["PROMUS(R) COMPANIES" logo] THE PROMUS COMPANIES INCORPORATED
People Pledged to Excellence
1023 Cherry Road
Memphis, TN 38117 USA
March 18, 1994
To Our Stockholders:
You are cordially invited to attend The Promus Companies Incorporated
Annual Meeting of Stockholders which will be held on April 29, 1994, at 11:00
a.m. at the Winegardner Auditorium-- Dixon Gallery and Gardens, 4339 Park
Avenue, Memphis, Tennessee. All stockholders of record as of March 4, 1994, are
entitled to vote at the Annual Meeting.
The meeting will be held to: (a) elect four Class I directors, (b) approve
an amendment to the Certificate of Incorporation to increase the authorized
shares of Common Stock and reduce their par value per share, (c) approve
amendments to the Company's Stock Option Plan and (d) ratify the appointment of
independent public accountants for 1994.
We appreciate your continued confidence in the Company and hope you will
attend this year's Annual Meeting in person.
Whether or not you expect to attend the meeting, please complete, sign,
date and return the enclosed proxy card promptly to ensure that your shares will
be represented at the meeting. If you attend the meeting, you may vote in person
even if you have sent in your proxy card.
Sincerely,
/s/ Michael D. Rose
Michael D. Rose
Chairman of the Board
and Chief Executive Officer
THE PROMUS COMPANIES INCORPORATED
NOTICE OF MEETING
The Annual Meeting of Stockholders of The Promus Companies Incorporated
will be held at the Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park
Avenue, Memphis, Tennessee, on Friday, April 29, 1994, at 11:00 a.m. to:
1. elect four Class I directors;
2. amend the Company's Certificate of Incorporation to:
(a) increase the authorized number of shares of Common Stock from
120,000,000 to 360,000,000; and
(b) reduce the par value of each share of Common Stock from $1.50 to
$.10
(referred to collectively as the "Charter Amendment");
3. approve amendments to the Company's 1990 Stock Option Plan ("Stock
Option Plan");
4. ratify the appointment of Arthur Andersen & Co. as the Company's
independent public accountants for the 1994 calendar year; and
5. transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on March 4, 1994, are
entitled to vote. The list of stockholders will be available for examination for
the ten days prior to the meeting at The Promus Companies Incorporated,
Corporate Secretary's Office, 1023 Cherry Road, Memphis, Tennessee 38117.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
/s/ E. O. Robinson, Jr.
E. O. Robinson, Jr.
Secretary
March 18, 1994
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Promus Companies Incorporated ("Promus"
or the "Company") for use at the Annual Meeting of Stockholders to be held on
April 29, 1994 (the "Annual Meeting").
The Company's principal executive offices are located at 1023 Cherry Road,
Memphis, Tennessee 38117. A copy of the Company's 1993 Annual Report to
Stockholders, this Proxy Statement and accompanying proxy card will be first
mailed to stockholders on approximately March 22, 1994.
VOTING PROCEDURES
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to 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 item; (b) vote
"Against" the item; or (c) "Abstain" from voting on the item. As discussed
below, if you "Abstain" from voting, it will have the effect of a vote "Against"
the item if a quorum is present.
Stockholders may vote by either completing and returning the enclosed proxy
card prior to the meeting, voting in person at the meeting, or submitting a
signed proxy card at the meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company, by submitting a later dated proxy, or by attending the meeting and
voting in person. Attendance at the meeting will not, by itself, constitute
revocation of the 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.
Each unrevoked proxy card properly signed and received prior to the close
of the meeting will be voted as indicated. Unless otherwise specified on the
proxy, the shares represented by a signed proxy card will be voted FOR items 1,
2, 3 and 4 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.
If a proxy card indicates an abstention or a broker non-vote on a
particular matter, then the shares represented by such proxy will be counted for
quorum purposes. If a quorum is present, an abstention will have the effect of a
vote against the matter and broker non-votes will have no effect.
The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of Promus common stock ("Common Stock") outstanding on March 4, 1994,
will constitute a quorum.
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, the shares held by the Plan for such participant will not be
voted.
The Company's transfer agent, The Bank of New York, will tabulate the
votes. A representative of the transfer agent will be appointed as inspector at
the Annual Meeting to count all votes and ballots and perform the other duties
required of an inspector.
SHARES ENTITLED TO VOTE AND REQUIRED VOTE
Stockholders of record at the close of business on March 4, 1994, are
entitled to vote at the meeting. At that date, 102,330,710 shares of Common
Stock were outstanding. Except for the Charter Amendment, the affirmative vote
of the holders of a majority of the shares of Common Stock that are represented
in person or by proxy at the meeting and entitled to vote is required to approve
each matter to be voted on at the meeting. The Charter Amendment requires the
affirmative vote of a majority of the outstanding shares of Common Stock
regardless of whether the holders of such shares are present at the meeting.
Each share of Common Stock is entitled to one vote.
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 17 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 10 directors.
In accordance with the Certificate of Incorporation, the Company's Board of
Directors is divided into three classes with staggered terms. Each class of
directors is elected for a term of three years. Four Class I directors are to be
elected at the 1994 Annual Meeting for a three-year term ending in 1997. Upon
recommendation of the Human Resources Committee of the Board of Directors (the
"Human Resources Committee"), Joe M. Henson, Michael D. Rose, Ronald Terry and
Eddie N. Williams have been nominated by the Board of Directors for election to
these Class I positions. Pursuant to a policy adopted by the Board of Directors,
non-management directors may not serve as a director for more than 15 years. In
accordance with this policy, after serving 15 years, a director is expected to
resign effective the next annual stockholders meeting at which directors are
elected. Mr. Terry will have 15 years of board service in September 1994,
including service with Holiday Corporation and Holiday Inns, Inc. If he is
elected at the 1994 Annual Meeting, it is expected he will resign as a director
effective the date of the 1995 annual stockholders meeting. Under the Company's
Certificate of Incorporation, the remaining Board of Directors will be entitled
to elect a successor to fill the vacancy created by Mr. Terry's resignation to
serve for the remainder of Mr. Terry's three year term.
In the event any nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the proxy will be voted for any substitute
nominee selected by the current Board of Directors. Management has no reason to
believe, at this time, that the persons named will be unable or will decline to
serve if elected, and each nominee has informed the Company that he will serve
if elected.
2
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth in the following table is the beneficial ownership of Promus
Common Stock as of January 31, 1994, for all current directors, including all
nominees to the Board of Directors, the five executive officers of the Company
named on page 18 and all directors and executive officers as a group. Each
director or executive officer beneficially owns less than 1% of the total
outstanding shares of Promus Common Stock except for Mr. Rose, who beneficially
owns approximately 1.5% of the outstanding shares. All directors and executive
officers as a group beneficially own approximately 3.1% of the total outstanding
shares (including exercisable options).
The amounts of shares shown in the table and related notes as well as other
share amounts shown in this proxy statement reflect a 2 for 1 stock split in
March 1993 and a 3 for 2 stock split in November 1993, each of which was
effected as a stock dividend (the "Stock Splits").
NAME AMOUNT OF SHARES (a)
- ------------------------------------------------------ --------------------
James L. Barksdale.................................... 35,200
James B. Farley....................................... 18,618
Joe M. Henson......................................... 225,000
Charles A. Ledsinger, Jr.............................. 161,068
Ben C. Peternell...................................... 286,901
Colin V. Reed......................................... 105,724
Michael D. Rose....................................... 1,571,103(b)(c)
Walter J. Salmon...................................... 14,601
Philip G. Satre....................................... 419,659
Boake A. Sells........................................ 18,000
Ronald Terry.......................................... 107,287(d)
Eddie N. Williams..................................... 4,550
Shirley Young......................................... 34,850
All directors and executive officers as a group....... 3,137,830
- ---------------
(a) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock options: Mr. Ledsinger, 9,000 shares;
Mr. Peternell, 6,525 shares; Mr. Reed 8,475 shares; Mr. Rose, 33,750
shares; Mr. Satre, 23,100 shares; all directors and executive officers as a
group, 85,656 shares. Shares listed include shares allocated to accounts
under the Company's Savings and Retirement Plan as of December 31, 1993.
