<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
PARK PLACE ENTERTAINMENT CORPORATION
- ----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[PARK PLACE ENTERTAINMENT LOGO]
PARK PLACE ENTERTAINMENT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
YEAR 2000
I cordially invite you to attend our Annual Meeting of Stockholders for the year
2000.
PLACE: Paris Las Vegas
Las Vegas, Nevada
TIME: Friday, May 12, 2000
10:00 A.M.
ITEMS OF BUSINESS: - To elect three directors.
- To approve and ratify amendments to the 1998 Independent
Director Stock Option Plan.
- To approve and ratify the Executive Incentive Plan.
- To conduct any other business properly before the Board.
RECORD DATE: You can vote if you are a stockholder of record as of the
close of business on March 17, 2000.
STOCKHOLDER LIST: A list of stockholders eligible to vote at the Annual
Meeting of Stockholders will be available for inspection at
the annual meeting and at least ten days prior to the
annual meeting in the executive offices of Paris Las Vegas
during regular business hours.
PROXY VOTING: Your vote is important. Whether you plan to attend the
annual meeting or not, please complete, date, and sign the
accompanying proxy card as soon as possible and return it
promptly to Norwest Shareholder Services in the envelope
provided, or use our 24-hour a day telephone or internet
voting options.
ITEMS ENCLOSED IN THIS MAILING:
- Proxy Statement, containing information about Park Place and
this annual meeting.
- Annual Report to Stockholders containing information about
our past year's business, including our audited financial
statements.
- Proxy card with voting information and return envelope.
Sincerely,
By Order of the Board of Directors:
/s/ Clive S. Cummis
Clive S. Cummis,
March 31, 2000 Secretary
Las Vegas, Nevada Park Place Entertainment
Corporation
<PAGE>
[PARK PLACE ENTERTAINMENT LOGO]
PROXY STATEMENT
PARK PLACE ENTERTAINMENT CORPORATION
3930 HOWARD HUGHES PARKWAY
LAS VEGAS, NEVADA 89109
This Proxy Statement is solicited by the Board of Directors of Park Place
Entertainment Corporation and is being furnished to the stockholders of Park
Place in connection with its annual meeting of stockholders to be held at Paris
Las Vegas in Las Vegas, Nevada on May 12, 2000 at 10:00 A.M. local time, and at
any adjournments of that meeting.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
WHAT AM I BEING ASKED TO VOTE ON?
ITEM ONE: The election of three directors to the Board of Directors.
ITEM TWO: The approval and ratification of amendments to the 1998
Independent Director Stock Option Plan.
ITEM THREE: The approval and ratification of the Executive Incentive
Plan.
WHAT CONSTITUTES A QUORUM FOR PURPOSES OF VOTING?
A majority of the outstanding shares of common stock, represented either in
person or by proxy at the meeting, will constitute a quorum for the transaction
of business. As of the record date on March 17, 2000, we had 305,207,609 shares
of common stock outstanding, which constitutes all of the outstanding voting
securities of Park Place. The proxy card provides space for you to approve,
disapprove, or abstain from each of the three items above.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH ITEM?
The affirmative vote of a plurality of the votes cast by holders of shares
of common stock is required for the election of directors. Approval of the
amendments to the 1998 Independent Director Stock Option Plan and approval of
the Executive Incentive Plan each require the affirmative vote of the holders of
a majority of the shares of common stock present in person or represented by
proxy at the meeting (with no effect being given to abstentions).
BROKER VOTING: Under the rules of the New York Stock Exchange, the election
of directors, approval of the amendments to the 1998 Independent Director Stock
Option Plan, and approval of the Executive Incentive Plan are all considered to
be "routine" matters upon which brokerage firms may vote in their discretion on
behalf of their customers, if their customers have not furnished voting
instructions within a specified period prior to the annual meeting.
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HOW MANY VOTES DO I HAVE?
Each share of Park Place common stock that you own entitles you to one vote.
The proxy card shows the number of shares that you owned as of the record date
for voting, which is March 17, 2000.
HOW DO I VOTE?
You may vote by proxy card, by telephone, by internet, or you may vote in
person at the annual meeting. We encourage you to vote in advance by proxy,
telephone, or internet--even if you do plan to attend the meeting.
BY PROXY: To vote by proxy, you should complete, sign and date the enclosed
proxy card and return it promptly in the enclosed envelope. One of the
individuals named on your proxy card (your "proxy") will vote your shares as you
direct on your proxy card. If you do not make specific selections, your proxy
will vote your shares as recommended by the current Board of Directors, in this
manner:
- "FOR" the election of all three director nominees;
- "FOR" the approval and ratification of the amendments to the 1998
Independent Director Stock Option Plan;
- "FOR" the approval and ratification of the Executive Incentive Plan.
BY TELEPHONE: We have established a toll-free 800 number which is printed
on your proxy card. You can use any touch-tone telephone to vote your proxy
24 hours a day, 7 days a week. The instructions in the message will ask you to
enter our 3-digit Company Number and your personal 7-digit Control Number, both
of which are printed on your proxy card.
BY INTERNET: We have established a secure web page where you can also vote
24 hours a day, 7 days a week. The web page address is listed on your proxy
card. The website will ask you to enter our 3-digit Company Number and your
personal 7-digit Control Number, both of which are printed on your proxy card.
The website will identify how many shares you are entitled to vote and create a
ballot for you to vote and send by e-mail to us.
CAN I REVOKE MY PROXY AFTER I HAVE SENT IT IN?
Yes. If you return your proxy card to us, or if you vote by telephone or
internet proxy, you may revoke your vote at any time before the meeting. You may
revoke it in any of the following ways:
- You may attend and vote in person at the meeting, which automatically
revokes any previously received proxy vote from you.
- You may send in a later-dated proxy card, or vote again by mail or
internet proxy. This will automatically revoke your earlier vote.
- You may notify the Secretary of the company that you wish to revoke your
previously mailed proxy card, your telephone proxy or your internet proxy.
This must be done in writing and sent to his attention at this address:
Clive S. Cummis, Secretary
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
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WHAT IF MY SHARES ARE HELD IN THE NAME OF MY BROKER, BANK, OR ANOTHER
INSTITUTION?
You may vote now by mailing in the enclosed proxy card, or by using our
telephone or internet proxy voting. If you want to vote in person at the
meeting, you must bring to the meeting an account statement or a letter from
your institution indicating that you were the beneficial owner of the shares on
March 17, 2000, the record date for voting.
WHAT IF I OWN SHARES THROUGH PARK PLACE'S EMPLOYEE STOCK PURCHASE PLAN?
If you are a Park Place employee participating in the company's Employee
Stock Purchase Plan, you may be receiving this proxy material because of shares
held for you in that plan. In that case, you may use the enclosed proxy card,
telephone, or internet proxy to direct the plan trustees how to vote your
shares. They are required to vote in accordance with your instructions. The
trustees will vote all shares held in the plan. They will vote any shares for
which they DO NOT receive instructions in the same proportion as they vote the
shares for which they DO receive instructions.
HOW CAN I REVIEW THE COMPANY'S ANNUAL 10-K?
The annual report of the company on Form 10-K, including the financial
statements and the schedules thereto, will be furnished without charge to any
beneficial owner of securities entitled to vote at this annual meeting. You may
request a copy by representing that you were a beneficial owner of the company's
securities as of March 17, 2000 in writing addressed to:
Geoffrey Davis
Vice President of Corporate Communications
Park Place Entertainment
3930 Howard Hughes Parkway
Las Vegas, NV 89109
Additional information about us can be accessed through our 24-hour investor
relations service. You may call toll-free 877-PPE-NYSE (877-773-6973) or visit
WWW.PARKPLACE.COM to obtain the latest Park Place news and stock price
information, or to request information by email, fax or postal mail delivery.
ITEM 1
ELECTION OF DIRECTORS
Our Board of Directors currently consists of twelve members, although the
Board has the authority to establish its membership at between one and twenty
members. Eight members of the current board are outside directors. The directors
are divided into three classes with staggered terms of office. There are
currently four directors in each class. The term of office of the first class
expires at this annual meeting in 2000. The term of the second class expires at
the annual meeting of 2001 and the term of the third class expires in 2002.
At each annual meeting beginning with this one, one class of directors will
be elected to three-year terms. Each director elected at this meeting will hold
office until the annual meeting in 2003 or until his or her successor has been
elected. If any director resigns, dies, or is otherwise unable to serve out his
term, the Board may fill such vacancy until the next annual meeting.
The four directors whose terms expire at this meeting are CLIVE S. CUMMIS,
ERIC M. HILTON, BARBARA BELL COLEMAN, and LYLE BERMAN. Mr. Berman was not
nominated for re-election due to the Board's concern with his conflicting
business interests. The Board has elected not to fill his position at this time,
which will reduce the total number of directors to eleven after this annual
meeting. The Board has nominated the other three directors for re-election. The
nominees have been selected on the
4
<PAGE>
basis of their exemplary service as current directors, their integrity and
independence, their understanding of our business environment, and their
willingness to devote substantial time to Board duties. For biographical
information about each of these nominees, please see "Information About
Directors and Executive Officers" beginning on page 10.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THESE NOMINEES:
CLIVE S. CUMMIS
ERIC M. HILTON
BARBARA BELL COLEMAN
ITEM 2
APPROVAL AND RATIFICATION OF AMENDMENTS TO
1998 INDEPENDENT DIRECTOR STOCK OPTION PLAN
Stockholders are asked to ratify amendments made by the Board of Directors
to the 1998 Independent Director Stock Option Plan (the "Director Plan"). The
Director Plan was approved by stockholders in November 1998 with 65,000 total
shares authorized for issuance. The plan provides for the grant of stock options
to purchase shares of Park Place common stock to our non-employee independent
directors. The Director Plan is administered by our full Park Place Board,
acting by a majority of its members.
The plan provides the Board full authority to grant Stock Options. Each
independent director is to automatically receive options to purchase 2,000
shares upon his or her initial appointment to the Board, and options to purchase
2,000 shares at each annual meeting thereafter during the director's term of
service. The Board of Directors approved amendments to the plan in
January 2000, subject to stockholder approval, which increase to 600,000 the
total shares authorized for issuance. The Board also approved amendments which
provide for an automatic grant of 50,000 options to purchase shares of common
stock to each independent director, which will vest over a four year period.
These options were granted in January, subject to stockholder approval and
continuing service as an independent director on the day after the annual
meeting. The Board of Directors believes that the amendments to the plan will
allow the interests of non-employee directors to be more closely aligned with
our stockholders through greater equity participation and ownership in the
company. It will ensure that the compensation of our directors is closely
aligned with the performance of Park Place, and will assist Park Place in
attracting and retaining well-qualified individuals to serve as independent
directors. We believe it is in the best interests of Park Place and its
stockholders to ratify and approve the amendments to the Director Plan.
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PARK PLACE ENTERTAINMENT CORPORATION
1998 INDEPENDENT DIRECTOR STOCK OPTION PLAN
The following table sets forth the number of Park Place options to purchase
common stock granted to the independent directors and the group identified below
under the amendments to the Director Plan, and the total number of options held
by each independent director after the grant.
<TABLE>
<CAPTION>
NUMBER OF UNITS TOTAL
(OPTIONS TO PURCHASE OPTIONS
DIRECTOR AND POSITION DOLLAR VALUE(1) COMMON STOCK)(2) HELD(3)
- --------------------- --------------- -------------------- --------
<S> <C> <C> <C>
Barbara Bell Coleman................................ -- 50,000 52,000
A. Steven Crown..................................... -- 50,000 56,000
Barron Hilton....................................... -- 50,000 52,000
Eric Hilton......................................... -- 50,000 52,000
Gen. P.X. Kelley (Ret.)............................. -- 50,000 50,000
Ken Looloian........................................ -- 50,000 52,000
Rocco Marano........................................ -- 50,000 52,000
Gilbert L. Shelton.................................. -- 50,000 52,000
--------- ------- -------
Non-Executive Director Group Total.................. -- 400,000 418,000
</TABLE>
- ------------------------
(1) The dollar value to each person is not determinable and will be based upon
the trading price of Park Place common stock on the date of exercise.
(2) Granted on January 13, 2000, subject to stockholder approval.
(3) Includes options previously granted.
DIRECTOR PLAN HIGHLIGHTS
Certain material features of the Director Plan, as amended, are summarized
below. This summary is subject to the full statement of the Director Plan, a
copy of which is attached as Exhibit A to this Proxy Statement, marked to
reflect the amendments.
PURPOSE.
The purpose of the Director Plan is to give Park Place a competitive
advantage in attracting, retaining and motivating non-employee directors and to
provide Park Place and its subsidiaries with a stock plan providing incentives
more directly linked to the profitability of Park Place's business and increases
in shareholder value. Under the Director Plan, only non-incentive stock options
are made available for grant.
ADMINISTRATION.
The Director Plan is administered by the full Park Place Board, acting by a
majority of its members.
SHARES SUBJECT TO THE DIRECTOR PLAN.
