FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to
__________________
Commission file number 1-5976
CAESARS WORLD, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0773674
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 Century Park East, Los Angeles, California 90067
(Address of principal executive offices)
(Zip Code)
(310) 552-2711
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12,
13, or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
At March 3, 1994, registrant had outstanding 24,881,268
shares of its $.10 par value common stock.
CAESARS WORLD, INC. AND SUBSIDIARIES
January 31, 1994
INDEX
Page No. Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
January 31, 1994 (Unaudited) and July 31, 1993. . .3
Consolidated Statement of Shareholders' Equity
(Unaudited) - Six months ended January 31, 1994 . .4
Consolidated Statements of Income (Unaudited) -
Six months ended January 31, 1994 and 1993. . . . .5
Consolidated Statements of Income (Unaudited) -
Three months ended January 31, 1994 and 1993. . . .6
Condensed Consolidated Statements of Cash
Flows (Unaudited) - Six months ended
January 31, 1994 and 1993 . . . . . . . . . . . . .7
Notes to Condensed Consolidated Financial
Statements (Unaudited). . . . . . . . . . . . . . .8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . 10
Part II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 18
Item 5. Other Information. . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 20
PART I. Financial Information
Item 1. Financial Statements
CAESARS WORLD, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
January 31, July 31,
1994 1993
(Unaudited) (a)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalent investments $115,580 $108,616
Receivables, net 83,610 66,041
Inventories 12,692 11,364
Deferred income taxes 36,107 42,748
Prepaid expenses and other 10,473 12,366
Total current assets 258,462 241,135
Property and equipment, net 622,228 616,393
Excess cost of investments over net assets
acquired, net 52,794 52,916
Other assets 49,228 45,275
$982,712 $955,719
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt and
obligations under capital leases $ 29,795 $ 30,263
Accounts payable and accrued expenses 123,578 125,835
Income taxes 12,143 9,361
Total current liabilities 165,516 165,459
Long-term debt and obligations under capital
leases, net of current maturities 235,829 253,422
Other
liabilities, including deferred income
taxes of $22,888 and $29,282 57,999 63,948
Shareholders' equity
Common stock 2,612 2,590
Additional paid-in capital 127,145 117,399
Common stock in treasury (32,695) (30,358)
Deferred compensation (22,907) (16,146)
Retained earnings 449,213 399,405
Total shareholders' equity 523,368 472,890
$982,712 $955,719
<FN>
(a) The balance sheet at July 31, 1993 has been condensed from the audited
balance sheet at that date.
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity - (Unaudited)
Six months Ended January 31, 1994
(In thousands, except shares outstanding)
<TABLE>
<CAPTION>
Common Stock Additional Common
Shares Paid-in Stock in Deferred Retained
Outstanding Amount Capital Treasury Compensation Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
July 31, 1993 24,619,631 $2,590 $117,399 $(30,358) $(16,146) $399,405 $472,890
Stock options
exercised 38,292 4 575 - - - 579
Amortization of
deferred
compensation,
termination
of restricted
stock grants
and other, net (28,001) (2) (1,024) - 3,454 - 2,428
Common stock
purchased
and held in
treasury (44,048) - - (2,337) - - (2,337)
Vesting of
incentive
stock grants 89,833 - - - - - -
Issuance of
restricted
stock grants 199,781 20 10,195 - (10,215) - -
Net income - - - - - 49,808 49,808
Balance January
31, 1994 24,875,488 $2,612 $127,145 $(32,695) $(22,907)$449,213 $523,368
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
(In thousands, except net income per share)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
1994 1993
<S> <C> <C>
Revenue
Casino $416,258 $393,351
Rooms 34,965 34,131
Food and beverage 41,134 39,029
Other income 34,707 30,524
527,064 497,035
Costs and expenses
Casino 216,897 211,924
Rooms 10,772 10,034
Food and beverage 30,754 28,381
Other operating expenses 21,387 19,213
Selling, general and administrative 94,608 92,287
Depreciation and amortization 27,658 27,375
Provision for doubtful accounts 34,730 27,269
436,806 416,483
Operating income 90,258 80,552
Interest and dividend income 1,647 986
Interest expense, net (9,778) (16,225)
Income before income taxes 82,127 65,313
Income taxes 32,319 24,819
Net income $ 49,808 $ 40,494
Net income per share $ 2.04 $ 1.66
Average number of common and common equivalent
shares outstanding 24,468 24,328
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
