 16
("Section 16") of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any successor provision; or (ii) who has received an
award under the Plan (except for the award specifically provided under
Section 4(b) and (c)) if at the time of such appointment, any restrictions
on the transferability of the shares so awarded currently remain in effect
or remained in effect at any time during the twelve-month period
immediately prior to such person's appointment to the Committee. The
Committee shall have full and final authority in its discretion to
interpret conclusively the provisions of the Plan; to decide all questions
of fact arising in its application; to determine the employees to whom
awards shall be made under the Plan; to determine the awards to be made and
the amount, size, terms and restrictions of each such award; to determine
the time when awards will be granted; and to make all other determinations
necessary or advisable for the administration of the Plan, other than, in
each such case, determinations required in connection with awards granted
pursuant to the terms of Section 4(b) and (c).
(b) CERTAIN ADMINISTRATIVE PRINCIPLES. Without intending to
limit the discretion of the Committee in exercising its judgment in
accordance with Section 2(a), subject to Section 4(b) and (c) the Company
currently anticipates that awards of shares of Common Stock under the Plan
will be made to persons selected to participate by the Chief Executive
Officer of Promus and approved by the Committee in accordance with Section
4(a), based, among other things, on individual performance both currently
and over time, the impact of the individual's position within the Company
on the long-term performance of the Company, and the individual's potential
for advancement to positions of greater responsibility.
(c) REDUCTION IN AWARDS. The Committee may provide in the terms
of any award of restricted stock (other than awards under Section 4(b) and
(c)) that the award will be decreased if the participant's grade level is
reduced by the Company for performance, by reason of a change in job
functions or responsibilities, or by reason of transfer to a different
position during the term of the award. Shares that vested prior to the
reduction in the grade level shall not be affected.
1
3. SHARES SUBJECT TO PLAN. The shares issued under the Plan shall not
exceed in the aggregate 1,600,000 shares of Common Stock. Such shares may be
authorized and unissued shares or treasury shares. Any shares which are awarded
hereunder and subsequently forfeited shall again be available under the Plan.
4. PARTICIPANTS
(a) Subject to awards required by Sections 4(b) and (c) below,
persons eligible to participate in the Plan shall be limited to key
employees of the Company who are selected by the Chief Executive Officer of
Promus and approved by the Committee and who, in the judgment of the
Committee, make significant contributions to the Company. Members of the
Board who are not also officers or employees of the Company shall not be
eligible for selection or awards except as specifically provided in Section
4(b) and (c).
(b) Each employee or non-employee director of the Company who
prior to the merger (the "Merger") of Bass (U.S.A.) Hotels, Incorporated, a
Delaware corporation ("Merger Sub"), with and into Holiday Corporation
("Holiday") pursuant to that certain Agreement and Plan of Merger among
Holiday, Holiday Inns, Inc., the Company, Bass plc, Merger Sub and Bass
(U.S.A.) Hotels, Incorporated, a Tennessee corporation, dated as of August
24, 1989, as amended, held restricted stock issued under Holiday's 1985
Restricted Stock Plan or 1981 Restricted Stock Incentive Plan
(collectively, "Holiday Restricted Stock") shall, in lieu of receipt of
shares of Promus stock that would have been issued in the spin-off
distribution of Promus with respect to such Holiday Restricted Stock, be
issued shares of restricted stock ("Replacement Shares") under this Plan
subject to the following terms:
(1) Upon the consummation of the Merger each such
employee or director shall hereby be issued, without the requirement
of any additional act of the Committee, a number of Replacement
Shares equal to the number of shares of unvested Holiday Restricted
Stock that such employee held immediately prior to the consummation
of the Merger.
(2) Such Replacement Shares shall be subject to the same
terms as the Holiday Restricted Stock they replace, except that (i)
the Replacement Shares shall vest based on continued employment
only: any performance vesting requirements shall be deemed to have
been met; (ii) vesting shall be based on continued employment with
the Company or, with respect to non-employee directors of Promus,
continued tenure as a member of the Board and all references to
Holiday and its subsidiaries in the Holiday restricted stock
agreement shall be deemed to be references to Promus and its
subsidiaries; and (iii) only 50% of the unvested Replacement Shares
shall vest upon death or disability of such employee or director.
(3) The Replacement Shares shall be evidenced by
restricted stock agreements or certificates reflecting the terms of
this Section 4(b).
(4) The Committee shall have full authority to implement
this Section 4(b) in accordance with its terms and its
implementation of this paragraph (b) shall be final, binding and
conclusive upon the recipients of Replacement Shares, the Company
and all other interested parties.