Subject to adjustment as set forth in the Director Plan, the total number of
shares of Park Place common stock reserved and available for grant under the
Director Plan is 600,000. If an option expires or terminates for any reason
during the term of the Director Plan and prior to the exercise thereof in full,
the shares of Park Place common stock subject to, but not delivered under, such
option shall be available for options thereafter granted under the Director
Plan.
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In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of Park Place,
any reorganization, or any partial or complete liquidation of Park Place, the
number, exercise price and kind of shares that are subject to outstanding
options will be adjusted in such manner and to such extent, if any, as the Park
Place Board in its absolute discretion may deem appropriate in such
circumstances.
ELIGIBILITY.
Participation in the Director Plan is limited to independent directors of
Park Place who are not employees of Park Place or any subsidiary thereof.
OPTION PRICE.
The option price per share of Park Place common stock will equal 100% of the
fair market value of the Park Place common stock on the date of grant.
OPTION GRANTS.
The Director Plan provides for an automatic grant of an option to purchase
50,000 shares to each person serving as an independent director on the day after
this annual meeting. Each future independent director will receive an automatic
option to purchase 50,000 shares upon his or her initial appointment to the Park
Place Board of Directors. The amendments to the Director Plan, if approved, will
not affect options to purchase shares previously granted to our independent
directors, nor does it restrict the Board from making future discretionary
grants.
TERM AND EXERCISE OF OPTIONS.
The term of each stock option shall be ten years from the date of grant. The
options will become vested and exercisable in five equal annual installments of
10,000 each, with the first 10,000 vesting on the date of the grant and an
additional 10,000 vesting on each anniversary thereafter for the next four
years. The vesting and exercise of the options are subject to earlier
termination in the event that the optionee's service as an independent director
terminates.
NONTRANSFERABILITY OF STOCK OPTIONS.
Stock options are not transferable other than by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order.
During the lifetime of an optionee, a stock option is exercisable only by the
optionee.
DEATH, DISABILITY, RETIREMENT OR TERMINATION OF DIRECTORSHIP.
If an optionee's directorship terminates by reason of death, options may
thereafter be exercised only to the extent they were exercisable at the time of
death and may only be exercised within 12 months from the date of death, but in
no event after the date of expiration of the option.
If an optionee's directorship terminates by reason of disability, options
may thereafter be exercised only to the extent they were exercisable at the time
of such termination of directorship and only within 12 months from the date of
such termination of directorship, but in no event after the date of expiration
of the option.
If an optionee's directorship terminates by reason of retirement, options
may thereafter be exercised only to the extent they were exercisable at the time
of such termination of directorship and only within 24 months from the date of
such termination of directorship, but in no event after the date of expiration
of the option.
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If an optionee incurs a termination of directorship for any reason other
than death, disability or retirement, options may thereafter be exercised only
to the extent they were exercisable at the time of such termination of
directorship, and only within three months from the date of such termination of
directorship, but in no event after the date of expiration of the option.
If an optionee incurs a termination of directorship at or after a Change in
Control of Park Place, other than by reason of death, disability or retirement,
any option held by such optionee shall be exercisable for the lesser of (1) six
months and one day from the date of such termination of directorship, and
(2) the balance of such option's term.
CHANGE IN CONTROL CASH-OUT.
Unless the Park Place Board provides otherwise at the time of grant, during
the 60-day period following a Change in Control of Park Place, the optionee
shall have the right to surrender all or part of the option, regardless of
whether the option is fully exercisable, in exchange for a cash payment by Park
Place equal to the excess of the Change in Control Price (as defined in the
Director Plan) per share of Park Place common stock over the exercise price per
share, multiplied by the number of shares which the optionee has elected to cash
out; provided, however, under certain circumstances, the Park Place Board may
elect to substitute for such cash payment Park Place common stock with a Fair
Market Value (as defined in the Director Plan) equal to the cash that would
otherwise be payable.
TERMINATION.
The term during which options may be granted under the Director Plan expires
ten years after the effective date of the Director Plan, unless sooner
terminated by the Park Place Board. Such termination has no effect on options
then in effect.
EFFECTIVE DATE.
Subject to approval by the stockholders, the amendments to the Director Plan
shall be effective as of the date of the annual meeting and the approval of the
amendments to the Plan.
TAX CONSEQUENCES.
The federal income tax consequences of participation in the Director Plan
are complex and subject to change.
Nonqualified stock options granted under the Director Plan will not qualify
for any special tax benefits to the optionee. An optionee generally will not
recognize any taxable income at the time he or she is granted a nonqualified
option. However, upon exercise, the optionee will recognize ordinary income for
federal and state, if any, income tax purposes measured by the excess of the
then fair market value of the shares over the option price. The income realized
by the optionee will be subject to income tax withholding. The optionee's basis
for determination of gain or loss upon the subsequent disposition of shares
acquired upon the exercise of a nonqualified stock option will be the amount
paid for such shares plus any ordinary income recognized as a result of the
exercise of such option. Upon disposition of any shares acquired pursuant to the
exercise of a nonqualified stock option, the difference between the sale price
and the optionee's basis in the shares will be treated as a capital gain or loss
and will be characterized as long-term capital gain or loss if the shares have
been held for more than one year at the date of their disposition.
In general, there will be no federal income tax consequences to Park Place
upon the grant or termination of a nonqualified stock option or a sale or
disposition of the shares acquired upon the exercise of a nonqualified stock
option. However, upon the exercise of a nonqualified stock option,
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Park Place will be entitled to a deduction for federal income tax purposes equal
to the amount of ordinary income that an optionee is required to recognize as a
result of the exercise.
The foregoing does not purport to be a complete description of the federal
income tax aspects of the options. The above discussion is very general in
nature and may omit certain information that may affect the tax computations of
certain optionees. Optionees should, therefore, consult their own tax advisors
with respect to any questions they may have regarding the above described
matters, as well as any state and local tax consequences.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NUMBER 2.
ITEM 3
APPROVAL AND RATIFICATION OF EXECUTIVE INCENTIVE PLAN
The Compensation Committee of the Board of Directors has, under the
authority granted to it by the Board of Directors, adopted an Executive
Incentive Plan (the "Executive Plan"). The Executive Plan is being presented to
stockholders for approval and ratification at this annual meeting. This summary
is subject to the full text of the plan, which is attached to this Proxy
Statement as Exhibit B.
The Executive Plan is intended to meet the requirements of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), which governs the
deductibility of compensation paid to certain executive officers. In order for a
public company to deduct compensation in excess of $1 million paid to the chief
executive officer or any of the four other most highly compensated officers in a
fiscal year, such compensation must be paid pursuant to a plan which has been
approved by stockholders and meets the other requirements of Section 162(m) of
the Code.
If this Executive Plan is adopted and ratified by the stockholders, the
Compensation Committee will have the ability to award annual compensation in
excess of $1 million to its executive officers which is deductible to the
company under the provisions of the Executive Plan. If this Executive Plan is
not approved, the company generally will not be able to deduct compensation
awarded to any named executive officer in excess of $1 million. This Executive
Plan does not limit the ability of the Compensation Committee to award
additional discretionary bonuses or other forms of compensation to any of the
executive participants, but merely provides the maximum dollar amount which
would be deductible to Park Place.
Only our Chief Executive Officer and four other most highly compensated
executive officers are eligible to participate in the Executive Plan during a
given performance period. For each performance period, the Compensation
Committee will designate which executive officers will be participants in the
Executive Plan and establish, in writing, the performance-based criteria for
eligibility to receive incentive compensation under the Executive Plan. These
criteria will include an objective computation formula for computing the amount
of incentive compensation payable to each participant under the Executive Plan
if the performance criteria are met. No participant's incentive compensation for
any performance period under the Executive Plan will exceed five times the
participant's annual base salary as in effect on the first day of the fiscal
year.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NUMBER 3.
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INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
The information set forth below is submitted with respect to the nominees
for re-election, directors whose terms continue after this annual meeting, and
executive officers who are not directors.
<TABLE>
<CAPTION>
AGE TERM EXPIRES
-------- ------------
<S> <C> <C>
STEPHEN F. BOLLENBACH, Chairman of the Board 57 2002
</TABLE>
Mr. Bollenbach has served as Chairman of the Board of Park Place since
December 31, 1998. He has been President and Chief Executive Officer of Hilton
Hotels Corporation since May 1996, and served as director, Executive Vice
President and Chief Financial Officer of The Walt Disney Co. from
September 1995 until February 1996. He was President and Chief Executive Officer
of Host Marriott Corporation from October 1993 until April 1995. Mr. Bollenbach
is a director of Hilton Hotels Corporation, Kmart Corporation, Hilton Group PLC,
Time Warner, Inc., and Catellus Development Corporation.
<TABLE>
<S> <C> <C>
BARBARA BELL COLEMAN, Director 49 2000
</TABLE>
Ms. Bell Coleman has served as a director since January 15, 1999. She has been
the President of BBC Associates LLC, an executive consulting firm serving
businesses and philanthropic organizations, since 1998. From 1992 to 1998 she
was President of the Amelior Foundation, a charitable organization.
<TABLE>
<S> <C> <C>
A. STEVEN CROWN, Director 48 2001
</TABLE>
Mr. Crown has served as a director since December 31, 1998. He is General
Partner of Henry Crown and Company, a holding company which includes diversified
manufacturing operations, marine operations and real estate ventures. Mr. Crown
is a director of Hilton Hotels Corporation.
<TABLE>
<S> <C> <C>
CLIVE S. CUMMIS, 71 2000
</TABLE>
Director, Executive Vice President, Secretary
Mr. Cummis has served in this capacity since November 2, 1998. He has been a
director since December 4, 1998. Prior to joining us, Mr. Cummis was actively
engaged as Chairman of the law firm of Sills Cummis Radin Tischman Epstein &
Gross, which provided legal services to Hilton Hotels Corporation and continues
to provide legal services to us. Mr. Cummis continues to be associated with the
firm on a limited basis. He is a member of the President's Commission on White
House Fellows.
<TABLE>
<S> <C> <C>
ARTHUR M. GOLDBERG, 58 2002
</TABLE>
Director, President and Chief Executive Officer
Mr. Goldberg has served in this capacity since December 31, 1998. From December
1996 until December 31, 1998, he was Executive Vice President and President of
Gaming Operations for Hilton Hotels Corporation, and served as Chairman and
Chief Executive Officer of Bally Entertainment Corporation until December 1996.
Mr. Goldberg is a director of Hilton Hotels Corporation, Bally Total Fitness
Holding Corporation and First Union Corporation.
<TABLE>
<S> <C> <C>
WILLIAM BARRON HILTON, Director 72 2002
</TABLE>
Mr. Hilton has served as a director since December 31, 1998. He has been
Chairman of the Board of Hilton Hotels Corporation since February 1996, prior to
which he served as Chairman of the Board and Chief Executive Officer of Hilton
Hotels Corporation. William Barron Hilton and Eric Hilton are brothers.
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<TABLE>
<CAPTION>
AGE TERM EXPIRES
-------- ------------
<S> <C> <C>
ERIC M. HILTON, Director 66 2000
</TABLE>
Mr. Hilton has served as a director since December 31, 1998. He was a director
of Hilton Hotels Corporation and served as Vice Chairman of the Board of Hilton
Hotels Corporation until March 1997. William Barron Hilton and Eric Hilton are
brothers.
<TABLE>
<S> <C> <C>
GEN. PAUL X. KELLEY, (Ret.), Director 71 2003
</TABLE>
General Kelley has served as a Director since January, 2000. He has been a
partner with the investment firm of J. F. Lehman & Company since 1998. From 1989
to 1998 he was Vice Chairman of Government Relations for Cassidy &
Associates, Inc. General Kelley served as Commandant of the Marine Corps and a
member of the Joint Chiefs of Staff from 1983 until his retirement in 1987. He
holds directorships on the boards of Saul Centers, Inc., Sturm, Ruger &
Company, Inc., UST, Inc, the Wackenhut Corporation, and Columbia Partners,
L.L.C.
<TABLE>
<S> <C> <C>
J. KENNETH LOOLOIAN, Director 77 2001
</TABLE>
Mr. Looloian has served as a director since December 31, 1998. He is the
Executive Vice President of DiGiorgio Corporation and a consultant.
Mr. Looloian also serves as a director of Bally Total Fitness Holding
Corporation.
<TABLE>
<S> <C> <C>
ROCCO J. MARANO, Director 72 2001
</TABLE>
Mr. Marano has served as a director since December 31, 1998. He served as the
Chief Executive Officer of Bell Corp and is the former Chairman of Blue Cross
Blue Shield of New Jersey. He is currently a director of Computer Horizons
Corporation and Teamstaff Corporation.
<TABLE>
<S> <C> <C>
GILBERT L. SHELTON, Director 63 2001
</TABLE>
Mr. Shelton has served as a director since December 31, 1998. He is a private
investor.