(b) Includes 125,200 shares held by a charitable foundation of which Mr. Rose
serves as a director. Mr. Rose has shared voting and investment power over
these shares, but disclaims any other beneficial interest.
(c) Includes 111,000 shares held by a charitable lead trust of which Mr. Rose's
wife serves as the sole trustee. Mr. Rose disclaims any beneficial interest
in such shares.
(d) Included in the shares for Mr. Terry are 4,800 shares owned by members of
his family, in which shares he disclaims any beneficial interest.
3
NOMINEES: CLASS I, TERM EXPIRES 1997
[Picture] JOE M. HENSON
Mr. Henson, 60, has been Chairman of the Board of LEGENT Corporation
since 1989. He was Chief Executive Officer of LEGENT Corporation
from 1989 to April 1992. Mr. Henson has been a Promus director since
April 1991. He is a member of the Human Resources Committee.
[Picture] MICHAEL D. ROSE
Mr. Rose, 52, has been Chairman of the Board and Chief Executive
Officer of Promus since November 1989. Effective April 29, 1994, Mr.
Satre will become Chief Executive Officer of Promus and Mr. Rose
will continue as Chairman of the Board. Mr. Rose was President of
Promus from November 1989 to April 1991. He was the Chief Executive
Officer (1981-1990), Chairman of the Board (1984-1990) and President
(1988-1990) of Holiday Corporation ("Holiday"). Mr. Rose is also a
director of Ashland Oil, Inc., First Tennessee National Corporation
and General Mills, Inc. He has been a Promus director since November
1989 and was a director of Holiday from 1978 to February 1990. He is
Chairman of the Executive Committee.
[Picture] RONALD TERRY
Mr. Terry, 63, has been Chairman of the Board and Chief Executive
Officer of First Tennessee National Corporation since 1973 and was
President from 1988 to August 1991. He is also a director of
BellSouth Corporation. Mr. Terry has been a Promus director since
February 1990 and was a director of Holiday from 1979 to February
1990. He is a member of the Executive Committee and is Chairman of
the Audit Committee.
[Picture] EDDIE N. WILLIAMS
Mr. Williams, 61, 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 Grumman Corp. and Riggs
National Bank of Washington, D. C. Mr. Williams has been a Promus
director since October 1992. He is a member of the Audit Committee.
4
DIRECTORS: CLASS II, TERM EXPIRES 1995
[Picture] PHILIP G. SATRE
Mr. Satre, 44, has been President and Chief Operating Officer of
Promus since April 1991 and President of Harrah's, an indirect
subsidiary of Promus, since 1984. Effective April 29, 1994, he will
become Chief Executive Officer of Promus. He was Chief Executive
Officer of Harrah's from 1984 to April 1991. He was a Senior Vice
President of Promus from November 1989 to April 1991 and a Senior
Vice President of Holiday from December 1987 to February 1990. He
also is a director of Goody's Family Clothing, Inc. He has been a
director of Promus since November 1989 and was a director of Holiday
from 1988 to February 1990. He is a member of the Executive
Committee.
[Picture] BOAKE A. SELLS
Mr. Sells, 56, a private investor, was Chairman of the Board and
Chief Executive Officer of Revco D.S., Inc. from September 1987 to
June 1992 and was President of that company from April 1988 to June
1992. Mr. Sells is a director of Huffy Corporation. He has been a
Promus director since February 1990 and was a director of Holiday
from 1985 to February 1990. He is a member of the Audit Committee.
[Picture] SHIRLEY YOUNG
Ms. Young, 58, has been Vice President-Consumer Market Development,
General Motors Corporation since June 1988. From 1983 to June 1988
she was President and from June 1988 to December 1990 Chairman of
Grey Strategic Marketing, Inc., a subsidiary of Grey Advertising,
Inc. She is also a director of Bell Atlantic Corporation and a
Consultant Director of Dayton Hudson Corporation. Ms. Young has been
a Promus director since February 1990 and was a director of Holiday
from 1983 to February 1990. She is a member of the Audit Committee.
DIRECTORS: CLASS III, TERM EXPIRES 1996
[Picture] JAMES L. BARKSDALE
Mr. Barksdale, 51, has been President and Chief Operating Officer
and a director of McCaw Cellular Communications, Inc. since January
1992. He served as Executive Vice President and Chief Operating
Officer of Federal Express Corporation from 1983 to October 1991. He
has been a Promus director since February 1991. He is also a
director of 3Com Corporation, Envoy Corporation, LIN Broadcasting
Corp. and Network Computing Devices, Inc. He is a member of the
Executive Committee and the Human Resources Committee.
5
[Picture] JAMES B. FARLEY
Mr. Farley, 63, has been a trustee of Mutual Of New York since July
1993. He was Chairman of the Board of Mutual Of New York from April
1989 to July 1993, was Chief Executive Officer of that company from
April 1989 to January 1993 and was President from October 1988 to
January 1991. Mr. Farley is also a director of Ashland Oil, Inc. Mr.
Farley has been a Promus director since February 1990 and was a
director of Holiday from 1982 to February 1990. He is a member of
the Human Resources Committee.
[Picture] WALTER J. SALMON
Mr. Salmon, 63, since 1980 has been the Stanley Roth, Sr. Professor
of Retailing and, since 1989, Senior Associate Dean, Director of
External Relations, the Graduate School of Business Administration,
Harvard University. Mr. Salmon is also a director of Hannaford
Brothers Company, Luby's Cafeterias, Inc., The Neiman Marcus Group,
The Quaker Oats Company, Telxon Corp., and Circuit City Stores, Inc.
He has been a Promus director since February 1990 and was a director
of Holiday from 1981 to February 1990. He is Chairman of the Human
Resources Committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its direct or indirect
subsidiaries are paid a monthly fee of $2,083 plus $1,000 for each board meeting
and $1,000 for each committee meeting they attend. Committee chairmen are paid
an additional $500 for each committee meeting attended. Under the provisions of
the Company's two unfunded compensation deferral programs, directors may defer
the receipt of all or a portion of their directors' fees. Under the first plan,
amounts, while deferred, earn interest at a rate based on a calculated average
prime interest rate. Under the second plan (the "Executive Deferred Compensation
Plan"), amounts, while deferred, earn interest at a termination rate or at a
retirement rate, both of which are approved annually by the Human Resources
Committee. The termination rate for 1993 was 9% and the retirement rate was 16%.
For 1994, these rates are 8.5% and 15.5%, respectively. 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 higher rate. A director generally will receive the retirement rate when
he or she retires from the Board. All nonmanagement directors except Shirley
Young deferred their fees under the Executive Deferred Compensation Plan during
1993.
In connection with the administration of the Executive Deferred
Compensation Plan, the Company has purchased company-owned life insurance
policies insuring the lives of certain directors, officers and key employees. In
purchasing these life insurance policies, certain assumptions have been made
regarding mortality experience, interest rates and policy dividends. The Company
expects to recover policy premiums and the net cost of benefits paid under the
Executive Deferred Compensation Plan through the operation of these insurance
contracts. Participants in the plan have no rights in the insurance policies.
Amounts deferred under either plan may be paid in a lump sum or in installments,
as selected by the director when making the deferral election.
Each nonmanagement director is also provided with term life insurance of
$50,000, accidental death insurance of $50,000, travel accident insurance of
$250,000 while traveling on behalf of the Company and the opportunity to
participate in the Company's standard group health insurance plans.
6
During 1993 the total cost for these insurance benefits was approximately $996
per director participating in the plans. Each director receiving these benefits
incurred taxable income equal to the cost of the life and health insurance.