2
(c) Each non-employee member of the Board shall receive an award
of 1,000 restricted shares under the following terms:
(1) Each non-employee director of Promus who received
Holiday Restricted Stock shall receive Replacement Shares under
Section 4(b). Each non-employee member of the Board at the Spin-Off
(as defined in the Merger Agreement) who did not receive Holiday
Restricted Stock under Holiday's 1985 Restricted Stock Plan shall
receive an award of 1,000 shares. Such shares shall vest in 100
share installments starting April 1, 1990 and on each April 1
thereafter until April 1, 1999, provided such person is a member of
the Board on the vesting date.
(2) Any new non-employee member of the Board who is
elected or appointed after the Effective Time and during the term of
the Plan shall receive an award of 1,000 shares upon the effective
date of his or her election or appointment. Such shares shall vest
in 100 share installments on each April 1 starting the year
following that person's election or appointment to the Board
provided such person is a member of the Board on the vesting date.
(3) Unvested restricted shares granted to non-employee
directors shall be forfeited when the director's Board service
terminates, except all restricted shares shall vest upon: (a) a
Change in Control (as defined in the Plan's administrative
regulations); or (b) upon such person's death or disability (as
determined by the Committee in its discretion).
(4) Except as specifically provided above, all other
provisions of the Plan shall apply to such restricted shares
including but not limited to the provisions of Section 9 of the Plan
concerning adjustments that would be made to all restricted shares
in the event of corporate changes.
5. AWARDS. The Committee shall make awards of shares of Common Stock
in accordance with terms and conditions set forth in restricted stock agreements
("Agreements") or participation certificates ("Participation Certificates")
containing such terms and conditions (including those set forth below)
consistent with the Plan as the Committee shall determine.
(a) RESTRICTION PERIOD. At the time of each award (other than
an award of Replacement Shares), the Committee shall determine the period
during which the shares awarded shall be subject to the risks of forfeiture
and other terms and conditions in the applicable Agreements or
Participation Certificates. The Committee may at any time accelerate the
date of lapse of restrictions with respect to all or any part of the shares
awarded to a participant. The Committee shall have authority to approve
from time to time an award or awards of shares of Common Stock, not
exceeding 200 shares per individual, to persons who are selected by the
Chairman of the Board for special recognition based on superior past
performance, such shares to be issued without risk of forfeiture.
(b) CERTIFICATES. Each stock certificate issued in respect of
shares awarded to a participant shall be deposited with Promus, or its
designee, together with a stock power executed in blank by the participant,
and may bear an appropriate legend disclosing the restrictions on
transferability imposed on such shares by the Plan and the Agreements or
Participation Certificates.
3
(c) RESTRICTIONS UPON TRANSFER. Shares awarded, and the right
to vote such shares and to receive dividends thereon, may not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered during the restriction period applicable to such shares;
PROVIDED that the right to vote shares awarded pursuant to the Plan may be
assigned to a voting trust during the restriction period applicable to such
shares so long as the Committee, in its sole and absolute discretion,
approves such assignability of voting power in the grant of such shares.
During the restriction period the participant shall have all other rights
of a stockholder, including, but not limited to, the right to vote and to
receive dividends on such shares. If as a result of a stock dividend
(whether in securities of the Company or of any other company), stock
split, recapitalization, other adjustment in the stated capital of Promus,
or as the result of a merger, consolidation, reclassification or other
reorganization, or any other corporate transaction, Common Stock is
increased, reduced, or otherwise changed, and by virtue thereof the
recipient shall be entitled to new or additional or different shares, such
shares shall be subject to the same terms, conditions and restrictions as
the original shares.
(d) LAPSE OF RESTRICTIONS. Each Agreement or Participation
Certificate shall specify the terms and conditions upon which any
restrictions upon any shares awarded under the Plan shall lapse. Upon the
lapse of such restrictions, stock certificates evidencing such shares of
Common Stock without the foregoing restrictive legend shall be issued to
the participant or to his or her beneficiary or his or her estate as
provided in Section 5(f). Each such new certificate shall bear such
alternative legend, if any, as the Committee shall specify.
(e) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of
the termination of a participant's employment or, with respect to a
non-employee director, tenure as a director, as the case may be, for any
reason (except as provided in Section 5(f) below and as may otherwise be
provided in any Agreement or Participation Certificate) prior to the lapse
of restrictions, all shares subject to unlapsed restrictions shall be
forfeited by such participant to Promus without payment of any
consideration by Promus or the Company, and neither the participant nor any
successors, heirs, assigns or personal representatives of such participant
shall thereafter have any further rights or interest in such shares or
stock certificates.