<TABLE>
<S> <C> <C>
WALLACE R. BARR, Executive Vice President 54
</TABLE>
Mr. Barr has served in this capacity since December 31,1998. From January 1997
until December 31, 1998, he was Executive Vice President of Hilton Gaming
Corporation. From June 1993 until December 1998, he served as Executive Vice
President and Chief Operating Officer of Bally's Casino Holdings, Inc., during
which time he was also the chief operating officer of Bally's Park Place and the
Atlantic City Hilton Resort.
<TABLE>
<S> <C> <C>
MARK R. DODSON, Executive Vice President 37
</TABLE>
Mr. Dodson has served in this capacity since December 31, 1998. He was Executive
Vice President and Treasurer of Hilton Gaming Corporation from January 1998
until December 31, 1998, and Senior Vice President of Gaming Operations and
Treasurer, Hilton Gaming Corporation from December 1996 until January 1998. He
was Senior Vice President of Bally's Park Place from January 1996 until
December 1996, and Vice President of Development, Bally's Casino Holdings, Inc.
from December 1994 until January 1996. Mr. Dodson served as Director of
Corporate Development of Bally Entertainment Corporation from February 1993
until December 1994.
<TABLE>
<S> <C> <C>
SCOTT A. LAPORTA 37
</TABLE>
Executive Vice President, Chief Financial Officer, and Treasurer
Mr. LaPorta has served in this capacity since December 31, 1998. He was Senior
Vice President and Treasurer of Hilton Hotels Corporation from May 1996 to
December 31, 1998, and previously served as Senior Vice President and Treasurer
of Host Marriott Corporation.
11
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the amount of Park Place common stock owned by
(1) each of our directors, (2) each executive officer named in the Summary
Compensation Table on page 18, and (3) all executive officers and directors as a
group as of March 17, 2000. The "Options Exercisable" column includes only
options exercisable within sixty (60) days after March 17, 2000 and does not
include options proposed for stockholder ratification at this meeting. We had
305,207,609 shares of common stock outstanding on March 17, 2000.
<TABLE>
<CAPTION>
OPTIONS
NAME SHARES OWNED EXERCISABLE TOTAL APPROX. %
- ---- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C>
William Barron Hilton.......................... 22,933,230 2,000 22,935,230 7.5%
Arthur M. Goldberg(1).......................... 2,304,738 8,157,160 10,461,898 3.3%
Stephen F. Bollenbach.......................... 40,000 1,500,000 1,540,000 *
Lyle M. Berman................................. 3,894,844(3) 1,100,000 4,994,844 1.6%
A. Steven Crown................................ 3,685,500(4) 6,000 3,691,500 1.2%
Gilbert L. Shelton............................. 20,000(5) 2,000 22,000 *
Rocco J. Marano................................ 10,000 2,000 12,000 *
Clive S. Cummis(1)............................. 12,600 125,000 137,600 *
J. Kenneth Looloian............................ 10,500 2,000 12,500 *
Eric M. Hilton................................. 9,400 2,000 11,400 *
Barbara Bell Coleman........................... 700 2,000 2,700 *
Gen. Paul X. Kelley (Ret.)..................... 2,000 0 2,000 *
Mark R. Dodson(2).............................. 30,515 157,500 188,015 *
Wallace R. Barr(2)............................. 29,401 169,000 198,401 *
Scott A. LaPorta(2)............................ 1,000 237,500 238,500 *
----------- ---------- ---------- ----
All executive officers as a group.............. 32,984,428 11,464,160 44,448,588 14.0%
</TABLE>
- ------------------------
(1) Denotes Board member and Executive Officer
(2) Denotes Executive Officer
(3) Includes 82,500 shares of our common stock beneficially owned by
Mr. Berman's spouse. Includes 45,615 shares of our common stock held by
Berman Consulting Corporation, a corporation wholly owned by Mr. Berman.
Also includes 15,000 shares of our common stock beneficially owned by a
general partnership whose general partners include trusts for the benefit of
the reporting person's children. The reporting person is not a trustee of
the trusts. Mr. Berman disclaims beneficial ownership of the shares held by
his spouse and by the general partnership.
(4) Includes 5,000 shares of our common stock beneficially owned by Mr. Crown's
spouse. Mr. Crown is a partner of the Crown Fund, which owns 239,888 shares
of our common stock. He is a director of the Arie and Ida Crown Memorial, a
not-for-profit corporation which owns 894,272 shares of our common stock.
Pines Trailer Limited Partnership owns 600,000 shares of Park Place common
stock; Mr. Crown is a director, officer and shareholder of a corporation
which is a partner in Pines Trailer Limited Partnership, and Mr. Crown is a
partner in a partnership which is a partner in Pines Trailer Limited
Partnership. Areljay, L.P. owns 1,935,340 shares of Park Place common stock;
Mr. Crown is a director, officer, and shareholder of a corporation which is
a partner in Areljay, L.P., and Mr. Crown is a beneficiary under a trust
which is a partner in Areljay, L.P. Mr. Crown
12
<PAGE>
disclaims beneficial ownership of the shares held by The Crown Fund, The
Arie and Ida Crown Memorial, Pines Trailer Limited Partnership and Areljay,
L.P., except to the extent of his beneficial interest therein.
(5) Includes 20,000 shares owned jointly by Mr. Shelton and his spouse,
Dr. Judy Shelton, a director of Hilton Hotels Corporation, over which shares
Mr. Shelton shares voting and investment powers.
BENEFICIAL OWNERSHIP
The table below shows the amount of Park Place common stock owned by each
person who, in addition to the officers and directors listed above, to our
knowledge beneficially owned more than 5% of our outstanding common stock on
March 17, 2000.
<TABLE>
<CAPTION>
NAME SHARES OWNED APPROX %
- ---- ------------ --------
<S> <C> <C>
Highfields Capital Management L.P..................... 17,989,720(1) 5.9%
200 Claredon Street
Boston, Massachusetts 02117
Conrad N. Hilton Fund................................. 16,498,736(2) 5.4%
100 West Liberty Street
Reno, Nevada 89501
</TABLE>
- ------------------------
(1) The amount of common stock owned by Highfields Capital Management L.P. is
based upon its filing of a Schedule 13F-HR with the Securities and Exchange
Commission on February 14, 2000 for the period ended December 31, 1999.
(2) William Barron Hilton and Eric Hilton are two of the eleven directors of the
Conrad N. Hilton Fund. They disclaim beneficial ownership of the shares
owned by the Fund.
THE BOARD OF DIRECTORS
Our Certificate of Incorporation provides for from one to twenty directors,
the exact number to be determined from time-to-time by the Board of Directors.
The Board currently has twelve members who are divided into three staggered
classes. Due to the Board's decision not to fill Mr. Berman's expiring
directorship at this time, the Board will consist of eleven members after this
annual meeting.
The Board of Directors oversees the business affairs of Park Place and
monitors the performance of management. The Board is not involved in day-to-day
operations, but keeps informed through its board and committee meetings, regular
discussions with the executive officers, and by studying reports, materials, and
presentations provided to them by both management and outside auditors.
The Board met eight times in 1999. Each director attended more than 75% of
all board meetings and more than 75% of the meetings of committees of which the
director was a member, except General P.X. Kelley, who was not appointed to the
Board until January 2000.
13
<PAGE>
COMMITTEES OF THE BOARD
The Park Place Board has four standing committees: (i) the Audit Committee,
(ii) the Compliance Committee, (iii) the Compensation Committee and (iv) the
Nominating Committee.
AUDIT COMMITTEE
The Audit Committee provides oversight of the accounting, auditing, internal
control and financial reporting practices of Park Place. The committee reviews
the independence of the independent auditors, recommends to the Park Place Board
the engagement and discharge of independent auditors, reviews with the
independent auditors their audit reports, their scope of review, their findings,
and their recommendations. The committee reviews the scope and results of Park
Place procedures for internal auditing, the adequacy of internal accounting
controls, and directs and supervises special investigations. The committee meets
both with and without management in attendance. The Audit Committee met five
times in 1999.
COMPLIANCE COMMITTEE
The Compliance Committee supervises Park Place's efforts to ensure that its
business and operations are conducted in compliance with the highest standards
applicable to it as a matter of legal and regulatory requirements as well as
ethical business practices. In particular, the Compliance Committee is
responsible for the establishment and implementation of Park Place's internal
reporting system regarding compliance with regulatory matters associated with
the company's gaming operations. The committee supervises the activities of the
company's Compliance Officer and communicates on a periodic basis with gaming
regulatory agencies on compliance matters. It reviews information and reports
regarding the suitability of potential key employees of Park Place as well as
persons and entities proposed to be involved in material transactions or
relationships with Park Place. We believe that the involvement of the Board in
this endeavor creates an environment in which integrity and honesty are clearly
identified as a critical component of our corporate culture. The Compliance
Committee met six times in 1999.
COMPENSATION COMMITTEE
The Compensation Committee is comprised of outside directors and determines
the salary, bonus, stock option and other compensation for executive officers of
Park Place, as well as the overall employment and compensation practices of the
company in general. It administers the 1998 Employee Stock Incentive Plan,
including determining the persons to whom awards will be granted and the terms
of the grants. The Compensation Committee reports to the Board of Directors
regarding all its decisions concerning such awards. The Compensation Committee
prepares an annual report in which it discusses the compensation of Park Place
executives and the philosophy behind that compensation. This report begins on
page 20. The Compensation Committee met five times in 1999.
NOMINATING COMMITTEE
The Nominating Committee evaluates and recommends candidates to the Board of
Directors to fill positions on the Board of Directors. It reviews on a
continuing basis, and at least once a year, the structure of the Board to assure
its continuity and to assure that the proper skills and experience are
represented on the Board, and reviews any potential conflicts of Board members
when a prospective Board member is being considered for election to the Board.
The Nominating Committee met one time in 1999.
The Nominating Committee will consider, in its usual deliberations, any
stockholder recommendations for director positions sent to the Nominating
Committee, c/o Clive S. Cummis, Secretary, Park Place Entertainment Corporation,
3930 Howard Hughes Parkway, Las Vegas, Nevada 89109.
14
<PAGE>
MEMBERSHIP OF BOARD COMMITTEES
** DENOTES CHAIRPERSON
<TABLE>
<CAPTION>
NAME BOARD AUDIT COMPENSATION COMPLIANCE NOMINATING
- ---- -------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Stephen F. Bollenbach........................ X** X**
Arthur M. Goldberg........................... X X
Clive S. Cummis.............................. X X
Lyle A. Berman(1)............................ X X
Barbara Bell Coleman......................... X X
A. Steven Crown.............................. X X X X**
Barron Hilton................................ X X X X
Eric Hilton.................................. X X X X
J. Kenneth Looloian.......................... X X X** X
Rocco Marano................................. X X X X
Gilbert L. Shelton........................... X X** X X
Gen. P.X. Kelley(2).......................... X
</TABLE>
- ------------------------
(1) Reflects Mr. Berman's Board and committee memberships until the expiration
of his term on May 12, 2000.
(2) Gen. Kelley has not yet been appointed to committees.
HOW WE COMPENSATE DIRECTORS
MONTHLY DIRECTORS' FEES. We compensate directors who are not employees of
Park Place or its subsidiaries with a fee of $2,500 per month, which is $30,000
per year. We do not compensate our employees for service as a director.
INDEPENDENT DIRECTORS. We grant each independent non-employee director an
option to purchase 2,000 shares of Park Place common stock at the first meeting
following the director's election to the Board. These options are exercisable
immediately and expire in ten years. On the date of each annual meeting we grant
an additional option to purchase 2,000 fully vested shares to each independent
director.
The Board has approved amendments to the 1998 Independent Director Stock
Option Plan, which are presented for ratification by the stockholders at this
annual meeting. The amendments grant an option to purchase 50,000 shares to each
independent director, including those directors serving at the conclusion of
this annual meeting. The options vest over a four-year period, provided the
director remains on the Board. The amendments also provide for amending the Plan
to eliminate the provision granting 2,000 options to each independent director
at each annual meeting. Please see pages 5-9 for an in-depth discussion of these
amendments and Exhibit A for a complete text of the amendments.
MEETING FEES. We compensate non-employee directors with a fee of $1,000 for
attendance at each board, committee, and annual meeting. We reimburse all
employee and non-employee directors for travel and other related expenses
related to their attendance at board meetings, committee meetings, annual
meetings, and other Park Place business functions.
INDEPENDENT DIRECTORS' RETIREMENT PLAN. Any independent director who
retires after reaching age 65, and who has completed ten years of service as a
director, is entitled to an annual retirement benefit. A director who previously
retired as an officer of the company is not eligible for this plan. The benefit
is equal to 100% of the director's average fees, which include meeting and
committee attendance fees, for the 36 consecutive calendar months during which
his director's fees were the
15
<PAGE>
highest. If a director dies prior to retirement, but after reaching age 65, the
director's surviving spouse is entitled to an annual spouse's benefit equal to
one-half the benefit the director would have received had the director retired
on the date of death. The benefits under this plan are payable for a maximum of
ten years. In the event a retired director dies prior to receiving ten annual
payments, one-half of the annual benefit the director was receiving will be paid
to the director's surviving spouse for the balance of the ten-year period.