In February 1990 each nonmanagement director in office at that time was
awarded 1,000 shares of restricted stock under the Company's 1990 Restricted
Stock Plan which replaced 1,000 shares of Holiday restricted stock awarded in
April 1989. Nonmanagement directors who were elected in 1991 and 1992 also
received such an award. These awards vest in equal installments over ten years.
If a director who had prior Board service with Holiday retires, he or she will
also receive vesting credit for each full year of such service prior to April
28, 1989. In connection with the Stock Splits, the foregoing awards have been
adjusted to 3,000 shares.
MEETINGS
The Board of Directors met five times during 1993. During the year,
attendance at Board meetings averaged 95% and attendance at Committee meetings
averaged 95%.
AUDIT COMMITTEE
The Audit Committee, which met four times in 1993, (1) recommends annually
to the Board of Directors the independent public accountants for the Company and
its direct or indirect subsidiaries; (2) meets with the independent public
accountants concerning their audit, their evaluation of the Company's financial
statements, accounting developments that may affect the Company and their
nonaudit services; (3) meets with management and the internal auditors
concerning similar matters; and (4) makes recommendations to all of the
aforesaid groups that it deems appropriate.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee met five times during 1993. The Human
Resources Committee acts as the nominating committee of the Board of Directors.
It considers and makes recommendations to the Board of Directors concerning the
size and composition of the Board, the number of nonmanagement directors, the
qualifications of members and potential nominees for membership, the
compensation of directors, membership of committees of the Board and certain
administrative matters. The Human Resources Committee considers nominees
recommended by stockholders. Detailed resumes of business experience and
personal data of potential nominees may be submitted to the Corporate Secretary
at the address shown on the front page of this Proxy Statement.
The Human Resources Committee also approves the annual compensation of
corporate officers who are members of the Board of Directors and administers the
Company's bonus, restricted stock, stock option and other incentive compensation
plans. The Committee also makes various decisions and policy determinations in
connection with the Company's Savings and Retirement Plan and Employee Stock
Ownership Plan.
EXECUTIVE COMMITTEE
The Executive Committee met one time during 1993. During the intervals
between meetings of the Board of Directors, the Executive Committee, subject to
specified limitations, may act on behalf of the Board. Action taken by the
Executive Committee is reported to the Board of Directors at its first meeting
following such action. Without specific delegated authority, the Executive
Committee may not declare dividends except current quarterly dividends not in
excess of those last declared by the Board of Directors and may not increase or
decrease the number of directors or appoint new directors. Unless within an
overall plan previously approved by the Board of Directors, action taken by the
Executive Committee approving a transaction in excess of $75,000,000 is subject
to revision or rescission by the Board of Directors at the Board's first meeting
following such action.
7
CHARTER AMENDMENT
SUMMARY OF CHARTER AMENDMENT
On February 25, 1994, the Board of Directors unanimously adopted
resolutions approving the proposed Charter Amendment that amends the Company's
Certificate of Incorporation to:
(a) increase the aggregate number of shares of Common Stock that the
Company is authorized to issue from 120,000,000 to 360,000,000; and
(b) reduce the par value of the Company's Common Stock from $1.50 per
share to $.10 per share.
The Board of Directors declared that the Charter Amendment was advisable
and in the best interest of the Company and its stockholders, and directed that
the proposed Charter Amendment be considered at the Annual Meeting for the
purpose of obtaining the requisite stockholder approval.
The Charter Amendment would amend paragraph A of Article FOURTH of
the Certificate of Incorporation and add a new transitional paragraph at the end
of such paragraph A, as provided in the resolutions set forth on page 9 of this
Proxy Statement.
INCREASE IN AUTHORIZED STOCK AND DECREASE IN PAR VALUE PER SHARE
The 2 for 1 and 3 for 2 Stock Splits declared by the Board of Directors
during 1993 were effected in the form of stock dividends. A large percentage of
the Company's existing authorized shares were used to accomplish the Stock
Splits. As a result, additional authorized shares are necessary for future stock
splits or other significant corporate actions. Market conditions permitting,
Promus seeks the additional shares to enable the Board to effect stock splits in
the future similar to the 2 for 1 and 3 for 2 Stock Splits effected in 1993. The
Board could use the additional authorized shares for other corporate purposes
such as corporate mergers, acquisitions, equity financing for expansion or
developing new business opportunities, and employee benefit programs. Any such
actions would be in the discretion of the Board, as it has the authority to
determine, subject to applicable laws and stock exchange regulations, whether,
when and on what terms the issuance of shares of Common Stock may be warranted
in connection with possible stock splits or any of the other foregoing purposes.
Except where shares are issued on a pro-rata basis to all stockholders (such as
in a stock dividend or stock split), the issuance of additional shares of Common
Stock if approved by the Board of Directors would reduce the proportionate
ownership interests in the Company held by current stockholders. The reduction
in the par value per share from $1.50 to $.10 will result in the transfer of
approximately $143.2 million from the Common Stock account to the capital
surplus account on the Company's balance sheet. The capital surplus account is
available for dividends whereas the Common Stock account cannot be used to fund
dividends. The Company has no present intention to use the additional capital
surplus for dividends. The number of shares of Preferred Stock and Special Stock
authorized by the Certificate of Incorporation will remain the same.
EFFECTIVE DATE OF CHARTER AMENDMENT
If the Charter Amendment is adopted by the required vote of stockholders,
it will become effective when the appropriate Certificate of Amendment to the
Company's Certificate of Incorporation is filed with the Secretary of State of
the State of Delaware. The Company anticipates that this filing will be made on
April 29, 1994, promptly following the Annual Meeting, or as soon as practicable
thereafter.
8
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE FOLLOWING
RESOLUTIONS:
RESOLVED, that the Company's stockholders hereby approve the
following amendments to Article FOURTH of the Company's
Certificate of Incorporation:
(1) That paragraph A of Article FOURTH of the Certificate of
Incorporation of the Company be amended to read in its entirety
as follows:
"A. The total number of shares which the Corporation shall
have authority to issue is 365,150,000, consisting of
360,000,000 shares of Common Stock, par value $.10 per
share (the "Common Stock"), 150,000 shares of Preferred
Stock, par value of $100.00 per share (the "Preferred
Stock"), and 5,000,000 shares of Special Stock, par value
$1.12 1/2 per share (the "Special Stock")."
(2) That the following additional paragraph be inserted
immediately after paragraph A of Article FOURTH of the Company's
Certificate of Incorporation:
"Simultaneously with the effective date of the amendment
of paragraph A of Article FOURTH to read as set forth
above (the "Effective Date"), each share of the Common
Stock, par value $1.50 per share, of the Corporation
issued and outstanding or held as treasury shares
immediately prior to the Effective Date shall,
automatically and without further action on the part of
the holder thereof, have a par value of $.10 per share and
each existing certificate representing such shares shall
represent the same number of shares of Common Stock, with
a par value of $.10 per share.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE CHARTER
AMENDMENT UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
STOCK OPTION PLAN
DESCRIPTION OF PLAN
On November 5, 1989, the Company adopted 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. Members
of the Board of Directors who are not employees are not eligible to receive
stock options under the Plan.
As of January 31, 1994, the maximum number of shares authorized for the
issuance of new stock options was 1,761,220. 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.
No stock option or stock appreciation right may be granted after ten years
following the adoption of the plan. 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. See "Amendments to Stock Option
Plan For Stockholder Approval" below.
9
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. The
Committee has the right under the terms of the Stock Option Plan to decrease the
option price on any outstanding options. Except for price adjustments made in
connection with the Stock Splits, the Committee has never modified the option
price on outstanding options. The Committee also has the right under the terms
of the Stock Option Plan to accelerate the vesting of any option.
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 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 currently
have stock appreciation rights.