(In thousands, except net income per share)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
1994 1993
<S> <C> <C>
Revenue
Casino $207,598 $218,279
Rooms 15,031 14,465
Food and beverage 18,821 17,576
Other income 16,531 14,153
257,981 264,473
Costs and expenses
Casino 111,722 109,330
Rooms 4,834 4,549
Food and beverage 14,293 13,738
Other operating expenses 10,344 9,129
Selling, general and administrative 46,732 45,606
Depreciation and amortization 13,906 13,784
Provision for doubtful accounts 16,494 21,493
218,325 217,629
Operating income 39,656 46,844
Interest and dividend income 719 179
Interest expense, net (4,668) (5,850)
Income before income taxes 35,707 41,173
Income taxes 13,747 15,646
Net income $ 21,960 $ 25,527
Net income per share $ .90 $ 1.05
Average number of common and common equivalent
shares outstanding 24,535 24,394
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - (Unaudited)
(In thousands)
<TABLE>
<CAPITON>
Six Months Ended
January 31,
1994 1993
<S> <C> <C>
Cash flows from (used for) operating activities:
Net income $ 49,808 $ 40,494
Non-cash charges to income, net 30,899 31,134
Changes in assets and liabilities due to
operating activities:
Receivables, net (17,569) (23,773)
Other assets and liabilities, net (1,817) (12,928)
Net cash provided from operating
activities 61,321 34,927
Cash flows used for investing activities:
Purchases of property and equipment (32,708) (18,117)
Other investing activities, net (1,830) (1,823)
Net cash used for investing activities (34,538) (19,940)
Cash flows from (used for) financing activities:
Issuance of 8 7/8 % Senior Subordinated Notes - 150,000
Increase in long-term bank borrowings - 125,000
Reductions in debt and obligations
under capital leases (18,061) (294,788)
Other (1,758) (3,843)
Net cash used for financing
activities (19,819) (23,631)
Net increase (decrease) in cash and cash equivalent
investments 6,964 (8,644)
Cash and cash equivalent investments at the
beginning of the period 108,616 52,336
Cash and cash equivalent investments at the
end of the period $115,580 $ 43,692
Supplemental cash flow information
Cash used for:
Payment of interest $ 9,641 $ 19,890
Payment of Federal and state
income taxes, net $ 29,980 $ 22,888
</TABLE>
See notes to condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Condensed Consolidated Financial Statements -
The condensed consolidated balance sheet as of January 31,
1994, the consolidated statement of shareholders' equity for
the six months ended January 31, 1994, the consolidated
statements of income for the three and six months ended
January 31, 1994 and 1993, and the condensed consolidated
statements of cash flows for the six months ended January 31,
1994 and 1993, have been prepared by the Company and have not
been audited. In the opinion of management, all material
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results
of operations and cash flows for all periods presented have
been made. All significant intercompany balances and
transactions have been eliminated.
Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Company's July 31, 1993 Annual Report to Shareholders. The
results of operations for the three and six month periods
ended January 31, 1994 are not necessarily indicative of the
operating results for the full year.
The Company's independent public accountants
have made an unaudited interim review of the condensed
consolidated financial statements for the three and six
months ended January 31, 1994 and 1993, in accordance with
professional standards and procedures established by the
American Institute of Certified Public Accountants. A report
from the independent public accountants regarding the
unaudited review of the interim financial statements is
included herein in Part II, Item 6 (a), Exhibit 15.
Note 2. Net Income Per Share -- Net income per share
is based upon the weighted average number of common and
common equivalent shares outstanding for each period
presented.
Note 3. Regulatory Environment -- The gaming industry
in which the Company operates is subject to extensive
regulatory supervision and, accordingly, operating results
could be affected by legislative and regulatory changes or
changes in the policies of or application of the laws by
governmental entities. See the discussion under the caption
"Regulatory Environment" set forth on page 24 of the Form 10-
K of the Company for the fiscal year ended July 31, 1993.
Note 4. Income Taxes -- In February 1992, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, which supersedes previously issued standards.
The Company adopted SFAS 109 effective August 1, 1993. As
permissible under the new standard, the Company reflected the
impact as a cumulative adjustment in the fiscal 1994 first
quarter and did not restate prior periods. Under SFAS No.