(f) DEATH, DISABILITY OR RETIREMENT OF PARTICIPANTS. The
Committee shall from time to time adopt policies and procedures applicable
to awards that will govern the lapse or nonlapse of restrictions and the
rights of participants and beneficiaries in the event of death, disability
or retirement of participants. The Committee shall have authority to
define disability and retirement and other terms, and the Committee's
policies and procedures may differ with respect to awards granted at
different times and with respect to awards granted to different persons. A
participant's rights in the event of death, disability or retirement shall
be set forth in the Agreement or Participation Certificate that evidences
an award to the participant.
6. RIGHTS TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any
Agreement or Participation Certificate shall confer upon any participant the
right to continue in the employment of the Company or affect any right which the
Company may have to terminate at any time, with or without cause, the employment
of such participant.
7. WITHHOLDING. Whenever Promus proposes or is required to issue or
transfer shares of Common Stock under the Plan, Promus shall have the right to
withhold from sums due the recipient, or to require the recipient to remit to
Promus, any amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery of any certificate for such
shares. Whenever payments are to be made in cash, such payments shall be net of
an amount sufficient to satisfy any federal, state and/or local withholding tax
requirements imposed with respect to such payments.
4
8. NON-UNIFORM DETERMINATIONS. The Committee's determinations under
the Plan (including, without limitation, determinations of the persons to
receive awards, the form, amount and timing of such awards, and the terms and
provisions of such awards and the Agreements or Participation Certificates) need
not be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, awards under the Plan, regardless of whether such
persons are similarly situated.
9. ADJUSTMENTS. In the event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution, recapitalization,
reclassification, merger, consolidation, stock split-up, combination, exchange
of shares or otherwise, the Committee may appropriately adjust the number and/or
kind of shares which may be issued under the Plan and shall provide for such
equitable adjustments in shares previously awarded and still subject to
restrictions hereunder as the Committee, in its sole discretion, shall
determine. Any decision of the Committee pursuant to the terms of this Section
9 shall be final, binding and conclusive upon the participants, the Company and
all other interested parties.
10. AMENDMENT. The Committee may terminate, modify or amend the Plan in
such respect as it shall deem advisable, without obtaining approval from
Promus's stockholders except as such approval may be required pursuant to Rule
16b-3. No termination, modification or amendment of the Plan may, without the
consent of a participant, adversely affect a participant's rights under an award
granted prior thereto.
11. INDEMNIFICATION. Each person who is or has been a member of the
Committee or the Board or who otherwise participates in the administration or
operation of this Plan shall be indemnified by Promus against, and held harmless
from, any loss, cost, liability, or expense that may be imposed upon or incurred
by him or her in connection with or resulting from any claim, action, suit, or
proceeding in which such person may be involved by reason of any action taken or
failure to act under the Plan and shall be fully reimbursed by Promus for any
and all amounts paid by such person in satisfaction of judgment against him or
her in any such action, suit, or proceeding, PROVIDED he or she will give Promus
an opportunity, by written notice to the Committee, to defend the same at
Promus's own expense before he or she undertakes to defend it on his or her own
behalf. This right of indemnification shall not be exclusive of any other
rights of indemnification.
The Committee and the Board may rely upon any information furnished by the
Company, its public accountants and other experts. No individual will have
personal liability by reason of anything done or omitted to be done by the
Company, the Committee or the Board in connection with the Plan.
12. EFFECT ON OTHER PLANS. Participation in the Plan shall not affect
an employee's eligibility to participate in any other benefit or incentive plan
of the Company, and any awards made pursuant to the Plan shall not be used in
determining the benefits provided under any other plan of the Company, unless
specifically provided in such other plan.
13. DURATION OF THE PLAN. The Plan shall remain in effect until all
shares awarded under the Plan are free of all restrictions imposed by the Plan
and by Agreements or Participation Certificates, but no award shall be made more
than ten years after the date the Plan is approved by the stockholders of
Promus.
14. EFFECTIVE DATE. The Plan was originally adopted by Promus's Board
of Directors on 11/5/89 and by the stockholders of Promus on 11/5/89 and is to
be effective as of 1/1/90.
THE PROMUS COMPANIES INCORPORATED
By: /s/ Neil F. Barnhart
--------------------------------
Title: Vice President
--------------------------------
5
Exhibit 5
AMENDMENT TO
THE PROMUS COMPANIES INCORPORATED
1990 RESTRICTED STOCK PLAN
The Promus Companies Incorporated, a Delaware corporation, hereby adopts
this Amendment to the 1990 Restricted Stock Plan (the "Plan"), effective upon
the consummation of the spin-off of the hotel business of this corporation into
a new corporation.