In the event of an optionee's termination of employment (except by reason
of death, permanent and total disability or retirement), all unvested
(non-exercisable) stock options granted prior to January 1, 1992 (or based on
annual grants made prior to January 1, 1992) are forfeited by their terms. In
case of death, permanent and total disability, or retirement (termination of
employment at 55 years or older with at least ten years of service), all
unvested (non-exercisable) options granted prior to January 1, 1992 (or based on
annual grants made prior to January 1, 1992) will accelerate and become vested.
The treatment of stock options granted after January 1, 1992 with respect to
termination of employment, death, disability or retirement is discussed below.
Options may be exercised for a limited time after an optionee's death,
retirement, or determination of disability, but only to the extent they were
exercisable upon the date of such event. See "Amendments to Stock Option Plan
For Stockholder Approval" below. 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.
10
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 Securities Exchange Act of 1934, as amended (the
"Exchange Act"). No amendment, modification or termination of the Stock Option
Plan may adversely affect a participant's rights under any previously granted
option.
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. In connection with the Stock Splits,
the Committee approved adjustments that increased the authorized number of stock
options under the Stock Option Plan to account for the Stock Splits and also
adjusted the number and exercise price of outstanding options to preserve their
value prior to the Stock Splits.
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 with respect to
stock options granted after January 1, 1992, upon an optionee's retirement, all
stock options which at the time of retirement are unvested will be forfeited,
and upon death or disability, 50% of unvested options will become exercisable
and the balance will be forfeited. Upon a change in control (as defined), 100%
of unvested options granted after January 1, 1992, will become exercisable.
(These provisions of the new regulations do not apply to pro-rata grants of
stock options which are awarded after January 1, 1992, to newly-hired or
promoted employees where such grants are based on regular annual awards granted
prior to January 1, 1992.) The regulations provide that with respect to options
granted before or after January 1, 1992, the Committee may make 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. Federally 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. 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. The Company believes that the terms and conditions of the stock
options granted under the Stock Option Plan currently meet the requirements for
performance-based 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. One of the
proposed amendments to the Plan, as discussed below, is intended to assure the
continuing deductibility of such compensation under Section 162(m). When an
optionee disposes of shares acquired by the exercise of an 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
11
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. Federally taxable income is generally not
recognized by an optionee when an incentive stock option is granted. 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 an "item of adjustment" 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
long-term capital gain to the optionee, and the Company will 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 will be ordinary income to the optionee at the time of the
disqualifying disposition. The Company generally will be entitled to a federal
tax deduction equal to the amount of ordinary income recognized by the optionee.
If a disqualifying disposition occurs in the year of exercise, the "item of
adjustment" for alternative minimum tax purposes will not be more than the gain
on disposition. The basis of the acquired shares for purposes of determining the
alternative minimum tax gain or loss in years following the year of exercise
will be the exercise price increased by the amount of the "item of adjustment"
previously included in the alternative minimum taxable income.
AMENDMENTS TO STOCK OPTION PLAN FOR STOCKHOLDER APPROVAL
On February 25, 1994, the Human Resources Committee approved the following
proposed amendments to the Stock Option Plan which are being presented to the
stockholders for approval:
(a) An amendment that provides flexibility for exercising stock
options in the event of the retirement, death or disability of an optionee.
Under the current terms of the Stock Option Plan, an optionee has one year
after retirement, death or determination of disability to exercise a stock
option. The proposed amendment would allow an optionee with ten years of
service a two year period, and an optionee with 20 years of service 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 period prior to the end of the
normal term of the option.
(b) A proposed amendment intended to comply with Section 162(m) of the
Code. The proposed amendment would limit the number of stock options that
can be granted to any individual to 250,000 options in any one year period.
This number of options could be adjusted by the Human Resources Committee
in the event of a change in corporate capitalization such as a stock split,
stock dividend, a corporate transaction such as a merger, or other similar
event. The purpose of this amendment is to assure that compensation
attributable to stock options will continue to be fully deductible to the
Company under Section 162(m) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING AMENDMENTS TO
THE STOCK OPTION PLAN.
12
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee and
subject to ratification by the stockholders, has appointed Arthur Andersen & Co.
as the Company's independent public accountants for the 1994 calendar year.
Arthur Andersen & Co. has been the Company's independent public accountants
since February 1990, and prior to that was the independent public accountants
for Holiday from 1971 to 1990. A representative of Arthur Andersen & Co. will be
present at the meeting and will be given an opportunity to make a statement and
answer questions. If the appointment is not ratified or if Arthur Andersen & Co.
becomes incapable of serving in this capacity, or if their employment is
terminated, the Board will appoint independent public accountants whose
continued employment after the annual meeting in 1995 shall be subject to
ratification by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 1994.
REPORT OF THE HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
The Human Resources Committee (referred to in this section of the Proxy
Statement as the "Committee") is composed entirely of independent outside
directors. The Committee is responsible for approving the compensation of the
management directors (Mr. Rose and Mr. Satre), reviewing the compensation of
other executive officers, including the executive officers named on page 18, and
approving stock awards, including stock options, for each such officer.
The Company's compensation policy with regard to its executive officers and
other key management is to pay cash compensation (salary and bonus) in the
median range of amounts paid to executives who are employed in similar positions
in companies primarily in service and entertainment industries with revenues
regressed to be comparable to the Company's revenues. This group of
approximately 20 companies is the comparator group. The comparator group is not
identical to the peer group included in the performance comparison graph on page
17, although some companies in the peer group are included in the comparator
group. The Company uses the comparator group for comparison purposes in regard
to cash compensation because the Committee believes that the Company competes
for executive talent across the country with a broad range of companies in
several industries.
The Company provides long-term incentive compensation opportunity to
executive officers based solely on the performance of the Company's common
stock. The long-term incentives are designed to attract and retain key
executives by providing above average rewards for outstanding performance
relative to the comparator group. The Company's compensation policies are
described in more detail below.
SALARY
As discussed above, salary ranges of executive officers are based on
competitive factors. Merit salary increases within these ranges are based
primarily on (1) the officer's achievement of performance objectives and (2) the
current salary of the executive within the previously established salary range
for his grade level. Salaries on average for executive officers were subject to
adjustment within a range established for 1993 of 0 to 8% for merit increases.
Greater weight is normally given to the achievement
13
of objectives than to the executive's current salary level within the range of
his grade level, although specific weights for each factor have not been
established. The objectives of the Chairman and 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 an in-depth
and skilled organizational structure to operate and develop the Company's
businesses, positioning the Company for further growth and development and
achieving the Company's annual business plan and its various financial goals.
The Committee's assessment of the Chairman's and Chief Executive Officer's
performance is based on a subjective review of such officer's performance
against these objectives. Specific weights are not assigned to any particular
objective. The objectives of the other executive officers are approved by the
Chief Executive Officer. These objectives relate to achieving functional goals
and financial objectives within the officer's assigned area of responsibility.
For example, an objective could relate to completion of a project assigned to
that executive's area of responsibility. The Chief Executive Officer's
assessment of the performance of the other executive officers is based on a
subjective review of each officer's performance. Specific weights are not given
to each objective in this assessment.
The Committee approves merit salary increases for the Chairman and Chief
Executive Officer and the President. The Chief Executive Officer approves merit
salary increases for the other executive officers and such increases are
reviewed by the Committee. Merit salary percentage increases for the last three
years for all executive officers have averaged 4.6% per year. During the year
1993, the Committee approved a 4.8% merit salary increase for Mr. Rose and the
average merit salary percentage increases approved for the other executive
officers during 1993 was 4.7%.