109, the liability method is used in accounting for income
taxes. Under this method, tax assets and liabilities are
determined based upon differences between financial reporting
and the tax basis utilizing the enacted tax rates and laws in
effect when the differences are expected to reverse. The
adoption of the new standard had an immaterial impact on net
income.
In August 1993, the Omnibus Budget
Reconciliation Act of 1993 (OBRA) was enacted which resulted
in an increase in the federal corporate tax rate from 34% to
35% retroactive to January 1, 1993. The retroactive impact
of the enactment of OBRA and the adoption of SFAS 109
aggregated a net charge to the provision of income taxes in
the first quarter of fiscal 1994 of approximately $750,000.
Future net income of the Company will be adversely impacted
by the increased tax rate.
Note 5. On January 1, 1994 the Company adopted a
401(k) Plan for all full-time employees having at least one
year of service (as defined in the Plan). This replaced the
Company sponsored Individual Retirement Account (IRA) Plan.
The annual pretax cost to the Company of the new 401-K Plan
will be approximately $2 million greater than the previous
IRA Plan.
CAESARS WORLD, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Cash flow from operations together with available debt
capacity are the primary components providing the Company
financial flexibility to explore expansion opportunities and
provide adequate liquidity. Net cash provided by operating
activities was $61.3 million in the first six months of
fiscal 1994, compared with $34.9 million in the same period
of fiscal 1993. The increase in fiscal 1994 is primarily
attributable to higher net income and the changes in other
assets and liabilities which reduced the cash generated by
operating activities by a lesser amount during the fiscal
1994 first six month period compared with the same period in
fiscal 1993. At January 31, 1994 the Company's cash
equivalent investments were $68.7 million compared with $67.5
million at July 31, 1993 and $3.5 million at January 31,
1993.
Cash used for investing activities in the six months ended
January 31, 1994 was primarily for capital expenditure
projects at Caesars Palace in Las Vegas and Caesars Atlantic
City. Construction was completed in December 1993 on two
rooftop luxury suites, each costing approximately $6 million,
on one of the hotel towers at Caesars Palace. In mid-October
1993, Caesars Atlantic City opened a new 15,000-square-foot
simulcast casino, bringing the resort's total casino area to
approximately 75,000 square feet. This new facility features
high-tech systems for race horse betting, a poker area and
additional table games. Approximately 300 slot machines were
added in the original casino area where table games had
previously been located.
In the first six months of fiscal 1993, the Company
completed its debt restructuring program. In October 1992,
cash available from operations combined with the proceeds
from the issuance of new 8 7/8% Senior Subordinated Notes and
the drawdown of the new bank term loan were used to retire
the then outstanding 13 1/2% Subordinated Notes. The impact
of this restructuring combined with the scheduled reduction
of bank borrowings has been to significantly reduce interest
expense. A description of the new notes, the new bank loan
agreement and the debt restructuring is included in Note 6 of
Notes to Consolidated Financial Statements beginning on page
40 of the Form 10-K of the Company for the fiscal year ended
July 31, 1993 and in "Debt Restructuring" of Item 7,
Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 21 of the July 31, 1993
Form 10-K incorporated herein by reference.
In October 1993, the Company announced an additional $150
million multi-year capital expenditure program for Caesars
Palace in Las Vegas. This will dramatically change the
exterior of Caesars Palace, add between 100 to 150 new
suites, provide underground parking, add approximately 40,000
square feet of casino space as well as provide new
entertainment features. This is in addition to the major
capital expenditures previously announced which include a new
state-of-the-art magical and dining entertainment facility to
be opened in fiscal 1995. The conceptual design phase of the
multi-year capital program will be completed in fiscal 1994
with the construction occurring in fiscal 1995 and 1996.
Successful development of the expansion projects in St.
Louis, Missouri; Windsor, Ontario, Canada; Palm Springs,
California; Michigan City, Indiana and other projects as
described at Item 5 of Part II of this Report will likely
require capital investment by the Company.
The Company expects to be able to meet its future debt
obligations, finance operations and capital expenditures, as
well as provide for a substantial expansion of operations
through internally generated cash flow, liquidation of cash
equivalent investments, future borrowings (including amounts
available under the bank credit facilities), capital lease
transactions and/or sales of equity securities.