1. The Plan shall be amended to change the name of the Plan to The
Harrah's Entertainment, Inc. 1990 Restricted Stock Plan, to change each
reference to "Company" in the Plan to mean Harrah's Entertainment, Inc., to
change each reference to "Common Stock" to mean the common stock of Harrah's
Entertainment, Inc. and to delete each reference to "Replacement Shares."
2. Section 2(a) shall be amended to add the following as the last sentence
of such section:
The Committee shall consist of not less than three members of the
Board. In addition, each member of the Committee must be an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") ("Section 162(m)").
3. Section 2 of the Plan shall be amended to add the following as
paragraph 2(d) thereto:
(d) BOARD AUTHORITY. In its absolute discretion, the Board may at
any time and from time to time exercise any and all rights and duties of
the Committee under the Plan except with respect to matters which under
Section 16, Rule 16b-3 or Section 162(m) are required to be determined in
the absolute discretion of the Committee.
4. Section 3 of the Plan shall be amended to add the phrase "Subject to
the last sentence of this section," to the beginning of the first sentence and
to add the following after the last sentence of such section:
Effective as of June 30, 1995, the number of shares which may be
issued under the Plan is increased by an additional 500,000 shares of
Common Stock.
5. The Plan shall be amended to delete Section 4(b) of the Plan in its
entirety, to redesignate Section 4(c) as Section 4(b) and to change each
reference to Section 4(c) to mean Section 4(b).
6. The Plan shall be amended to delete Section 4(c)(1) of the Plan in its
entirety, to redesignate 4(c)(2) as Section 4(b)(1), to redesignate Section
4(c)(3) as Section 4(b)(2) and to redesignate Section 4(c)(4) as Section 4(b)(3)
and to change each reference to such sections accordingly.
7. Section 4(c)(3) (i.e. Section 4(b)(2) pursuant to this amendment) of
the Plan shall be amended to add the following to the end of such section:
; provided, however, that the Board rather than the Committee shall
exercise all discretion with respect to restricted shares awarded to each
non-employee member of the Board.
8. Section 5(a) of the Plan shall be amended to add the following to the
end of the second sentence thereof:
; provided, however, that with respect to any award of restricted
shares intended to qualify as peformance-based compensation under Section
162(m) or any successor provisions thereto, no such acceleration shall be
authorized to the extent that such acceleration would cause such restricted
shares to fail to so qualify.
9. Section 5 shall be amended by adding the following as Section 5(g).
(g) Upon each award of restricted shares under this Plan which the
Committee intends to qualify as performance-based compensation under
Section 162(m), the Committee shall indicate that such award is intended to
so qualify.
10. Section 9 of the Plan shall be amended to read in its entirety as
follows:
9. ADJUSTMENTS
(a) Subject to Section 9(e) but notwithstanding any other term of
this Plan, in the event that the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) determines
that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company,
or other similar corporate transaction or event, in the Committee's sole
discretion, affects the Common Stock such that an adjustment is determined
by the Committee (or the Board in the case of restricted shares to
non-employee members of the Board) to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan or with respect to an award or awards,
then the Committee shall, in such manner as it may deem equitable, adjust
any or all of:
(i) the number and type of shares of Common Stock (or
other securities or property) which may be granted under the Plan
(including, but not limited to, adjustments of the maximum number
and kind of shares which may be issued); and
(ii) with respect to restricted shares which remain
subject to restrictions imposed under this Plan, the number and type
of shares of Common Stock subject to such restricted stock awards.
(b) Subject to Section 9(e) but notwithstanding any other term of
this Plan, in the event of any corporate transaction or event described in
paragraph (a) which results in shares of Common Stock being exchanged for
or converted into cash, securities or other property (including securities
of another corporation), the Committee will have the right to terminate
this Plan as of the date of the transaction or event, in which case all
restricted stock awards which remain subject to restrictions imposed under
the Plan shall become the right to receive such cash, securities or other
property.