COMPENSATION COMMITTEE INTERLOCKS. William Barron Hilton, a non-executive
chairman of Hilton Hotels Corporation, is a director and member of our
Compensation Committee. Arthur M. Goldberg, an executive officer of Park Place,
is a member of the board of directors of Hilton Hotels Corporation.
J. Kenneth Looloian, an executive officer of DiGiorgio Corporation, is a
director and member of our Compensation Committee. Arthur M. Goldberg, an
executive officer of Park Place, is a member of the Compensation Committee of
DiGiorgio Corporation. In 1999, DiGiorgio Corporation provided us administrative
support services for which we paid $70,923.
EXECUTIVE COMPENSATION
EXECUTIVE EMPLOYMENT AGREEMENTS
Park Place has entered into six employment agreements with executive
officers and directors. The agreements are with Arthur M. Goldberg, Stephen
Bollenbach, Clive S. Cummis, Wallace R. Barr, Mark R. Dodson, and Scott A.
LaPorta. The key provisions of these agreements are outlined below.
ARTHUR M. GOLDBERG. Park Place has an employment agreement with Arthur
Goldberg for the period of December 31, 1998 through January 1, 2004, with
successive automatic renewal periods of one year each, unless either Park Place
or Mr. Goldberg elects not to renew. The agreement provides for the employment
of Mr. Goldberg as the President and Chief Executive Officer of Park Place at a
minimum annual base salary of $2,000,000. He is eligible for an annual bonus,
with the ability to defer any compensation into his personal deferred
compensation program (see below) or into the company's Executive Deferred
Compensation Plan. The payment of any portion of salary and bonus which would
not be deductible by Park Place on a current basis because of the $1 million
limitation on deductible compensation required by Section 162(m) of the Code may
be deferred, in the discretion of the Compensation Committee. If Mr. Goldberg's
employment with Park Place is terminated: (1) by Park Place for reasons other
than cause, disability, or by reason of Mr. Goldberg's death; or (2) by
Mr. Goldberg for good reason, then Park Place will be required to pay
Mr. Goldberg his base salary for the balance of the term of the agreement. In
addition, Park Place will provide Mr. Goldberg with all benefits due under any
applicable employee benefit plans. If a termination occurs following a change of
control of Park Place, then Mr. Goldberg will receive a lump-sum cash payment
equal to 2.99 times the sum of his annual base salary and his annual bonus for
the last full fiscal year ending during the term of the agreement (or, if
higher, his annual bonus for the last full fiscal year prior to the change of
control). Park Place will reimburse Mr. Goldberg for any excise tax incurred by
him under Section 4999 of the Code on any payments paid by Park Place to
Mr. Goldberg under the agreement or otherwise, which constitute "parachute
payments" under Section 280G of the Code. Park Place will bear the cost of all
income, excise and employment taxes imposed on any gross-up payment.
DEFERRED COMPENSATION AGREEMENT. Hilton Hotels Corporation entered into a
deferred compensation agreement with Mr. Goldberg on January 16, 1997. Park
Place assumed the obligations under that agreement on December 31, 1998. The
agreement provides for Park Place to pay Mr. Goldberg a lump sum payment of
$2.4 million, plus accrued interest from the initial date of the agreement,
within thirty days after the earlier of: (1) the last day of Park Place's
taxable year in which Mr. Goldberg ceases to be an employee of Park Place; or
(2) the date upon which Park Place's
16
<PAGE>
deduction with respect to all of his deferred salary is no longer limited under
Section 162(m) of the Code.
STEPHEN BOLLENBACH. Park Place has an employment agreement with Stephen
Bollenbach in which Mr. Bollenbach has agreed to serve as Chairman and advisor
to the Park Place Board of Directors for the period December 31, 1998 through
July 1, 2005. Under the agreement, Mr. Bollenbach is paid an annual base salary
of $100,000 per year, is not entitled to receive a bonus, and is not entitled to
receive any benefits provided to Park Place employees other than an annual
vacation and reimbursement of expenses he may incur in providing his services
under the agreement.
CLIVE S. CUMMIS. Park Place has entered into an agreement with Mr. Cummis
to serve as Executive Vice President, Law and Corporate Affairs and Secretary of
the corporation for the period January 1, 1999 through December 31, 2002 at a
minimum annual base salary of $650,000, with annual bonuses in the discretion of
the Board.
WALLACE R. BARR. Park Place has entered into an agreement with Mr. Barr to
serve as Executive Vice President for the period March 15, 1999 through
March 14, 2003 at a minimum annual base salary of $750,000, with annual bonuses
in the discretion of the Board. Park Place maintains a $1.8 term life insurance
policy on Mr. Barr during the term of his employment.
MARK R. DODSON. Park Place has entered into an agreement with Mr. Dodson to
serve as Executive Vice President for the period January 1, 1999 through
January 16, 2003 at a minimum annual base salary of $500,000, with annual
bonuses in the discretion of the Board. Park Place maintains a policy of term
life insurance on Mr. Dodson in an amount two times his annual base salary
during the term of his employment.
SCOTT A. LAPORTA. Park Place has entered into an agreement with
Mr. LaPorta to serve as Executive Vice President and Chief Financial Officer for
the period January 1, 1999 through January 16, 2003 at a minimum annual base
salary of $450,000, with annual bonuses in the discretion of the Board.
ADDITIONAL PROVISIONS. Each of the above four employment agreements for
Messrs. Cummis, Barr, Dodson and LaPorta also contains the following contractual
provisions:
TERMINATION. Park Place may terminate the executive at any time. If the
executive is terminated without cause, the executive will be paid a lump
sum amount equal to: (a) the greater of twenty-four months base salary or
his base salary for the balance of the term, whichever is greater, plus
(b) the greater of the average of the bonuses paid to the executive by
Park Place for the three prior years or the amount of the bonus, if any,
paid to the executive for the prior year. Additionally, all of the
executive's stock options will become immediately vested and exercisable.
CHANGE OF CONTROL. In the event of a change of control of Park Place,
the executive is entitled to terminate his employment agreement and be
paid a lump sum equal to one year's base salary. If a change of control
results in a successor to Park Place terminating the executive without
cause, the executive is entitled to be paid an amount equal to: (a) the
greater of twenty-four months base salary or his base salary for the
balance of the term, whichever is greater, plus (b) the greater of the
average of the bonuses paid to the executive by Park Place for the three
prior years or the amount of the bonus, if any, paid to the executive for
the prior year. Additionally, all of the executive's stock options will
become immediately vested and exercisable.
17
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to Park Place's Chief
Executive Officer and each of its other four most highly compensated executive
officers for services rendered during its fiscal years ended 1998 and 1999. The
year 1998 was the company's first year of operations.
PARK PLACE ENTERTAINMENT
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION(1) YEAR SALARY BONUS(4) COMPENSATION AWARDS OPTIONS COMPENSATION(5)
- ----------- -------- --------- --------- ------------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur Goldberg............ 1999 2,007,693 3,000,000 -- -- 2,207,160(3) 68,751
President and Chief 1998 N/A 1,000,000 -- -- 4,950,000(3) N/A
Executive Officer 1998 N/A N/A -- -- 6,000,000 N/A
Wallace Barr............... 1999 781,730 925,000 -- -- 500,000 91,781
Executive Vice President 1998 N/A 500,000 -- -- 72,000(2) N/A
Clive Cummis............... 1999 652,500 1,025,000 -- 500,000 16,846
Executive Vice President, 1998 N/A -- -- -- -- N/A
Law and Corporate
Affairs
Mark Dodson................ 1999 501,913 850,000 -- -- 500,000 57,255
Executive Vice President 1998 N/A 275,000 -- -- 55,000(2) N/A
Scott LaPorta.............. 1999 451,739 775,000 -- -- 500,000 48,453
Executive Vice President 1998 N/A 200,000 -- -- 160,000(2) N/A
and Chief Financial
Officer
</TABLE>
- ------------------------------
(1) On December 31, 1998, Hilton Hotels Corporation completed a spin-off of all
its gaming assets to Park Place. Messrs. Goldberg, Barr, Dodson and LaPorta
each resigned their respective positions with Hilton and assumed their
current positions with Park Place.
(2) On December 31, 1998, in connection with the spin-off of Hilton's gaming
assets to Park Place, the common stock of Park Place was distributed to the
holders of Hilton stock on a one-for-one basis. Each outstanding option to
purchase a share of Hilton common stock was converted on that date into an
option to purchase (1) one share of Hilton common stock and (2) one share of
Park Place common stock. The exercise prices of such options were adjusted
to preserve the intrinsic value thereof. These options reflect those
conversions.
(3) On December 31, 1998, Mr. Goldberg converted all his existing options to
purchase Hilton common stock into options to purchase Park Place common
stock. The number and price of Park Place options granted, pursuant to
Mr. Goldberg's employment agreement with Park Place, were to be adjusted to
preserve the intrinsic value of his converted Hilton options on
December 31, 1998. The 4,950,000 options granted in 1998 reflect that
conversion. In 1999, upon review of the 1998 transaction, the Compensation
Committee determined that further adjustment was necessary to adequately
preserve the value of his converted Hilton options on December 31, 1998, and
the 2,207,160 options granted in 1999 reflect that adjustment.
(4) Awards of annual bonuses are made by the Compensation Committee. All bonuses
awarded, whether paid prior or subsequent to any fiscal year-end, are
attributed in this table to the year in which they were earned.
(5) The amounts in this column represent (a) matching contributions made by the
company for the named executives under the company's Executive Deferred
Compensation Plan: Mr. Goldberg, $50,385; Mr. Barr, $64,237; Mr. Dodson,
$38,889, and Mr. LaPorta, $32,587; (b) matching contributions made by the
company for the named executives under the company's 401(k) Plan: $7,500
each for Messrs. Goldberg, Barr, and Dodson, and $5,000 each for
Messrs. Cummis and LaPorta; and (c) the premium paid by the company with
respect to disability and life insurance premiums: Mr. Goldberg, $10,866;
Mr. Barr, $20,044; Mr. Cummis, $11,846; Mr. Dodson and Mr. LaPorta, each
$10,866.
18
<PAGE>
OTHER COMPENSATION
We also provide certain perquisites and other personal benefits to executive
officers, which constitute an insignificant percentage of their total
compensation.
STOCK OPTION TABLE
The following table sets forth information regarding all 1999 grants of
stock options made to our named executive officers under our 1998 Employee Stock
Option Plan. There are no stock appreciation rights.
PARK PLACE ENTERTAINMENT
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------------------- -----------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR OPTION DATE
OPTIONS EMPLOYEES IN BASE PRICE MARKET EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH) VALUE DATE 5% 10%
- ---- ---------- ------------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur Goldberg(2)...... 877,364 12.6% $10.56 $10.56 12/18/01 $1,081,838 $2,230,749
768,037 11.1% $10.56 $10.56 12/18/02 $1,400,003 $2,959,295
561,759 8.1% $10.56 $10.56 12/18/03 $1,371,872 $2,974,300
Wallace Barr............ 500,000 7.2% $ 6.50 $ 6.50 01/15/09 $2,043,908 $5,179,663
Clive Cummis............ 500,000 7.2% $ 6.50 $ 6.50 01/15/09 $2,043,908 $5,179,663
Mark Dodson............. 500,000 7.2% $ 6.50 $ 6.50 01/15/09 $2,043,908 $5,179,663
Scott LaPorta........... 500,000 7.2% $ 6.50 $ 6.50 01/15/09 $2,043,908 $5,179,663
</TABLE>
- ------------------------------
(1) The amounts in the 5% and 10% columns represent the potential realizable
value of these options at assumed rates of appreciation over the term of the
option. These assumed rates are not intended to forecast the company's
future stock performance. The actual value, if any, of stock option
exercises will depend on the future performance of the company's common
stock, as well as the executive's continued employment through the
applicable vesting periods. There can be no assurance that the value, if
any, ultimately realized by the executive will be at or near the values
shown above.
(2) On December 31, 1998, Mr. Goldberg converted all his existing options to
purchase Hilton common stock into options to purchase Park Place common
stock. The number and price of Park Place options granted, pursuant to
Mr. Goldberg's employment agreement with Park Place, were to be adjusted to
preserve the intrinsic value of his converted Hilton options on
December 31, 1998. In 1999, upon review of the 1998 transaction, the
Compensation Committee determined that further adjustment was necessary to
adequately preserve the value of his converted Hilton options on
December 31, 1998, and these three grants totaling 2,207,160 options reflect
that adjustment.
19
<PAGE>
STOCK OPTION APPRECIATION TABLE
The following table sets forth information concerning exercises of stock
options by our named executive officers during the fiscal year ended
December 31, 1999, and the fiscal year-end value of unexercised stock options
granted under the 1998 Employee Stock Option Plan. There are no stock
appreciation rights.