Results of Operations
Comparison of net income for the three month periods ended January 31, 1994 and
January 31, 1993
Contribution to revenue and operating income by location, interest and income
taxes for the periods, were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended January 31,
1994 1993
<S> <C> <C>
Revenue
Nevada $168,048 $171,950
New Jersey 76,048 79,552
Casino/hotel operations 244,096 251,502
Pocono Resorts 8,882 8,184
Other (A) 5,003 4,787
Total revenue $257,981 $264,473
Contributions to operating income
Nevada $ 38,319 $ 42,466
New Jersey 7,140 8,939
Casino/hotel operations 45,459 51,405
Pocono Resorts 371 188
Other expenses (B) (6,174) (4,749)
Operating income 39,656 46,844
Interest and dividend income 719 179
Interest expense, net (4,668) (5,850)
Income before income taxes 35,707 41,173
Income taxes 13,747 15,646
Net income $ 21,960 $ 25,527
<FN>
(A) Other revenue is primarily from merchandising operations.
(B) Other expenses include the contribution from merchandising operations
and corporate expenses. Intercompany transactions have been eliminated.
</TABLE>
Nevada Operations
Revenue decreased 2 percent and contribution to
operating income decreased 10 percent at the Nevada
properties when comparing the quarters ended January 31, 1994
and 1993. The table game win percentage for the fiscal 1994
second quarter, although above historical averages, was below
the prior year second quarter and was the principal
contributor to declines in revenue and contributions to
operating income. The Company participates in the high-
betting-level player market and table game activity and win
percentages (particularly in baccarat) are volatile and can
fluctuate materially from quarter to quarter from this type
of play. The lower table game win occurred principally in
baccarat which is strongly affected by high-betting-level
customers. Table game activity at the Company's Nevada
casinos decreased by 1 percent during the second quarter when
compared to the same period last year in spite of the opening
of three mega resorts in Las Vegas and the ensuing nationwide
publicity and marketing programs that accompanied these major
openings. Slot machine activity in Nevada was about 5
percent higher in the 1994 quarter but this was offset by a
lower slot win percentage resulting in a relatively flat
quarterly slot revenue comparison. Higher marketing and
casino staffing expenses were partially offset by a $5.1
million or 24 percent reduction in the provision for doubtful
accounts during the 1994 second quarter due to improved
collection experience, a slight reduction in credit issued
and fewer marketing incentives applicable to specific
customers having large receivable balances.
Caesars New Jersey
Revenue decreased 4 percent at the Company's New Jersey
operation and, the contribution to operating income decreased
20 percent when comparing the second quarter of fiscal 1994
with the same period in fiscal 1993. The revenue decline was
primarily the result of lower casino table game and slot
activity offset in part by an increase in the table game win
percentage and the opening late in October of a simulcast
casino. Table game activity declined 18 percent primarily
due to increased competition and bad weather during the
fiscal 1994 quarter making it difficult for customers to get
to Atlantic City. Marketing related expenses decreased,
principally due to a reduction in passengers bussed to the
property and as a result of the lower overall casino
activity.
In mid-October, Caesars Atlantic City opened its new
15,000-square-foot simulcast casino, bringing the resort's
total casino capacity to approximately 75,000 square feet.
This new facility features high-tech systems for horse race
betting, a poker table section and additional casino table
games. The resort's slots capacity was simultaneously
expanded in the original casino area.
Other Expenses
Other expenses include the contribution from
merchandising operations and corporate expenses. The $1.4
million increase of these expenses when comparing the fiscal
1994 and 1993 second quarters is primarily attributable to
increased activities to explore expansion opportunities for
the Company. See Item 5 of Part II of this Report for a
discussion of the major expansion activities the Company is
currently working on.
Interest Expense
The Company's interest expense decreased $1.2 million
when comparing the fiscal 1994 and 1993 second quarters due
primarily to the debt refinancing which was completed during
the second quarter in fiscal 1993. This refinancing lowered
the effective borrowing rate on the majority of the Company's
outstanding indebtedness. Total long-term debt and
obligations under capital leases also decreased between the
second quarter of fiscal 1993 and the same period in fiscal
1994.