BONUSES
Under the Company's annual management incentive bonus plan, prior to the
beginning of each year the Committee assigns a corporate bonus objective for the
Company's executive officers that is a targeted level of pre-tax earnings for
the Company. The target is the pre-tax earnings contained in the Company's
annual plan and is calculated before interest expense, property transactions and
development expenses. A target bonus is established for each executive officer
that is a specified percentage of the officer's salary if the pre-tax earnings
objective is achieved. This percentage of salary increases or decreases on a
matrix (the "bonus matrix") in relation to the pre-tax earnings objective. If
100% of the pre-tax earnings objective is achieved, the target bonus for the
Chief Executive Officer is 60% of his base salary. For performance above 100% of
the pre-tax earnings objective, additional bonus, up to a maximum bonus of 120%
of such executive officer's base salary, can be awarded. For the other executive
officers, the target bonus for achieving 100% of the pre-tax earnings target
ranges from 45% to 60% of their base salary. This is increased on a graduated
scale to a maximum bonus of 90% to 120% of their base salary.
After the end of the plan year, the Committee determines the extent to
which the targeted corporate pre-tax earnings 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 due to the
objective achieved, by (b) each individual's salary. These amounts are then
added to create a corporate bonus pool. If the Committee determines that a
minimum pre-tax earnings target was not achieved, then no bonus pool is
established and no bonuses are payable unless an exception were to be approved
by the Committee because of unusual circumstances. No such exceptions to the
corporate plan have been approved in the last three years. If an exception were
approved, it would be a subjective decision by the Committee.
14
The bonus payable to the Chief Executive Officer and Chairman of the Board
from the bonus pool is the percentage of salary that is payable based solely on
the result achieved under the bonus matrix. The bonuses of the other executive
officers depend on the percentage of salary payable on the bonus matrix and an
assessment of their achievement of personal objectives. 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 Chairman and Chief Executive Officer. More
importance (no specified level) is generally given to the achievement of pre-tax
earnings than to the achievement of personal objectives. As a result of the
assessment of personal objectives, the bonuses of an executive officer (other
than the Chairman and Chief Executive Officer) 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.
For 1993, the Committee determined that the Company exceeded its pre-tax
earnings objective and thus the bonuses for 1993 performance that were paid to
all executive officers were greater than target bonuses.
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. Based on an assessment of
competitive factors, the Committee determines an award that is suitable for
providing an adequate incentive for both performance and retention purposes.
Awards are currently granted with a vesting period extending four to six years
from the initial grant date. In order to align the interest of senior executives
with the interest of stockholders, the Committee's current policy regarding
stock awards is to grant stock options to executive officers and other senior
officers, with a combination of restricted stock and stock options being granted
to other key employees.
Each executive officer is granted a stock option award that will give such
officer an estimated dollar value of stock compensation (the difference between
the option price and an estimated future market price of the stock) vesting each
year which is equal to a specific percentage of the officer's salary. This
percentage increases in line with the higher grade level of the officer. The
Chief Executive Officer's Stock compensation value is targeted at 100% of
salary, which is the highest percentage of salary as stock compensation. The
dollar value of the award is based on estimated annual increases in the market
value of the Common Stock in the future to reach the targeted level of
compensation. There is no certainty or assurance that such increases will occur.
The applicable percentage of salary, as a measure of stock compensation, is
determined for each executive after the Committee reviews the market-level
equity incentive awards granted to comparably-ranked executives by a group of 20
service and entertainment related companies. This same comparator group is used
for cash compensation but is not the same as the peer group used for the
performance graph although some of the companies may be the same. The Committee
has been advised by an independent consulting firm with expertise in executive
compensation that the awards approved by the Committee generally are consistent
with these market-level awards.
For the past several years, it was the Committee's practice to approve
awards each year for executive officers. This resulted in stock options being
granted annually at new option prices each year. For grants in 1994, the
Committee re-evaluated the need to provide longer term incentives for its
executive officers given the intense competitive environment for executive
talent in which the Company operates. Accordingly, the Committee decided to
grant awards in 1994 to the Company's executive
15
officers and a limited number of other key executives that combines, in one
award, the shares that would, in all likelihood, have been awarded in 1994, 1995
and 1996 ("three year award"). A three year award was made in January 1994 to
each of the executive officers with an option price set at the current market
price on the grant date. The award's first annual vesting date is January 1,
1996, with vesting in annual installments of various amounts extending to
January 1, 2000. The estimated value of each executive's stock options,
including the three year award, that vests per year in terms of equity
compensation as a percent of salary remains approximately in line with the
market level grants of the comparator group previously discussed.
The Committee believes that the larger initial grant size of the three-year
award, plus utilizing the current market price for the option price, provides
the incentive that is necessary to retain and attract the key executives needed
by the Company in the foreseeable future. At this time it is the intention of
the Committee is to make no further annual grants to this group of executives
until 1997. The Committee, however, intends to monitor the appropriateness of
this three-year award to insure long term incentive compensation remains
competitive in order that the Company has the ability to continue to attract and
retain executive talent. The actual value of the stock compensation vesting each
year is dependent on the market value of the Company's stock.
The amount of a stock option award is not dependent on past corporate
performance nor on the amount of options or restricted stock previously granted
to an executive officer. For this group of executives, the Company has no other
long-term incentive plans under which future awards will be made, so that
long-term stock market performance is the sole determinant of long-term
incentive compensation.
POLICY CONCERNING TAX DEDUCTIBILITY OF COMPENSATION
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 is necessary for competitive reasons or to attract or
retain a key executive, or where achieving tax deductibility (such as disclosing
performance goals) would be considered disadvantageous to the best interests of
the Company.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. Rose's base salary is based on his rights under his employment
agreement. Under his agreement, he is entitled to merit salary increases. These
merit increases are determined in accordance with the procedures and guidelines
described above. The Committee approved Mr. Rose's bonus for 1993 based on his
achievement with respect to the targeted pre-tax earnings goal for the Company.
No stock options were granted to Mr. Rose during 1993.
Human Resources Committee
Walter J. Salmon (Chairman)
James L. Barksdale
James B. Farley
Joe M. Henson
16
PERFORMANCE OF PROMUS COMMON STOCK
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) a group of peer issuers with similar businesses. See
Note (1). The graph assumes reinvestment of dividends. Performance of the
Company's Common Stock includes the performance of Holiday Common Stock prior to
February 7, 1990. See Note (2).
[Performance graph delivered pursuant to Form SE dated March 16, 1994]
(1) The Peer Group companies consist of Bally Manufacturing Corp., Caesars
World, Inc., Circus Circus Enterprises, Inc., Hilton Hotels Corp., La Quinta
Motor Inns, Inc., Marriott International, Mirage Resorts, Inc., and Showboat
Inc. Marriott Corporation (in last year's graph) has been replaced by
Marriott International because trading was discontinued in Marriott
Corporation as a result of a corporate restructuring in which Marriott
International was the surviving corporation whose business is similar to the
Company's.
(2) The line graph for Promus Common Stock assumes that $100 was invested in the
common stock of Holiday Corporation ("Holiday") on December 31, 1988. On
February 7, 1990, Promus Common
(Footnotes continued on following page)
17
(Footnotes continued from preceding page)
Stock was spun off on a share-for-share basis to the stockholders of
Holiday. Immediately after the spin-off, Bass PLC ("Bass") acquired
Holiday's Holiday Inn hotel division by means of a merger between Holiday
and a subsidiary of Bass. In the merger Holiday stockholders received an
approximate quarter-share of Bass ADRs for each Holiday share owned, and
their Holiday shares were cancelled. The Promus Board of Directors
thereafter declared a cash dividend of $30 per share on Promus stock ($10
per share when adjusted for the Stock Splits). The line graph assumes
reinvestment in shares of Promus Common Stock of both the special cash
dividend and the market value on February 8, 1990 of the Bass ADRs received
in the merger (approximately $4.39 per share of Holiday common stock). In
connection with these transactions, the executive officers and directors of
Holiday became the senior management and directors of Promus. Because of the
acquisition of the Holiday Inn business by Bass, the performance of
Holiday's common stock prior to the merger is not necessarily indicative of
what the performance of Promus Common Stock might have been during such
period.