PARK PLACE ENTERTAINMENT
AGGREGATED OPTION EXERCISES IN 1999 AND DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
SHARES ---------------------------------- ----------------------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- -------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Arthur Goldberg...... -- -- 8,157,160 5,000,000 $28,719,409 $18,375,000
Wallace Barr......... -- -- 26,000 546,000 $ 66,909 $ 3,092,364
Clive Cummis......... -- -- -- 500,000 $ -- $ 3,000,000
Mark Dodson.......... -- -- 18,750 536,250 $ 42,273 $ 3,064,546
Scott LaPorta........ -- -- 97,500 562,500 $ 279,893 $ 3,149,828
</TABLE>
- ------------------------------
(1) Amount represents the difference between the market value of the securities
at December 31, 1999 of $12.50, and the exercise price of "in-the-money"
options.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
composed entirely of independent outside directors. The Committee is responsible
for establishing and administering the compensation philosophy, policies and
programs applicable to the executive officers of the company, including specific
decisions regarding each executive officer's compensation.
Park Place is largely dependent upon the judgment, initiative and effort of
its executive officers for the successful conduct of its business. Therefore,
the Committee's primary objective is to establish plans that will attract,
retain, and motivate highly skilled and talented executives in a dynamic and
competitive industry. This is accomplished through implementation of the
following policies:
- ensuring that executive compensation is competitive within the gaming
industry as well as within other public companies of similar size, scope,
and revenues;
- providing incentives to executives to increase shareholder value, both in
the short-term and in the long-term;
- providing executives with a personal financial interest in the company
similar to the interests of our stockholders;
- linking executive compensation to company performance; and
- reflecting the performance and contribution of each executive officer in
the Committee's compensation determinations.
Our executive officers are compensated through a combination of salary,
performance bonuses, stock options, and a deferred compensation program.
SALARIES
The company entered into employment agreements in December 1998 with our
Chief Executive Officer and each of our other four executive officers which
established minimum annual base salaries
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for each executive. All base salaries have been maintained at these minimum
annual levels, although we review and evaluate each officer's salary annually.
We compare our salaries with those of other public companies, gaming and
non-gaming, of similar size, scope of operations, and revenues. We also consider
each officer's performance and responsibility level, as well as the company's
current financial condition and performance during the past fiscal year, such as
growth in revenues, EBITDA, earnings per share, and strategic acquisition or
disposition of assets.
PERFORMANCE BONUSES
At the beginning of each performance period, the Committee establishes
quantitative and qualitative performance objectives and the maximum potential
bonus award for each executive officer, including the Chief Executive Officer.
At the end of the performance period, the Committee determines the results
achieved relative to such performance objectives and sets each executive
officer's final award. For quantitative and qualitative performance in the
fiscal 1999 performance period, the Committee established maximum bonus awards
of 100% of salary based on achievement of its targeted EBITDA objective and
achievement of subjective personal goals. Upon achievement of the company's
targeted EBITDA, each executive officer, including the Chief Executive Officer,
was awarded a quantitative and qualitative performance bonus of 100% of base
salary. Additional awards were made by the Committee to executive officers,
including the Chief Executive Officer, for exceptional achievement in the
successful acquisition of Caesars World, Inc., and other gaming assets with
minimum use of outside resources. The Committee believes that the acquisition of
the Caesars World operations was a significant step towards implementing the
long-term growth plans of the company and increasing shareholder value.
POLICY REGARDING DEDUCTIBILITY OF COMPENSATION FOR TAX PURPOSES
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for non-performance based compensation over $1
million paid to the Chief Executive Officer and the four other most highly
compensated executive officers. The Board is recommending for stockholder
approval at this annual meeting a performance-based compensation plan that is
intended to qualify certain compensation awarded pursuant to the plan for
deductibility under Section 162(m) of the Code. Full discussion of this proposal
is provided herein under "Item 3, Approval and Ratification of Executive
Incentive Plan". In making compensation decisions, the Committee will take into
account the effect of Section 162(m), while maintaining the flexibility to
approve compensation arrangements that it deems to be in the best interests of
the company and its stockholders but that may not always qualify for full tax
deductibility.
STOCK OPTIONS
Annual stock option grants are a critical component of the company's
long-term executive compensation program by linking a major portion of executive
financial interests to the performance of our stock. Options increase the
executive's motivation and incentive to continue with the company and grow the
value of its stock by providing the executive with the same opportunity to
benefit from appreciation in the stock as do other stockholders. In 1999,
pursuant to their employment agreements, we awarded options to purchase 500,000
shares of common stock to each of the four executive officers, excepting the
Chief Executive Officer (see following paragraph). Options require further
service by vesting over a four-year period in equal annual installments. The
size of the option grants reflects the Committee's judgment as to the current
and potential contribution of the individual executive officer, including the
Chief Executive Officer, to the current and future growth and profitability of
the company and to the creation of shareholder value.
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<PAGE>
CHIEF EXECUTIVE OFFICER STOCK OPTIONS
Under his employment agreement, Mr. Goldberg was granted options to purchase
4,000,000 shares and 2,000,000 shares of common stock. The option on 4,000,000
shares vests in four equal annual installments beginning on December 31, 1999.
The option on 2,000,000 shares does not vest or become exercisable until October
1, 2008; however, vesting and exercisability of this option will be 100%
accelerated if, at any time prior to December 31, 2003, the closing price of
Park Place common stock on the New York Stock Exchange on each of any seven
consecutive trading days equals or exceeds $17.173. We believe this incentive to
grow the value of our common stock recognizes the Chief Executive Officer's
exceptional performance and contribution, which will benefit all owners of
company common stock.
At the time of the spin-off of Park Place from Hilton Hotels Corporation,
holders of Hilton stock options were awarded an equivalent number of Park Place
options. In order to assure the stockholders and the investment community of his
emphasis on the long-term creation of shareholder value, Mr. Goldberg requested
that all his outstanding options to purchase shares of Hilton common stock be
converted into options to purchase shares of Park Place common stock. Therefore,
the number of shares and the exercise price of such Park Place options were
adjusted to preserve the intrinsic value of his Hilton options on December 31,
1998. The conversion resulted in a grant of options to purchase 7,157,160 shares
of Park Place common stock to replace his Hilton options.
EXECUTIVE DEFERRED COMPENSATION PLAN
Executive officers also may participate in a plan under which they may elect
to defer any portion of their compensation in accordance with plan provisions.
The company provides a matching contribution of 50% of the first 10% of
compensation deferred by the executive. The executive's interest in the
company's match vests at the rate of one-third per annum, with 100% acceleration
in the event of death, permanent disability, change of control, or retirement at
age 55 or thereafter.
COMPENSATION CONSULTANT
Having just completed our first year of operations, the Committee has
recently engaged a nationally known outside executive compensation expert with
whom it will consult regarding the company's incentive compensation plans and
the compensation levels of our executive officers, to ensure that they are
effective, appropriate, competitive and tax efficient.
Approved by the Compensation Committee of the Board of Directors:
J. KENNETH LOOLOIAN, CHAIRMAN
BARBARA BELL COLEMAN
A. STEVEN CROWN
BARRON HILTON
ERIC HILTON
ROCCO MARANO
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<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on our common stock against the cumulative total return of the S&P 500
Index and the Dow Jones Domestic Casino Index Group for the period of one year
commencing on December 31, 1998 and ending on December 31, 1999. The graph and
table assume that $100 was invested on December 31, 1998 in each of the
company's common stock, the S&P 500 Index, and the Dow Jones Domestic Casino
Index Group, and that all dividends were reinvested. This data was furnished by
Research Data Group, Inc.
COMPARISON OF 1 YEAR CUMULATIVE TOTAL RETURN*
AMONG PARK PLACE ENTERTAINMENT CORPORATION,
THE S&P 500 INDEX, AND THE DOW JONES CASINOS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PARK PLACE ENTERTAINMENT CORPORATION S & P 500 DOW JONES DOMESTIC CASINO INDEX FUND
<S> <C> <C> <C>
12/31/99 $196.08 $121.04 $151.11
12/31/98 $100 $100 $100
</TABLE>
- ------------------------
* $100 INVESTED ON 12/31/98 IN STOCK OR INDEX. INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
12/31/98 12/31/99
-------- --------
<S> <C> <C>
PARK PLACE ENTERTAINMENT CORPORATION........................ $100 $196.08
S&P 500 INDEX............................................... $100 $121.04
DOW JONES DOMESTIC CASINO INDEX GROUP....................... $100 $151.11
</TABLE>
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<PAGE>
RELATED-PARTY TRANSACTIONS.
Decisions concerning related-party transactions are required to be reviewed
by the Audit Committee. We believe that the transactions described below are on
terms at least as favorable as if obtained from non-related parties.
LEGAL SERVICES. Clive S. Cummis, Executive Vice President, Secretary and
Director, is Chairman of the New Jersey law firm Sills Cummis Radin
Tischman Epstein & Gross, which law firm has and continues to provide
legal services to us. While Mr. Cummis receives compensation from the law
firm, he does not participate in the profits of the firm. The fees paid
by Park Place to the law firm did not exceed 5% of the firm's gross
revenues for its last full fiscal year.
CHANGE IN CONTROL AND EMPLOYMENT ARRANGEMENTS. Lyle Berman, a director
of Park Place whose term expires at this annual meeting and who has not
been nominated for re-election, is the former Chairman of the Board of
Grand Casinos, Inc., which was merged with Park Place on December 31,
1998. Mr. Berman was a party to an employment agreement with Grand which
contained "change of control" provisions. These provisions were triggered
at the time of the merger and Grand was required to:
- pay him up to three years of his then current base salary;
- pay him any outstanding incentive compensation to which he would
otherwise be entitled in the absence of the termination or
resignation; and
- continue to provide various employee benefits to which he would
otherwise be entitled for an additional year.
The "change of control" provisions also provided for a two year period in
which Mr. Berman could exercise any outstanding options to purchase
common stock. For purposes of Mr. Berman's agreement, a "change of
control" occurred by reason of the merger and we paid Mr. Berman
$1,895,833 on January 4, 1999. We also paid Mr. Berman a consulting fee
of $200,000 in 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To our knowledge, based solely upon a review of the reports furnished to us
and written representations by our reporting directors, executive officers, and
owners of more than ten percent of our equity securities that no other reports
were required, all reports required to be filed with the Securities and Exchange
Commission under Section 16(a) were timely filed.
APPRAISAL RIGHTS
None of the proposals to be voted on at the annual meeting creates a right
of appraisal under Delaware law. A vote "FOR" or "AGAINST" any of the proposals
presented herein will only affect the outcome of that proposal.
EXPENSES OF PROXY SOLICITATION
The expenses of making this solicitation consist of the costs of preparing,
printing, and mailing the proxies and Proxy Statements, the costs of the
telephone and website administration, and the charges and expenses of brokerage
houses, proxy solicitors, nominees or fiduciaries for forwarding such documents
to security owners. Our Proxy Solicitor is McKenzie Partners and the
compensation to be paid for its services will be approximately $9500. These are
the only contemplated expenses of this solicitation and they will be paid by the
company.
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INDEPENDENT PUBLIC ACCOUNTANTS
Our independent accountants are Arthur Andersen LLP. Arthur Andersen has
audited our financial statements since our inception in 1998, and served as
Hilton Hotel Corporation's auditors prior to the spin-off of its gaming assets
to Park Place. Arthur Andersen is expected to have a representative present at
the annual meeting who will have the opportunity to make a statement if such
representative desires to do so and is expected to be available to respond to
appropriate questions. We have not yet formally engaged an accountant to audit
our financial statements for the year ending December 31, 2000. We have
solicited proposals from several international auditing firms and are in the
process of evaluating them.
NEXT ANNUAL MEETING
Any stockholder intending to submit a proposal for inclusion in the Proxy
Statement for the 2001 annual meeting must meet the eligibility and other
criteria required under Rule 14a-8 of the Securities and Exchange Act of 1934,
as amended. The proposal must be received by our Secretary, Clive S. Cummis, no
later than December 8, 2000. In addition, written notice of stockholder
proposals (other than proposals submitted to the company for inclusion in the
proxy material) for consideration at the annual meeting to be held in 2001 must
be received by the company no earlier than February 10, 2001 and no later than
March 2, 2001 in order to be considered timely. In the event that the date of
the annual meeting is more than 30 days before or more than 60 days after the
anniversary date of this year's meeting, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 70th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made by
the company.
OTHER BUSINESS
The Board of Directors knows of no other business which will be presented
for action by the stockholders at this annual meeting. However, if any business
other than that set forth in this Notice and Proxy Statement should be presented
at the annual meeting, the proxies named on the enclosed proxy card will use
their discretion to vote all proxies in accordance with their best judgment.
PARK PLACE ENTERTAINMENT CORPORATION'S 1999 ANNUAL REPORT TO STOCKHOLDERS,
INCLUDING FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1999,
ACCOMPANIES THESE PROXY MATERIALS. ALL ARE BEING MAILED TO STOCKHOLDERS OF
RECORD AS OF MARCH 17, 2000 ON THIS 31ST DAY OF MARCH, 2000.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Clive S. Cummis
CLIVE S. CUMMIS,
SECRETARY
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<PAGE>
EXHIBIT A
[ITEMS IN BRACKETS ARE DELETED] ITEMS UNDERLINED ARE ADDED.