(c) Subject to Section 9(e) but notwithstanding any other term of
this Plan, in the event of any corporate transaction or other event
described in Section 9(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes in
applicable laws, regulations, or accounting principles, the Committee (or
the Board in the case of restricted shares awarded to non-employee members
of the Board) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be
-2-
made available under the Plan or with respect to an award or awards, to
facilitate such transactions or events or to give effect to such changes in
laws, regulating or principles:
(i) In its discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) may
provide, either automatically or upon the participant's request, for
either the purchase of some or all shares which remain subject to
restrictions imposed under this Plan, for an amount of cash equal to
the amount that could have been attained upon the sale of such
shares or realization of the participant's rights had the
restrictions on such shares lapsed or the replacement of some or all
of such shares with other rights or property selected by the
Committee in its sole discretion;
(ii) In its discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) may
provide either by the terms of the Agreement on Participation
Certificate or by a resolution adopted prior to the occurrence of
such transaction or event that at a specified time prior to such
transaction or event the restrictions imposed under the Agreement on
Participation Certificate upon some or all shares of the restricted
shares may lapse and/or that some or all shares of such restricted
shares may cease to be subject to forfeiture under Section 5(e)
after such transaction or event;
(iii) In its discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) may
provide, either by the terms of the Agreement or Participation
Certificate or by a resolution adopted prior to the occurrence of
such transaction or event, that upon such transaction or event, some
or all shares which remain subject to restrictions imposed under
this Plan shall be substituted for by similar shares of stock of the
successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares; and
(iv) In its discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) may
make adjustments in the terms and conditions of, and the criteria
governing, restricted shares which remain subject to restrictions
imposed under this Plan and/or restricted shares which may be issued
in the future.
(d) Subject to 9(e) but notwithstanding any other term of this
Plan, the Committee (or the Board in the case of restricted shares awarded
to non-employee members of the Board) may, in its discretion, include such
further provisions and limitations in any Agreement or Participation
Certificate as it may deem equitable and in the best interests of the
Company.
(e) With respect to any award of restricted shares intended to
qualify as performance-based compensation under Section 162(m), no
adjustment or action described in this Section 9 or in any other provision
of this Plan shall be authorized to the extent that such adjustment or
action would cause such restricted shares to fail to so qualify.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would violate Section 16 or Rule 16b-3. The
number of restricted shares awarded under this Plan shall always rounded to
the next whole number.
-3-
(f) Any decision of the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) pursuant to
the terms of this Section 9 shall be final, binding and conclusive upon the
participants, the Company and all other interested parties.
11. Section 10 of the Plan shall be amended to read in its entirety as
follows:
10. AMENDMENT
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
Notwithstanding the foregoing, the provisions of the Plan relating to the
award of restricted shares to non-employee members of the Board and the
terms of such restricted share awards shall not be amended more than once
every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended from time to
time, or the respective rules thereunder. Furthermore, no action of the
Committee may modify the eligibility requirements of Section 4, or
otherwise amend the Plan in a manner requiring stockholder approval as a
matter of Section 16, Rule 16b-3 or Section 162(m) or other applicable law,
regulation or rule without approval of the Company's shareholders given
within 12 months before or after the action by the Committee. Neither the
amendment, suspension nor termination of the Plan shall, without the
consent of the participant, impair any rights or obligations under any
shares theretofore granted. No shares may be granted during any period of
suspension nor after termination of the Plan, and in no event may any
shares be granted under this Plan after the expiration of ten years from
the date the Plan is adopted by the Board.
12. The Plan shall be amended to add Section 15 which shall read in its
entirety as follows:
15. CONSIDERATION
The consideration for the issuance of shares of restricted stock, in
addition to payment of the purchase price if any, shall be the
participant's past or future service with Promus or its subsidiaries.
* * * *
I hereby certify that the foregoing amendment to the Plan was duly adopted
by the Board of Directors of The Promus Companies Incorporated as of April 5,
1995.
Executed on this 26 day of May, 1995.
/s/ E. O. Robinson, Jr.
----------------------------------------
Secretary
-4-
AMENDMENT TO
THE HARRAH'S ENTERTAINMENT, INC.
1990 RESTRICTED STOCK PLAN
Harrah's Entertainment, Inc. (the "Company") hereby adopts this Amendment to
The Harrah's Entertainment, Inc. 1990 Restricted Stock Plan (the "Plan"),
subject to stockholder approval of this Amendment which approval is expected to
occur on May 1, 1998.
1. The last sentence of Section 3 of the Plan is amended by changing the
period at the end of the sentence to a comma and adding the following
language after such comma: "and effective May 1, 1998, the number of
shares which may be issued under the Plan is increased by an additional
3,100,000 shares."
2. The last sentence of Section 10 of the Plan is amended to read as
follows:
"No shares may be granted during any period of suspension nor after
termination of the Plan, and in no event may any shares be granted under
the Plan after February 25, 2008."
3. Section 13 of the Plan is amended to read as follows:
"The Plan shall remain in effect until all shares awarded under the Plan
are free of restrictions imposed by the Plan and by Agreements or
Participation Certificates, but no award shall be made after February 25,
2008."
This Amendment was duly adopted by the Board of Directors of the Company on
February 26, 1998.
--------------------------------------
Rebecca W. Ballou
Secretary