The Summary Compensation Table below sets forth certain compensation
information concerning five executive officers.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- -------------------------
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARD(S)($)(2) OPTIONS(#)(3) COMPENSATION($)(4)
- ----------------------------- --------- ---------- ---------- ---------------- ------------ ----------- ----------------
Michael D. Rose 1993 $ 509,233 $ 504,141 $ 88,234 $ 318,807
Chairman of the Board and 1992 505,108 282,860 89,968 240,000 236,408
Chief Executive Officer 1991 469,646 304,505
Philip G. Satre 1993 345,639 342,183 108,624
President and Chief 1992 341,446 191,210 164,400 80,859
Operating Officer 1991 301,346 190,600 $ 645,188
Colin V. Reed 1993 244,231 200,269 393,750 24,000 33,675
Senior Vice President, 1992 171,346 88,819 61,440 20,927
Corporate Development 1991 132,913 64,500 38,835
Charles A. Ledsinger, Jr. 1993 210,576 172,672 23,782
Senior Vice President and 1992 208,731 98,103 63,000 15,090
Chief Financial Officer 1991 194,019 104,800
Ben C. Peternell 1993 194,577 159,553 122,198
Senior Vice President, 1992 192,254 88,437 47,100 92,935
Human Resources and 1991 177,685 96,000
Communications
- ---------------
(1) Other Annual Compensation for Mr. Rose includes allocated amounts for
aircraft usage and household security. Such amounts, respectively, were as
follows for 1993: $22,349 and $28,707. Such amounts, respectively, were as
follows for 1992; $35,600 and $28,800. For the fiscal years 1993 and 1992,
amounts of Other Annual Compensation for each individual named above (other
than Mr. Rose) aggregated less than (a) 10% of the total annual salary and
bonus for each individual or (b) $50,000 whichever is lower. Accordingly, no
such amounts are included. Other Annual Compensation amounts paid for 1991
are not presented.
(Footnotes continued on following page)
18
(Footnotes continued from preceding page)
(2) The 1993 award of restricted stock to Mr. Reed was 21,000 shares with
vesting in equal annual installments over the period 1994 to 1995. The 1991
award of restricted stock to Mr. Satre was 99,900 shares with vesting in
equal annual amounts over the period 1992 to 1995. The 1991 award of
restricted stock to Mr. Reed was 6,495 shares with vesting in equal annual
amounts over the period 1992 to 1995. Dividends will be paid on restricted
stock in the same manner and to the same extent as dividends are paid on
other shares of Common Stock. The number of unvested shares of restricted
stock awards held by Mr. Satre, Mr. Reed, Mr. Ledsinger and Mr. Peternell as
of December 31, 1993, was 74,973, 22,497, 25,500 and 30,000 respectively.
The market value of unvested restricted stock awards held by Mr. Satre, Mr.
Reed, Mr. Ledsinger and Mr. Peternell as of December 31, 1993, was
$3,430,015, $1,029,238, $1,166,625, and $1,372,500 respectively. Mr. Rose
held no unvested shares of restricted stock at December 31, 1993.
(3) Adjusted for the Stock Splits in 1993 as follows: a 2 for 1 split in March
1993 and a 3 for 2 split in November 1993.
(4) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation balances and (b) matching contributions to the
Company's Savings & Retirement Plan. Such amounts, respectively, were as
follows for 1993: Mr. Rose, $309,813 and $8,994; Mr. Satre, $99,630 and
$8,994; Mr. Reed, $24,681 and $8,994; Mr. Ledsinger, $12,134 and $11,648;
and Mr. Peternell, $113,442 and $8,756. Such amounts, respectively, were as
follows for 1992; Mr. Rose, $228,214 and $8,194; Mr. Satre $72,131 and
$8,728; Mr. Reed, $12,845 and $8,082; Mr. Ledsinger, $6,407 and $8,683; and
Mr. Peternell, $84,607 and $8,328. All Other Compensation amounts paid for
1991 are not presented. The Company does not provide a fixed benefit pension
plan for its executives. The amounts set forth above are retirement benefits
which are a function of deferred income voluntarily contributed by the
executives.
The following table sets forth certain information regarding grants of
stock options made to the executive officers named in the Summary Compensation
Table during 1993, including information as to the potential realizable value of
such options at assumed annual rates of stock price appreciation for the ten
year option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1993 and for all
Promus stockholders.
OPTION GRANTS IN THE LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
--------------------------------------------------- ---------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#)(3) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
- ------------------------------ ----------- ------------- ----------- ---------- ----------- --------------- ---------------
Michael D. Rose............... -- -- $ -- -- $ -- $ -- $ --
Philip G. Satre............... -- -- -- -- -- -- --
Colin V. Reed................. 24,000 7.4% 18.75 2/26/03 -- 283,003 717,184
Charles A. Ledsinger, Jr...... -- -- -- -- -- -- --
Ben C. Peternell.............. -- -- -- -- -- -- --
All Stockholders(2)........... n/a n/a n/a n/a -- 1,711,051,884 4,336,141,420
All Optionees................. 326,470 100.00% 26.65(4) various -- 5,470,660 13,863,727
All Optionees as a percent
of All Stockholders Gain.... n/a n/a n/a n/a n/a 0.32% 0.32%
(Footnotes on following page)
19
(Footnotes for preceding page)
- ---------------
(1) The dollar amounts under these columns are the result of calculations at
zero percent, and at five percent and 10 percent rates set by the Securities
and Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of the Company's stock price. In the above
table, the Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors.
(2) These amounts represent the appreciated value which common shareholders
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.
(3) Employees vest in the right to exercise these options over a four-year
period. The options granted to Mr. Reed were granted on February 25, 1993.
The options granted to other optionees were granted at various times during
1993. In general, major option awards have been granted once a year. Options
may also be granted at other times at the discretion of the Human Resources
Committee based on promotions or similar reasons. See "Report of the Human
Resources Committee on Executive Compensation" and "Stock Option Plan" in
this proxy statement for more information concerning stock option awards.
(4) Represents average exercise price of options granted to all Optionees.
The following table sets forth certain information concerning stock option
exercises during 1993 by the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN 1993 AND
DECEMBER 31, 1993, OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1993(#) AT DECEMBER 31, 1993($)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- -------------------------------------- ------------- ----------- ------------- ------------ ------------- --------------
Michael D. Rose....................... -- $ -- -- 240,000 -- $ 8,119,997
Philip G. Satre....................... -- -- -- 164,400 -- 5,554,697
Colin V. Reed......................... 3,123 137,589 -- 85,440 -- 2,707,693
Charles A. Ledsinger, Jr.............. 8,010 376,923 -- 63,000 -- 2,135,249
Ben C. Peternell...................... -- -- -- 47,100 -- 1,586,605
- ---------------
(1) Amount represents the difference between the aggregated option price of
unexercised options and a $45.75 market price on December 31, 1993.
20
CERTAIN EMPLOYMENT ARRANGEMENTS
On February 25, 1994, the Board of Directors elected Mr. Satre Chief
Executive Officer of the Company effective April 29, 1994, replacing Mr. Rose in
this position. Mr. Satre will continue to serve as President. The Board also
approved an employment agreement with Mr. Satre. Under this agreement, the
Company has agreed to employ Mr. Satre as Chief Executive Officer of the Company
from April 29, 1994, until December 31, 1998 at an annual salary of $450,000,
subject to merit increases as may be approved by the Human Resources Committee.
During the term of this employment agreement, Mr. Satre will continue to be
eligible for his current benefits, including eligibility for bonus compensation
and long term incentive compensation in the form of stock options and restricted
stock awards as may be approved by the Human Resources Committee. The Board
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 will
continue in force during this period of time for vesting purposes. If the
agreement is terminated for cause, his unvested options will be cancelled and
his salary will end. He will be entitled to the retirement rate for his account
under the Executive Deferred Compensation Plan if he is terminated without cause
or if he resigns for good reason. If a change in control were to occur during
his employment agreement and his employment terminated voluntarily or
involuntarily within two years after the change in control, Mr. Satre would be
entitled to receive the severance payments under his severance agreement (if
then in force) in lieu of the salary and rights under his employment agreement.