PARK PLACE ENTERTAINMENT CORPORATION
1998 INDEPENDENT DIRECTOR STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Corporation a competitive advantage
in attracting, retaining and motivating non-employee directors and to provide
the Corporation and its subsidiaries with a stock plan providing incentives more
directly linked to the profitability of the Corporation's businesses and
increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "AFFILIATE" means a corporation or other entity controlled by the
Corporation and designated by the Board from time to time as such.
(b) "BOARD" means the Board of Directors of the Corporation.
(c) "CHANGE IN CONTROL" MEANS the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the me OF
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (1) the then outstanding shares of common
stock of the Corporation (the "Outstanding Corporation common stock") or
(2) the combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities") (a "Control Purchase);
excluding, however, the following: (1) Any acquisition directly from the
Corporation, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Corporation, (2) Any acquisition by the
Corporation, (3) Any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, (4) Any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subparagraph (iii) of this definition, or (5) Any acquisition by Barron
Hilton, the Charitable Remainder Unitrust created by Barron Hilton to
receive shares from the Estate of Conrad N. Hilton, or the Conrad N. Hilton
Fund; or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however,
for purposes of this definition, that any individual who becomes a member of
the Board subsequent to the effective date of the Plan, whose election, or
nomination for election by the Corporation's stockholders, was approved by a
vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in
Rule 14a- 11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board shall not be so considered as a member of the
Incumbent Board (a "Board Change"); or
(iii) The approval by the stockholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation ("Corporate
Transaction"); excluding however, such a Corporate Transaction pursuant to
which
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<PAGE>
(1) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Corporation common stock
and Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more
than 60% of, respectively, the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation common stock and Outstanding
Corporation Voting Securities, as the case may be, (2) no Person (other than
the Corporation, any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate Transaction)
will beneficially own, directly or indirectly, 20% or more of, respectively,
the outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the outstanding
voting securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) "CHANGE IN CONTROL PRICE" means the higher of (i) the highest reported
sales price, regular way, of a share of common stock in any transaction reported
on the New York Stock Exchange Composite Tape or other national exchange on
which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change in Control or (ii) if the Change in Control is
the result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of common stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that in the case of a Stock Option
which (A) is subject to Section 16(b) of the Exchange Act and (B) was granted
within 240 days of the Change in Control, then the Change in Control Price for
such Stock Option shall be the Fair Market Value of the common stock on the date
such Stock Option is exercised or deemed exercised. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other noncash consideration, the value of such securities
or other noncash consideration shall be determined in the sole discretion of the
Board.
(e) "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(f) "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
(g) "COMMON STOCK" means common stock, par value $.01 per share, of the
Corporation.
(h) "CORPORATION" means Park Place Entertainment Corporation, a Delaware
corporation.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means permanent and total disability as determined under
procedures established by the Board for purposes of the Plan.
(k) "DISTRIBUTION" means the distribution to the holders of the outstanding
shares of Hilton common stock, on a one-for-one basis, of all of the outstanding
shares of common stock.
(1) "EMPLOYEE" means any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Corporation or of any corporation which
is a subsidiary of the Corporation.
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<PAGE>
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
(n) "FAIR MARKET VALUE" means, as of any given date, the mean between the
highest and lowest reported sales prices of the common stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the common stock is listed or on NASDAQ.
If there is no regular public trading market for such common stock, the Fair
Market Value of the common stock shall be determined by the Board in good faith.
(o) "HILTON" means Hilton Hotels Corporation, a Delaware corporation.
(p) "HILTON COMMON STOCK" means common stock, par value $2.50 per share, of
Hilton.
(q) "INDEPENDENT DIRECTOR" means a member of the Board who is not an
Employee.
(r) "PLAN" means the Park Place Entertainment Corporation 1998 Independent
Director Stock Option Plan, as set forth herein and as hereinafter amended from
time to time.
(s) "RETIREMENT" means retirement from service as a Director at or after age
65.
(t) "RULE 16B-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
(u) "STOCK OPTION" means a non-qualified option to purchase common stock
granted under Section 5.
(v) "TERMINATION OF DIRECTORSHIP" means the time when an optionee who is an
Independent Director ceases to be a Director for any reason, including, but not
by way of limitation, a termination by resignation, failure to be elected, death
or Retirement. The Board, in its sole and absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Directorship
with respect to Independent Directors.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the full Board, acting by a majority of
its members then in office.
The Board shall have plenary authority to grant Stock Options pursuant to
the terms of the Plan to Independent Directors.
Among other things, the Board shall have the authority, subject to the terms
of the Plan to:
(a) Determine the terms and conditions of any Stock Option granted hereunder
(subject to the terms and conditions of the Plan), any vesting condition,
restriction or limitation (which may be related to the performance of the
participant, the Corporation or any subsidiary or Affiliate) and any forfeiture
waiver regarding any Stock Option and the shares of common stock relating
thereto, in accordance with the terms of the Plan;
(b) Modify, amend or adjust the terms and conditions of any Stock Option, at
any time or from time to time;
(c) Determine to what extent and under what circumstances common stock and
other amounts payable with respect to a Stock Option shall be deferred; and
The Board shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms
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<PAGE>
and provisions of the Plan and any Stock Option, issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of the
Plan.
The Board may act only by a majority of its members then in office, except
that the members thereof may (i) delegate to an officer of the Corporation the
authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and
(i) of Section 5 (provided that no such delegation may be made that would cause
Stock Options or other transactions under the Plan to cease to be exempt from
Section 16(b) of the Exchange Act) and (ii) authorize any one or more of their
number or any officer of the Corporation to execute and deliver documents on
behalf of the Board.
Any determination made by the Board or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Stock Option shall be
made in the sole discretion of the Board or such delegate at the time of the
grant of the Stock Option or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Board or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Corporation and Plan
participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of common stock reserved and available for grant
under the Plan shall be [65,000] 600,000. Shares subject to a Stock Option under
the Plan may be authorized and unissued shares or may be treasury shares.
If any Stock Option terminates without being exercised, shares subject to
such Stock Option shall again be available for distribution in connection with
Stock Options under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Corporation, the Board may make such substitution or
adjustments in the aggregate number and kind of shares reserved for issuance
under the Plan, in the number, kind and option price of shares subject to
outstanding Stock Options, in the number and kind of shares subject to other
outstanding Stock Options granted under the Plan and/or such other equitable
substitution or adjustments as it may determine to be appropriate in its sole
discretion; provided, however, that the number of shares subject to any Stock
Option shall always be a whole number.
SECTION 4. ELIGIBILITY
Except as provided in Section 10, Independent Directors are eligible to be
granted Stock Options under the Plan.
SECTION 5. STOCK OPTIONS
No Stock Option granted under the Plan shall constitute an "incentive stock
option" under Section 422 of the Code. Any Stock Option granted under the Plan
shall be in such form as the Board may from time to time approve.
DURING THE TERM OF THE PLAN, EACH PERSON WHO IS AN INDEPENDENT DIRECTOR AS
OF THE EFFECTIVE DATE OF THE APPROVAL OF THE AMENDED PLAN SHALL BE AUTOMATICALLY
GRANTED A STOCK OPTION TO PURCHASE FIFTY THOUSAND (50,000) SHARES OF COMMON
STOCK (SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN) ON SUCH EFFECTIVE DATE. DURING
THE TERM OF THE PLAN, EACH PERSON WHO IS INITIALLY ELECTED TO THE BOARD AS AN
INDEPENDENT DIRECTOR AFTER THE EFFECTIVE DATE OF THE APPROVAL OF THE AMENDED
PLAN, SHALL BE AUTOMATICALLY GRANTED A STOCK OPTION TO PURCHASE FIFTY THOUSAND
(50,000) SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN) ON
THE DATE OF SUCH INITIAL ELECTION.
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<PAGE>
[DURING THE TERM OF THE PLAN, EACH PERSON WHO IS AN INDEPENDENT DIRECTOR AS
OF THE EFFECTIVE DATE OF THE DISTRIBUTION AUTOMATICALLY SHALL BE GRANTED (I) A
STOCK OPTION TO PURCHASE TWO THOUSAND (2,000) SHARES OF COMMON STOCK (SUBJECT TO
ADJUSTMENT AS PROVIDED HEREIN) ON SUCH EFFECTIVE DATE, AND (II) A STOCK OPTION
TO PURCHASE TWO THOUSAND (2,000) SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT
AS PROVIDED HEREIN) ON THE DATE OF EACH ANNUAL MEETING OF STOCKHOLDERS AFTER
SUCH EFFECTIVE DATE, FOR SO LONG AS SUCH PERSON REMAINS AN INDEPENDENT DIRECTOR.
DURING THE TERM OF THE PLAN, EACH PERSON WHO IS INITIALLY ELECTED TO THE BOARD
AFTER THE EFFECTIVE DATE OF THE DISTRIBUTION AND WHO IS AN INDEPENDENT DIRECTOR
AT THE TIME OF SUCH INITIAL ELECTION AUTOMATICALLY SHALL BE GRANTED (I) A STOCK
OPTION TO PURCHASE TWO THOUSAND (2,000) SHARES OF COMMON STOCK (SUBJECT TO
ADJUSTMENT AS PROVIDED HEREIN) ON THE DATE OF SUCH INITIAL ELECTION, AND (II) A
STOCK OPTION TO PURCHASE TWO THOUSAND (2,000) SHARES OF COMMON STOCK (SUBJECT TO
ADJUSTMENT AS PROVIDED HEREIN) ON THE DATE OF EACH ANNUAL MEETING OF
STOCKHOLDERS AFTER SUCH INITIAL ELECTION FOR SO LONG AS SUCH PERSON REMAINS AN
INDEPENDENT DIRECTOR. ALL OF THE FOREGOING STOCK OPTION GRANTS AUTHORIZED BY
THIS SECTION 5 ARE SUBJECT TO APPROVAL OF THE PLAN BY THE HILTON STOCKHOLDERS IN
ACCORDANCE WITH SECTION 9.]
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. The grant of a Stock Option shall occur on the
dates specified above. The Corporation shall notify a participant of any grant
of a Stock Option, and a written option agreement or agreements shall be duly
executed and delivered by the Corporation to the participant. Such agreement or
agreements shall become effective upon execution by the Corporation and the
participant.
Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions as the
Board shall deem desirable:
(a) OPTION PRICE. The option price per share of common stock purchasable
under a Stock Option shall equal 100% of the Fair Market Value of the common
stock subject to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option shall be 10 years from the
date such Stock Option is granted, without variation or acceleration hereunder,
but subject to paragraphs (f), (g), (h) and (i) of this Section 5, and no Stock
Option shall be exercisable more than ten years after the date the Stock Option
is granted.
(C)_VESTING AND EXERCISABILITY. EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH
STOCK OPTION TO PURCHASE 50,000 SHARES SHALL BECOME FULLY VESTED AND EXERCISABLE
OVER A FOUR-YEAR PERIOD FROM AND AFTER THE DATE ON WHICH SUCH STOCK OPTION IS
GRANTED, AS FOLLOWS: 20% ON THE DATE OF THE GRANT, 20% ON THE FIRST ANNIVERSARY
OF THE GRANT, 20% ON THE SECOND ANNIVERSARY OF THE GRANT, 20% ON THE THIRD
ANNIVERSARY OF THE GRANT, AND 20% ON THE FOURTH ANNIVERSARY OF THE GRANT, FOR
SUCH PERIOD AS THE PERSON REMAINS IN OFFICE AS AN INDEPENDENT DIRECTOR.
[(C) EXERCISABILITY. EXCEPT AS OTHERWISE PROVIDED HEREIN, STOCK OPTIONS
SHALL BE EXERCISABLE FROM AND AFTER THE DATE ON WHICH SUCH STOCK OPTION IS
GRANTED.]
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5, VESTED
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Corporation specifying
the number of shares of common stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Board may accept.
Payment, in full or in part, may also be made in the form of unrestricted common
stock already owned by the optionee of the same class as the common stock
subject to the Stock Option (based on the Fair Market Value of the common stock
on the date the Stock Option is exercised).
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Payment for any shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the Corporation, together with
a copy of irrevocable instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds to pay the purchase price, and,
if requested, by the amount of any Federal, state, local or foreign withholding
taxes. To facilitate the foregoing, the Corporation may enter into agreements
for coordinated procedures with one or more brokerage turns.
No shares of common stock shall be issued until full payment therefor has
been made. An optionee shall have all of the rights of a shareholder of the
Corporation holding the class or series of common stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 8(a).
(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution; or (ii) pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended) whether directly or indirectly or by means of a trust or
partnership or otherwise, under the applicable option agreement. All Stock
Options shall be exercisable, subject to the terms of this Plan, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee or its alternative payee pursuant to such
qualified domestic relations order, it being understood that the terms "holder"
and "optionee" include the guardian and legal representative of the optionee
named in the option agreement and any person to whom an option is transferred by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Board, if an
optionee's directorship terminates by reason of death, any Stock Option held by
such optionee may thereafter be exercised, to the extent then exercisable, for a
period of one year (or such other period as the Board may specify in the option
agreement) from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by the
Board, if an optionee's directorship terminates by reason of Disability, any
Stock Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of termination, for a period of one
year (or such other period as the Board may specify in the option agreement)
from the date of such termination of directorship or until the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such period, any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was exercisable at
the time of death for a period of 12 months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by the
Board, if an optionee's directorship terminates by reason of Retirement, any
Stock Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of such Retirement, for a period of
two years (or such other period as the Board may specify in the option
agreement) from the date of such termination of directorship or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such period any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(i) OTHER TERMINATION. Unless otherwise determined by the Board: (A) if an
optionee incurs a Termination of Directorship, other than by death, Disability
or Retirement, all Stock Options held by
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such optionee shall thereupon terminate; and (B) if an optionee incurs a
Termination of Directorship for any reason other than death, Disability or
Retirement, any Stock Option held by such optionee, to the extent then
exercisable, may be exercised, for the lesser of three months from the date of
such Termination of Directorship or the balance of such Stock Option's term;
provided, however, that if the optionee dies within such three-month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three-month period, continue to be exercisable to the extent
to which it was exercisable at the time of death for a period of 12 months from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. Notwithstanding the foregoing, if an
optionee incurs a Termination of Directorship at or after a Change in Control,
other than by reason of death, Disability or Retirement, any Stock Option held
by such optionee shall be exercisable for the lesser of (1) six months and one
day from the date of such Termination of Directorship, and (2) the balance of
such Stock Option's term.
(j) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), unless the Board shall determine otherwise at the time of grant, an
optionee shall have the right, whether or not the Stock Option is fully
exercisable and in lieu of the payment of the exercise price for the shares of
common stock being purchased under the Stock Option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part of
the Stock Option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change in Control Price
per share of common stock on the date of such election shall exceed the exercise
price per share of common stock under the Stock Option (the "Spread") multiplied
by the number of shares of common stock granted under the Stock Option as to
which the right granted under this Section 5(j) shall have been exercised;
provided, however, that if the Change in Control is within six months of the
date of grant of a particular Stock Option and is subject to Section 16(b) of
the Exchange Act no such election shall be made by such optionee with respect to
such Stock Option prior to six months from the date of grant. However, if the
end of such 60-day period from and after a Change in Control is within six
months of the date of grant of a Stock Option and is subject to Section 16(b) of
the Exchange Act, such Stock Option shall be canceled in exchange for a cash
payment to the optionee, effected on the day which is six months and one day
after the date of grant of such Option, equal to the Spread multiplied by the
number of shares of common stock granted under the Stock Option. Notwithstanding
the foregoing, if any right granted pursuant to this Section 5(j) would make a
Change in Control transaction ineligible for pooling of interests accounting
under APB No. 16 that but for this Section 5(j) would otherwise be eligible for
such accounting treatment, the Board shall have the ability to substitute the
cash payable pursuant to this Section 5(j) with Stock with a Fair Market Value
equal to the cash that would otherwise be payable hereunder.
SECTION 6. TERM, AMENDMENT AND TERMINATION
The Plan will terminate 10 years after the effective date of the Plan. Under
the Plan, Stock Options outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option theretofore granted without the optionee's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment shall be made without the
approval of the Corporation's stockholders (i) if such amendment would increase
the limit imposed under Section 3 on the maximum number of shares of common
stock reserved and available for grant under the Plan, or (ii) to the extent
such approval is required by law or agreement.
The Board may amend the terms of any Stock Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without the holder's consent
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except such an amendment made to cause the Plan or Stock Option to qualify for
the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting rules as well as
other developments, and to grant Stock Options which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 7. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Board may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver common stock or make payments; provided, however, that unless the Board
otherwise determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
SECTION 8. GENERAL PROVISIONS
(a) The Board may require each person purchasing or receiving shares
pursuant to a Stock Option to represent to and agree with the Corporation in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Board deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Corporation shall not be required to issue or deliver any
certificate or certificates for shares of common stock under the Plan prior to
fulfillment of all of the following conditions:
(i) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the common stock;
(ii) Any registration or other qualification of such shares of the
Corporation under any state or Federal law or regulation, or the maintaining
in effect of any such registration or other qualification which the Board
shall, in its absolute discretion upon the advice of counsel, deem necessary
or advisable; and
(iii) Obtaining any other consent, approval, or permit from any state or
Federal governmental agency which the Board shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees or Directors.
(c) Adoption of the Plan shall not confer upon any Independent Director any
right to continue to serve as a Director, nor shall it interfere in any way with
the right of the Corporation to terminate the directorship of any Independent
Director at any time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for Federal income tax purposes with respect
to any Stock Option under the Plan, the participant shall pay to the
Corporation, or make arrangements satisfactory to the Board regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. The obligations of the
Corporation under the Plan shall be conditional on such payment or arrangements,
and the Corporation and its Affiliates shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
participant. The Board may establish such procedures as it deems appropriate,
including making irrevocable elections, for the settlement of withholding
obligations with common stock.
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(e) The Board shall establish such procedures as it deems appropriate for a
participant to designate a beneficiary to whom any amounts payable in the event
of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(f) The Plan and all Stock Options granted and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to principles of conflict of laws.
SECTION 9. EFFECTIVE DATE OF PLAN
The Plan shall be effective ON DECEMBER 31, 1998. [AS OF THE EFFECTIVE DATE
OF THE DISTRIBUTION, PROVIDED THAT IT IS APPROVED BY AT LEAST A MAJORITY OF THE
SHARES VOTED OF HILTON COMMON STOCK AT THE SPECIAL MEETING OF HILTON
STOCKHOLDERS WITH RESPECT TO THE DISTRIBUTION AND OTHER RELATED MATTERS.] THE
AMENDMENTS TO THIS PLAN SHALL BE EFFECTIVE AS OF THE DATE OF THE STOCKHOLDER
MEETING APPROVING THE AMENDMENTS.
SECTION 10. PROVISIONS REGARDING THE DISTRIBUTION
(a) Concurrently with the Distribution, the Corporation and Hilton are
entering into that certain Employee Benefits and Other Employment Matters
Allocation Agreement, dated as of the date of the Distribution (the "Benefits
Allocation Agreement"), which provides for the Corporation and Hilton to
allocate the responsibilities with respect to certain matters relating to
employees and employee compensation, benefits, labor and other employment
matters. Concurrently with the Distribution and pursuant to the terms of the
Benefits Allocation Agreement all outstanding options to purchase Hilton common
stock granted under the Hilton 1997 Independent Director Stock Option Plan
(each, a "Hilton Director Option") shall be adjusted (the "Option Adjustment")
to represent options to purchase an equivalent-number of shares of Hilton common
stock (each adjusted option to purchase Hilton common stock, an "Adjusted Hilton
Option") and shares of the Corporation's common stock (each adjusted option to
purchase the Corporation's common stock, an "Adjusted Park Place Option").
Pursuant to the Option Adjustment, the intrinsic value of the Hilton Director
Options immediately prior to the Distribution shall be preserved immediately
after the Distribution, and the exercise price of the Hilton Director Options
shall be allocated between the Adjusted Hilton Options and the Adjusted Park
Place Options based upon the relative values of Hilton common stock and the
Corporation's common stock on the date of the Distribution, all as determined by
Hilton.
(b) Following the date of the Option Adjustment, all Adjusted Park Place
Options which were issued as a result of Hilton Director Options shall be
subject to the terms of this Plan and the applicable option agreement and all
Adjusted Hilton Options which were issued as a result of Hilton Director Options
shall be subject to the terms of the Hilton 1997 Independent Director Stock
Option Plan and any applicable option agreement.
(c) For purposes of this Plan, with respect to Adjusted Park Place Options
held by members of the Board of Directors of Hilton (the "Hilton Board") as a
result of the Option Adjustment, references to directorship or termination of
directorship in this Plan and in the applicable option agreement shall be deemed
to refer to directorship or termination of directorship on the Hilton Board.
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EXHIBIT B
PARK PLACE ENTERTAINMENT CORPORATION
EXECUTIVE INCENTIVE PLAN
SECTION 1. PURPOSE
1.1 This Executive Incentive Plan (the "Plan") is designed to reward
executive officers of Park Place Entertainment Corporation (the "Company") for
achieving corporate performance objectives. The Plan is intended to provide an
incentive for superior work and to motivate participating officers toward even
higher achievement and business results, to tie their goals and interests to
those of the Company and its stockholders, and to enable the Company to attract
and retain highly qualified executive officers. The Plan is also intended to
secure the deductibility of certain incentive compensation payable to the
Company's Chief Executive Officer and the four (4) other highest compensated
executive officers serving at fiscal-year end (collectively, the "Covered
Executives") whose compensation is required to be reported in the Company's
Proxy Statement. Compensation payable hereunder to such persons is intended to
qualify as "performance-based compensation" as described in
Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), except as provided in Section 5.2 or 5.3.
SECTION 2. ELIGIBILITY AND PARTICIPATION
2.1 Only the Company's Chief Executive Officer and the four (4) most highly
compensated executive officers of the Company are eligible to participate in the
Plan. At the time performance objectives are established for a "Performance
Period", as defined below, the Compensation Committee (the "Committee") of the
Company's Board of Directors (the "Board") will designate which executive
officers among those who may be eligible to participate in the Plan will in fact
be participants for such Performance Period.
SECTION 3. PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
3.1 The Committee will establish the performance period (the "Performance
Period") with respect to which incentive compensation may be payable under the
Plan, which period may be up to one year or more than one year.
3.2 For each incentive award to a Covered Executive, the Committee will
establish in writing, with respect to each Performance Period, one or more
performance goals, a specific target objective or objectives with respect to
such performance goals, and an objective computation formula or schedule for
determining the amount of incentive compensation potentially payable to the
participant under the Plan if the performance goals are attained. The Committee
shall select a Covered Executive for participation and determine matters under
this Section 3.2 not later than the 90th day of the Performance Period and in no
event after 25% of the Performance Period has elapsed.
3.3 Performance goals for incentive awards to Covered Executives will be
based upon one or more of the following business criteria for the Company as a
whole, or any of its subsidiaries, operating divisions, or other business units
on an absolute or relative basis: (1) earnings including operating income,
earnings before or after taxes, earnings before or after interest, depreciation,
amortization, or extraordinary or special items; (2) earnings per common share
(basic or diluted); (3) return on assets (gross or net), return on investment,
return on capital, or return on equity; (4) return on revenues; (5) cash flow,
free cash flow, cash flow return on investment (discounted or otherwise), net
cash provided by operations, or cash flow in excess of cost of capital;
(6) economic value created; (7) operating margin or profit margin; (8) stock
price or total stockholder return; (9) cost targets, reductions and savings,
productivity and efficiencies; and (10) strategic business criteria, consisting
of one or more objectives based on meeting specified market penetration or
market share, geographic business expansion, customer satisfaction, employee
satisfaction, human resources management,
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supervision of litigation, information technology, and goals relating to
acquisitions, divestitures, joint ventures and similar transactions. In
addition, and provided such is consistent with the goal of providing for
deductibility under the Code, performance goals for incentive awards to Covered
Executives may be based upon a participant's attainment of personal professional
objectives. Such objectives may include any of the foregoing performance goals,
the implementation of policies and plans, the negotiation of transactions, and
the development of long-term business goals. Measuring the performance of the
Company or a participant's against these performance goals established by the
Committee will be objectively determinable. In addition, unless otherwise
determined by the Committee at the time the performance goals are established,
performance will be determined (to the extent applicable) according to generally
accepted accounting principles ("GAAP") in existence on the date on which the
performance goals are established and without regard to any changes in such
principles after such date.
3.4 The Committee may establish an incentive award pool, which shall be a
hypothetical unfunded pool, for purposes of measuring performance of the Company
in connection with incentive awards. The amount of such incentive award pool
shall be based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 3.3 during the given
Performance Period. The Committee may specify the amount of the incentive award
pool as a percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria. The portion of the
incentive award pool potentially payable to each Covered Executive shall be pre-
established by the Committee in accordance with Section 3.2.
SECTION 4. DETERMINATION OF AMOUNTS EARNED UNDER INCENTIVE AWARDS; PER-PERSON
LIMITATIONS
4.1 Promptly after the end of each Performance Period, the Committee will
determine and certify in writing, in a manner conforming to applicable
regulations under Code Section 162(m), the extent to which the performance goals
applicable to the participant's incentive award have been achieved for such
Performance Period and other material terms of the incentive award have been
satisfied. In particular, the Committee will calculate the amount earned and
potentially payable in respect of each participant's incentive award for such
Performance Period based upon achievement of the performance goals and
objectives, in accordance with the computation formulae or schedule for such
incentive award. With respect to a Covered Executive, the Committee will have no
discretion to increase the amount earned as an incentive award under this Plan
after applying the computation formulae or schedule, but the Committee may
reduce the amount of, or totally eliminate, such incentive award if the
Committee determines, in its absolute and sole discretion, that such a reduction
or elimination is appropriate in order to reflect the participant's performance
or any other factor deemed relevant by the Committee. The Committee may exercise
its discretion under this Section 4.1 at any time, including at the time the
incentive award terms are established (by specifying circumstances in which the
payout amount will be reduced) or thereafter.