On February 25, 1994, the Board of Directors approved an employment
agreement with Mr. Rose, replacing an existing agreement. Under the new
agreement, the Company has agreed to employ Mr. Rose in a full time capacity as
Chairman of the Board, subject to his election to the Board of Directors, until
December 31, 1998, at an annual salary of $550,000, subject to merit increases
as may be approved by the Human Resources Committee. The agreement can be
extended on a year to year basis after December 31, 1998, pursuant to mutual
agreement. During the term of this employment agreement, Mr. Rose will continue
to be eligible for his current benefits, including eligibility for bonus
compensation and long term incentive compensation in the form of stock options
and restricted stock awards as may be approved by the Human Resources Committee.
After April 30, 1996, however, the Board may modify his duties to serve as
Chairman of the Board at 50% time and 50% salary or to serve in a more limited
role with a commensurate lesser salary. The Board reserves the right to
terminate the employment agreement at any time with or without cause and Mr.
Rose may resign for good reason (as defined). If the agreement is terminated by
the Board without cause or if he resigns for good reason, his unvested stock
options will vest at that time and he will receive two years' salary
continuation. If the agreement is terminated for cause or if he resigns without
good reason, his unvested stock options will be cancelled and his salary will
end. The agreement further provides that such options will vest if he retires
after April 30, 1996 or on December 31, 1998, if his employment continues to
that date. If a change in control were to occur during his employment agreement
and his employment terminated voluntarily or involuntarily within two years
after the change in control, Mr. Rose would be entitled to receive the severance
payments under his severance agreement (if then in force) in lieu of the salary
and rights under his employment agreement.
After the termination of their employment with the Company, both Mr. Rose
and Mr. Satre will be entitled to receive group insurance benefits at the
Company's cost for their respective lifetimes similar to the benefits provided
to other retired management directors of the Company. In addition, both
21
employment agreements provide for a non-competition covenant for a period of two
years following termination of employment pursuant to which the executive agrees
not to engage in a business competitive with the Company or its subsidiaries.
The Company has entered into severance agreements with each of the
executive officers named on page 18. Each severance agreement provides for a
compensation payment of 2.99 times the average "annual compensation" paid to
such executive for the five preceding calendar years (the "Compensation
Payment"), as well as accelerated payment or accelerated vesting of any
compensation or awards payable to such executive under any incentive plan of the
Company if the executive is terminated subsequent to a change in control of the
Company, as defined in the severance agreements (the "Accelerated Payments")
(collectively, the "Severance Payments"), with certain exceptions described
below. With respect to restricted stock and stock options, such stock awards
vest automatically upon a change of control regardless of termination of the
employee. The "annual compensation" for purposes of determining the Compensation
Payment under the severance agreement excludes restricted stock vestings and
compensation or dividends related to restricted stock or stock options. A change
in control is defined to occur whenever: (i) any person becomes the beneficial
owner of 25% or more of the Company's then outstanding voting securities
regardless of comparative voting power of such securities, (ii) within a
two-year period, members of the Board of Directors at the beginning of such
period and approved successors no longer constitute a majority of such Board, or
(iii) holders of securities entitled to vote thereon approve a merger or
consolidation (with certain exceptions) or a plan of complete liquidation.
The executives are not entitled to the Compensation Payments subsequent to
a change in control if their termination is: (i) by the Company for cause (as
defined), (ii) a result of retirement or disability, or, except for Mr. Rose and
Mr. Satre, (iii) voluntary and not for good reason (as defined). In the event
that an executive becomes entitled to Severance Payments, which are subject to
taxation under Section 4999 (the "Excise Tax") of the Code, the severance
agreements provide that the Company shall pay the executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the executive
after deduction of any Excise Tax on the Severance Payments and all Excise Tax
and other taxes on the Gross-Up Payment, shall equal the initial Severance
Payments, subject to certain exceptions.
Mr. Rose and Mr. Satre are entitled to the Compensation Payments if, after
a change in control of the Company, such executive's employment terminates
involuntarily or he resigns. The other executives are entitled to the
Compensation Payments subsequent to a change in control of the Company if the
executive's employment is terminated involuntarily or if the executive resigns
with good reason (as defined).
In addition, the severance agreements each provide that in the event of a
potential change in control of the Company (as defined below): (i) the Company
will deposit in escrow a sum of money sufficient to fund the Severance Payments
in the event of a change in control of the Company, and (ii) each executive will
agree to remain in the employ of the Company for a certain period of time. A
potential change in control of the Company is defined to occur whenever (i) the
Company enters into an agreement which would result in a change in control of
the Company, (ii) any person publicly announces an intention to take action
which would result in change of control of the Company, (iii) any person, other
than the trustee of an employee benefit plan of the Company, who is or becomes a
beneficial owner of 9.5% of the combined voting power of the Company's then
outstanding securities, increases his beneficial ownership of such securities by
5% or more over the percentage previously
22
owned on the date of the severance agreement, or (iv) the Board 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 on page 18 on January 1,
1994, if a change in control occurred and if such executives had been terminated
as of that date would have been approximately: Mr. Rose, $2,221,312 and
$8,119,997; Mr. Satre, $1,412,852 and $8,984,712; Mr. Reed, $671,365 and
$3,736,931; Mr. Ledsinger, $761,219 and $3,301,874; and Mr. Peternell, $777,171
and $2,959,105. Such Accelerated Payments include the value of unvested
restricted stock, valued as of December 31, 1993, and unvested stock options
that would accelerate upon a change in control.
The Company's executive officers participate in the Executive Deferred
Compensation Plan which provides for two alternative interest rates, a
termination rate and a retirement rate. See "Compensation of Directors" for more
information concerning these rates. In the event of a change in control, as
defined in the Executive Deferred Compensation Plan, a participant who is not
yet entitled to the retirement rate will receive such rate if his employment is
terminated within a 24 month period after the change in control. Messrs. Satre,
Ledsinger, Reed and Peternell are not yet entitled to the retirement rate.
Consequently, if a change in control as defined in the 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 eight nonmanagment directors which will
be payable under the Executive Deferred Compensation Plan or other deferred
compensation plans. Upon occurrence of a potential change in control of the
Company, the Company also will place into this escrow fund the severance
payments which become payable to the executive officers and certain other
executives only following a change in control. The Company intends to increase
the escrow fund, if necessary, to assure payment of future deferrals and also
has the right to increase the escrow fund to pay premiums on the insurance
policies and interest on policy loans. The escrow fund is subject to the claims
of the Company's creditors in the case of the Company's insolvency or
bankruptcy.
CERTAIN TRANSACTIONS
Mr. Ronald Terry, a director of the Company, is Chairman and Chief
Executive Officer 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 the Company has with
several banks (the "Bank Facility"). Pursuant to the Bank Facility, First
Tennessee has committed to loan to the Company's subsidiary, Embassy Suites,
Inc., $25,000,000, representing a 3.846% share of the total commitment covered
by the Bank Facility. As of December 31, 1993, $6,269,231 of this $25,000,000
commitment had been funded and $9,202,054 had been provided in the
23
form of unfunded letters of credit. In connection with this commitment, First
Tennessee received fees of $143,410 during 1993.
Also, First Tennessee acted as the merchant bank for Mastercard and Visa
and received fees of $290,016 during 1993 for providing this service to the
Company and its direct and indirect subsidiaries. In addition, the total
discount received by First Tennessee in connection with credit card merchant
processing for the Company and its subsidiaries in 1993 was $2,997,712. Certain
direct and indirect subsidiaries of the Company and hotels managed by such
entities maintained deposit accounts with First Tennessee during 1993. The
average ledger balance during 1993 was $1,010,415 and the ledger balance on
December 31, 1993, was $7,865,544. Deposit account service fees paid to First
Tennessee in excess of the earnings credit assigned to these accounts were
$107,016 during 1993. First Tennessee also received fees of $5,593 on other
miscellaneous transactions with the Company in 1993.
During 1993, Messrs. Satre and Ledsinger, executive officers of the
Company, had indebtedness to the Company in the aggregate amount of $240,216.26
and $128,400.30, respectively, to pay withholding taxes on their restricted
stock vesting in December 1992. The rate of interest on such indebtedness was
7%. Mr. Satre paid such indebtedness in full on January 12, 1993, and Mr.
Ledsinger paid such indebtedness in full on March 29, 1993.
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
owners of more than 5% of Common Stock as of December 31, 1993.
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED CLASS
- --------------------------------------------------------------------- ----------------- -----------
Provident Investment Counsel......................................... 7,659,722(1) 7.5%
and Robert Martin Kommerstad
300 North Lake Avenue
Pasadena, CA 91101- 4022
Trustees of The Promus............................................... 5,591,480(2) 5.5%
Companies Incorporated
Savings and Retirement Plan
1023 Cherry Road
Memphis, TN 38117
- ---------------
(1) Provident Investment Counsel ("Provident") is a registered investment
adviser and has reported beneficial ownership of the shares listed as a
result of Provident's discretionary authority to buy, sell and vote shares
of Common Stock for its investment advisory clients. No single investment
advisory client of Provident owns more than 5% of the Common Stock. Robert
Martin Kommerstad, a shareholder of Provident, controls Provident by virture
of his position as the sole voting trustee of a voting trust which holds all
of the outstanding securities of Provident, and his ownership of the listed
shares is reported as indirect. Provident and Mr. Kommerstad share voting
power as to 5,951,497 shares of the shares listed and have no power to vote
1,708,225 shares of the shares listed. Provident and Mr. Kommerstad share
investment power as to 7,659,722 shares of the shares listed. Neither
Provident nor Mr. Kommerstad separately have sole voting power or sole
investment power as to any of the shares listed. The source of this
information is a Schedule 13G filed by Provident
(Footnotes continued on following page)
24
(Footnotes continued from preceding page)
and Robert Martin Kommerstad with the Securities and Exchange Commission and
dated February 9, 1994.
(2) The trustees of The Promus Companies Incorporated 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 accounts pursuant to the terms of the Plan. No one participant has
such rights with respect to more than 5% of the Common Stock. The source of
this information is a Schedule 13G filed by the trustees of the Plan with
the Securities and Exchange Commission and dated February 4, 1994.
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 and Co. to assist in the
solicitation of proxies with respect to shares of Promus Common Stock held of
record by brokers, nominees and institutions. The estimated cost of the services
of D.F. King is $9,500, plus expenses.
STOCKHOLDER PROPOSALS
For any proposal to be considered for inclusion in the Company's proxy
statement and form of proxy for presentation at the 1995 Annual Meeting of
Stockholders, it must be received at the Company's principal executive offices
on or before November 18, 1994.
By Direction of the Board of Directors
/s/ E. O. Robinson, Jr.
E. O. Robinson, Jr.
Secretary
Memphis, Tennessee
March 18, 1994
25
THE FOLLOWING TRADEMARKS USED IN THIS DOCUMENT ARE OWNED BY THE PROMUS COMPANIES
INCORPORATED, ITS DIRECT OR INDIRECT SUBSIDIARIES, OR AFFILIATES: PROMUS(R),
EMBASSY SUITES(R), HARRAH'S(R), HAMPTON INN(R), HAMPTON INN & SUITESSM AND
HOMEWOOD SUITES(R).
["PROMUS COMPANIES(R)" logo]
NOTICE OF 1994
ANNUAL MEETING AND
PROXY STATEMENT
["Harrah's(R)" logo]
["Embassy Suites(R)" logo]
["Hampton Inn(R)" logo]
["Homewood Suites(R)" logo]
["Hampton Inn & Suites(SM) logo]
THE PROMUS COMPANIES INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
ANNUAL MEETING OF STOCKHOLDERS--APRIL 29, 1994
The undersigned stockholder of The Promus Companies Incorporated hereby
appoints Michael D. Rose, Philip G. Satre and Ben C. Peternell, or any one of
them, true and lawful proxies and attorneys, with full power of substitution to
each, for and in the name, place and stead of the undersigned, and with all the
powers the undersigned would possess if present, to vote all stock of the
undersigned in the Company at the Annual Meeting of Stockholders to be held on
April 29, 1994, and any adjournment thereof. This Proxy also constitutes
confidential voting instructions for the use of participants in the Company's
Employee Stock Ownership Plan.
THE SHARES REPRESENTED BY THIS SIGNED PROXY WILL BE VOTED IN ACCORDANCE WITH
THE CHOICES SPECIFIED ON THE REVERSE SIDE AND SUCH AUTHORITY IS HEREBY GRANTED.
IF A CHOICE IS NOT SPECIFIED, SUCH SHARES WILL BE VOTED FOR PROPOSALS 1, 2, 3
AND 4 AND IN ACCORDANCE WITH THE PROXY'S DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING, AND AUTHORITY IS HEREBY GRANTED TO DO SO. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES, FOR THE CHARTER
AMENDMENT, FOR THE AMENDMENTS TO THE COMPANY'S 1990 STOCK OPTION PLAN AND FOR
APPROVAL OF RATIFICATION OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS.
The undersigned hereby acknowledges receipt of the Notice for the Annual
Meeting, Proxy Statement and Annual Report to Stockholders.
(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)
PLEASE MARK BOXES [X] OR X IN BLACK OR BLUE INK.
The Board of Directors recommends a vote FOR all nominees and FOR the other
matters presented:
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0918
1. Election of Directors for Class I
NOMINEES: Joe M. Henson, Michael D. Rose, Ronald Terry and Eddie N. Williams
[ ] FOR [ ] WITHHELD [ ] EXCEPTIONS*
*Exceptions ...............................................
Instructions: To vote your shares for all Director nominees, mark the "For"
box. To withhold your vote for all nominees, mark the "Withheld" box. To
withhold authority or vote for a particular nominee, mark the "Exceptions"
box and write the name(s) of the exception(s) in the space provided. IF
AUTHORITY TO VOTE FOR ANY NOMINEE IS NOT WITHHELD, THIS SIGNED PROXY WILL BE
DEEMED TO GRANT AUTHORITY TO VOTE FOR THE NOMINEE.
________________________________________________________________________________
2. Charter Amendment to increase the authorized shares of Common Stock and
reduce their par value per share as described in the accompanying proxy
statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Amendments to the Company's 1990 Stock Option Plan as described in the
accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of Arthur Andersen & Co. as the Company's independent public
accountants for the 1994 calendar year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, to act upon such other matters as may properly come
before the meeting or any adjournment thereof.
Address Change Please sign the Proxy as your
If you have noted an Address name appears hereon. When
Change on this card, mark here. signing as attorney, executor,
Address Change [ ] administrator, trustee or
guardian, please give title.
All joint owners should sign.
DATE __________________________
SIGNATURE(S) __________________
_______________________________
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
APPENDIX A
THE PROMUS COMPANIES INCORPORATED
1990 STOCK OPTION PLAN
(as amended as of April 30, 1993)
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.
-1-
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
-2-
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 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.
-3-
(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.
- ------------
* 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.
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.*
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* Pursuant to action taken by the Committee on October 29, 1993,
in connection with a 3 for 2 stock split, these additional shares
were multiplied by 1.5.
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.
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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 non-
qualified stock options shall not be less than $1.50 per share.
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
preceeding 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
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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.
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.
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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 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.
-7-
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 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.
-8-
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.
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
-9-
(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.
-10-
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
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.
-11-
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
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.
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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: Neil F. Barnhart
------------------------------
Neil F. Barnhart
Vice President
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