4.2 The maximum amount that may be earned under the Plan by a Covered
Executive during any calendar year shall be equal to five times the
participant's annual base salary as in effect on the first day of the fiscal
year. For purposes of this Section 4.2, "earned" means satisfying performance
goals so that an amount becomes potentially payable hereunder, without regard to
whether it is to be paid currently or on a deferred basis or continues to be
subject to any service requirement or other non-performance condition.
SECTION 5. PAYMENT OF INCENTIVE AWARDS
5.1 An incentive award will become payable by the Company to a participant,
or to the participant's estate in the event of his or her death, at such time as
the Committee may specify, but, except as provided under Section 5.2 or 5.3, in
no event before the time the Committee has adopted the written certification
specified in Section 4.1.
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5.2 The Committee may specify whether and the extent to which an incentive
award will remain outstanding and, if earned, become payable in the event of
termination of a participant's employment by the Company and its subsidiaries
prior to the time the incentive award would have become payable under
Section 5.1. If the Committee does not determine otherwise, an incentive award
that would otherwise be payable to a participant who is not employed by the
Company or one of its subsidiaries on the last day of a Performance Period will
be paid on a prorated basis after completion of the Performance Period (with the
portion not payable being forfeited), or paid, as follows: (a) resignation due
to disability--award prorated based upon the length of active service during
Performance Period; (b) retirement in accordance with Company's retirement
policies--award prorated based upon the length of active service during
Performance Period; (c) voluntary termination--award forfeited; (d) involuntary
termination--award prorated based upon length of active service during
Performance Period,; (e) resignation pursuant to mutual written agreement--award
prorated based upon length of active service during Performance Period;
(e) death of participant--prorated based upon length of active service during
Performance Period. In addition, if the Committee does not determine otherwise,
if a participant takes a leave of absence during a Performance Period, any
amount payable under his or her incentive award will be prorated based upon
length of active service during Performance Period. The foregoing
notwithstanding, the Committee may determine, in its discretion, to pay an
incentive award in whole or in part upon the death or disability of the
participant.
5.3 The Committee may specify whether and the extent to which an incentive
award will be deemed earned and will be paid out in the event of a Change in
Control of the Company. In the case of a Covered Executive, an incentive award
may become payable upon a Change in Control and prior to the end of the
Performance Period only if and to the extent specified at the time of grant. For
this purpose, the term "Change in Control" shall have the meaning defined in the
Company's 1998 Stock Incentive Plan, unless otherwise determined by the
Committee.
SECTION 6. OTHER TERMS AND CONDITIONS
6.1 No incentive award will be paid out under the Plan unless and until the
material terms (within the meaning of Code Section 162(m)(4)(C) of the Code) of
the Plan, including the business criteria described in Section 3.3 of the Plan,
are disclosed to the Company's stockholders and are approved by the stockholders
by a majority of votes cast in person or by proxy (including abstentions to the
extent abstentions are counted as voting under applicable state law).
6.2 The Committee may impose any terms and conditions on an incentive award,
not inconsistent with the Plan, as it may determine in its discretion. Thus, the
Committee may specify that an incentive award will be paid out in cash or
partially or wholly in the form of shares or share-based awards, but only if the
shares or awards are authorized under the 1998 Employee Stock Incentive Plan or
another plan of the Company authorizing issuance of shares or share-based awards
for employees. Any such payout in the form of shares or share-based awards shall
be subject to the approval of any committee or other administrator with
authority to make grants under such other plan. In converting a cash-
denominated amount of incentive compensation into such shares or share-based
awards, the shares or share-based awards shall be valued based upon the fair
market value of shares without regard to any restrictions on transferability,
risk of forfeiture, or other terms and conditions applicable to the shares or
share-based awards, except that options may be valued based on a reasonable
valuation model approved by the Committee. In addition, the Committee may
require that payment of incentive awards be deferred or permit participants to
elect to defer payout of incentive awards, provided that such arrangements will
be implemented in such way so that compensation that is otherwise deductible
will not become non-deductible under Code Section 162(m). Terms and conditions
imposed by the Committee also may include obligations with respect to
non-competition and confidentiality, including obligations to forfeit a prior
payment relating to an award if the participant fails to perform such
obligations during a specified period of time after such payment has been made.
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6.3 The Committee is authorized to make adjustments in the performance goals
and other terms and conditions of incentive awards in recognition of unusual or
nonrecurring events (including, without limitation, extraordinary corporate
events as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any subsidiary or affiliate or other business unit, or
the financial statements of the Company or any subsidiary or affiliate, or in
response to changes in applicable laws, regulations, accounting principles, tax
rates and regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any subsidiary or affiliate
or business unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment shall be
authorized in respect of an incentive award granted to a Covered Executive if
and to the extent that the existence of authority to make such an adjustment
would cause the incentive award to fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
6.4 No person will have any legal claim to be granted an award under the Plan
and the Committee will have no obligation to treat participants uniformly.
Except as otherwise may be required by law, incentive awards under the Plan will
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary. Incentive awards under the Plan will be
payable from the general assets of the Company, and no participant will have any
claim with respect to any specific assets of the Company.
6.5 Neither the Plan nor any action taken under the Plan will be construed as
giving any employee the right to be retained in the employ of the Company or any
subsidiary or to maintain any participant's compensation at any level.
6.6 The Company or any of its subsidiaries may deduct from any award any
applicable withholding taxes or any amounts owed by the employee to the Company
or any of its subsidiaries.
6.7 Neither the adoption of the Plan by the Committee, its submission to the
stockholders of the Company for approval, nor the granting or payment of any
incentive award hereunder shall be construed as creating any limitations on the
power of the Committee to adopt such other incentive arrangements, apart from
the Plan, as it may deem desirable, including incentive arrangements and awards
which do not qualify under Code Section 162(m), and such other arrangements
which may be either applicable generally or only in specific cases.
SECTION 7. ADMINISTRATION
7.1 The Plan shall be administered by a committee of two or more directors of
the Company designated by the Committee. Directors appointed or serving as
members of the Committee shall not be employees of the Company or any subsidiary
or affiliate. In appointing members of the Committee, the Board will consider
whether a member is or will be an "outside director" as defined in Treasury
Regulation 1.162-27(e) under Code Section 162(m), but no action of the Committee
shall be barred or rendered invalid solely because one or more members of the
Committee did not qualify as an "outside director" at the time such action was
taken. At any time that a member of the Committee is not an "outside director,"
any action of the Committee relating to an incentive award intended by the
Committee to qualify as "performance-based compensation" within the meaning of
Code Section 162(m) and regulations thereunder may be taken by a subcommittee,
designated by the Committee, composed solely of two or more "outside directors."
Such action of a subcommittee shall be the action of the Committee for purposes
of the Plan. Unless it determines otherwise, the Compensation Committee will
constitute the Committee hereunder.
7.2 The Committee will have full power and authority to administer and
interpret the provisions of the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
The express grant of any specific power to the Committee, and the taking of any
action by
38
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the Committee, shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of the Company or
any subsidiary or affiliate, or committees thereof, the authority, subject to
such terms as the Committee shall determine, to perform such administrative
functions as the Committee may determine, to the extent that such delegation
will not cause incentive awards intended to qualify as "performance-based
compensation" under Code Section 162(m) to fail to so qualify.
7.3 The Committee will hold its meetings at such times and places as it may
determine, will keep minutes of its meetings and will adopt, amend and revoke
such rules or procedures as it may deem proper; provided, however, that it may
take action only upon the agreement of a majority of the whole Committee. Any
action that the Committee will take through a written instrument signed by a
majority of its members will be as effective as though it had been taken at a
meeting duly called and held. The Committee will report all actions taken by it
to the Board as they relate to this Plan.
7.4 The Committee is entitled to rely on opinions, reports or statements of
officers or employees of the Company and of Company counsel (inside or retained
counsel), public accountants and other professional or expert persons.
7.5 It is the intent of the Company that compensation under the Plan to
Covered Executives shall constitute qualified "performance-based compensation"
within the meaning of Code Section 162(m) and regulations thereunder.
Accordingly, the provisions of the Plan, including the definitions of Covered
Executive and other terms used herein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. If any provision
of the Plan or any document relating to an incentive award to a Covered
Executive does not comply or is inconsistent with the requirements of Code
Section 162(m) or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements, and no
provision shall be deemed to confer upon the Committee or any other person
discretion to increase the amount of compensation otherwise payable in
connection with any such incentive award upon attainment of the applicable
performance objectives.
7.6 The Committee reserves the right to amend or terminate the Plan in whole
or in part at any time. Unless otherwise prohibited by applicable law, any
amendment required to conform the Plan to the requirements of Code
Section 162(m) may be made by the Committee. No amendment may be made which
materially broadens the class of individuals who are eligible to participate in
the Plan, materially changes the performance criteria specified in Section 3.3
or increases the maximum amount payable as an incentive award to any participant
as specified in Section 4.2 without stockholder approval of such amendment prior
to a payout that could not have been authorized but for such amendment;
provided, however, that, if stockholder approval of any such amendment is not
required in order for incentive awards paid to Covered Executives to constitute
qualified performance-based compensation under Section 162(m) of the Code, then
such approval will not be required.
7.7 No member of the Committee will be liable for any action taken or omitted
to be taken or for any determination made by him or her in good faith with
respect to the Plan, and the Company will indemnify and hold harmless each
member of the Committee against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any act or omission in connection with the
administration or interpretation of the Plan, unless arising out of such
person's own fraud or bad faith or such indemnification is otherwise prohibited
by law.
7.8 The place of administration of the Plan will be in the State of Nevada.
The validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan and
incentive awards hereunder, will be determined solely in accordance with the
laws of the State of Nevada, without regard to principles of conflicts of laws.
39
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[LOGO]
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PARK PLACE ENTERTAINMENT CORPORATION
3930 HOWARD HUGHES PARKWAY
LAS VEGAS, NEVADA 89109 PROXY CARD AND VOTING INSTRUCTIONS
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
By signing and returning this proxy, you appoint Wesley Allison and Anthony
Brolick, and each of them, with full power of substitution, to vote your
shares at the Annual Meeting of Stockholders to be held on May 12, 2000, at
10:00 A.M. (or any adjournments thereof) at the following location:
Paris Las Vegas Resort
3655 So. Las Vegas Blvd.
Las Vegas, Nevada 89109
SEE REVERSE SIDE FOR VOTING INSTRUCTIONS
<PAGE>
COMPANY #
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CONTROL #
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THERE ARE THREE QUICK AND EASY WAYS TO VOTE YOUR PROXY:
VOTES BY PHONE TOLL FREE 1-800-240-6326
-- Use any touch-tone telephone to vote your proxy 24 hours a day,
7 days a week, until 12:00 p.m. on May 11, 2000.
-- You will be asked to enter your 3-digit COMPANY number and your
personal 7-digit CONTROL number, which are located above.
-- Follow the simple instructions.
VOTES BY INTERNET http://www.eproxy.com/ppe/
-- Use the Internet to vote your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. on May 11, 2000.
-- You will be asked to enter your 3-digit COMPANY number and your
personal 7-digit CONTROL number, which are located above.
-- Follow the simple instructions to obtain your records, create
your ballot, and e-mail it to us.
VOTE BY MAIL
-- Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Park
Place Entertainment Corporation, c/o Shareowner Services, P.O.
Box 64873, St. Paul, MN 55164-0873.
IF YOU HAVE VOTED BY TELEPHONE OR INTERNET,
PLEASE DO NOT MAIL YOUR PROXY CARD.
PLEASE DETACH HERE
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
1. ELECTION OF DIRECTORS: 01 COLEMAN 02 CUMMIS 03 HILTON / / Vote FOR all / / Vote WITHHELD from
nominees nominees
(as marked below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE(S),
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
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2. APPROVE AND RATIFY AMENDMENTS TO THE 1998 INDEPENDENT / / For / / Against / / Abstain
DIRECTOR STOCK OPTION PLAN
3. APPROVE AND RATIFY THE EXECUTIVE INCENTIVE PLAN / / For / / Against / / Abstain
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS YOU DIRECT. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" EACH ITEM.
Address Change? Mark Box / / Indicate changes below: Date
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Signature(s) in Box
Please sign exactly as your name appears on this proxy.
If shares are held in joint tenancy, all joint tenants
must sign. Trustees, administrators, etc. must include
title and authority. Corporations must provide full
name of Corporation and title of authorized officer
signing.
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