Comparison of net income for the six month periods ended January 31, 1994 and
January 31, 1993
Contribution to revenue and operating income by location,
interest and income taxes for the periods, were as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended January 31,
1994 1993
<S> <C> <C>
Revenue
Nevada $323,272 $290,181
New Jersey 170,084 174,615
Casino/hotel operations 493,356 464,796
Pocono Resorts 23,374 21,910
Other (A) 10,334 10,329
Total revenue $527,064 $497,035
Contributions to operating income
Nevada $ 65,803 $ 55,697
New Jersey 29,782 28,768
Casino/hotel operations 95,585 84,465
Pocono Resorts 5,448 5,017
Other expenses (B) (10,775) (8,930)
Operating income 90,258 80,552
Interest and dividend income 1,647 986
Interest expense, net (9,778) (16,225)
Income before income taxes 82,127 65,313
Income taxes 32,319 24,819
Net income $ 49,808 $ 40,494
<FN>
(A) Other revenue is primarily from merchandising operations.
(B) Other expenses include the contribution from merchandising operations
and corporate expenses. Intercompany transactions have been eliminated.
</TABLE>
Nevada Operations
Contribution to operating income from the Nevada
operations increased 18 percent in the six months ended
January 31, 1994 compared with the same period in the prior
year, primarily the result of higher casino revenue. Revenue
generated by the Nevada operations increased 11 percent in
the fiscal 1994 first six months compared to the same period
in fiscal 1993. During the 1994 six month period table game
activity increased 4 percent and the win percentage increased
to 23.3 percent at the Nevada operations compared with 21.1
percent during the same period in fiscal 1993. Slot machine
activity increased at both Nevada locations and was the
primary reason for the 7 percent improvement in slot machine
revenue. The slot improvement at the Company's Nevada
operations was primarily attributable to greater customer
traffic generated by slot marketing programs as well as an
increase in visitors to Las Vegas. See the discussion of
Nevada Operations beginning on page 12 as to the quarter-to-
quarter volatility resulting from high-level play.
Casino expenses at the Nevada operations increased 10
percent during the six months ended January 31, 1994 compared
with the same period last year and were primarily for
increased high-level customer expenses, slot marketing
programs, increased casino payroll to service the increased
activity and other casino marketing programs. The provision
for doubtful accounts was $6.9 million higher due to
increases in the issuance of casino credit and marketing
incentives applicable to specific high-betting-limit
customers along with additional allowances for specific
uncollectible receivables.
Caesars New Jersey
The contribution to operating income from Caesars New
Jersey increased 4 percent over the first six months of
fiscal 1993. Caesars Atlantic City's casino revenue was down
3 percent compared with the prior year six month period.
Table game activity declined by 18 percent. This was
consistent with, but steeper than, the industry trend and was
partially offset by a higher table game win percentage in
fiscal 1994 compared with the same six month period in fiscal
1993. A decrease in slot machine activity was partially
offset by an increase in slot machine hold percentages.
Increased competition and bad weather in the second quarter
of fiscal 1994 were responsible for the reduced casino
activity. The fiscal 1994 casino revenue was favorably
impacted by $1.8 million of revenue generated by the
introduction of poker and horse race betting in October 1993.
The 15,000 square foot casino expansion features high-tech
horse race betting, a poker section, additional casino table
games and enabled the Company to add additional slot machines
in the original casino area.
During the six months ended January 31, 1994 casino
expenses decreased $7.4 million primarily reflecting a
reduction in marketing expenses and lower casino operating
expenses resulting from the decreased casino activity.
Other Expenses
Other expenses increased in the first six months of
fiscal 1994 by $1.8 million compared with the same period in
fiscal 1993. Increased compensation costs and expenses
related to the exploring of expansion activities by the
Company were the primary reasons for the higher expenses.
See Item 5 of Part II of this Report for a discussion of the
major expansion activities the Company is currently working
on.
Interest Expenses
The Company's interest expense decreased 40 percent for
the six months of fiscal 1994 compared to a year earlier. A
reduction in borrowings as well as the debt restructuring
completed in early fiscal 1993 resulted in the lower interest
expense.
Income Taxes
The effective income tax rate for the six months ended
January 31, 1994, was 1.4 percentage points higher than the
same period in 1993. The higher tax rate reflects the impact
of two non-recurring tax charges. In August 1993, the
Federal tax rate increased from 34% to 35%, retroactive to
January 1, 1993. The Company also changed its method for
income tax accounting by adopting SFAS 109 effective August
1, 1993. The impact of this cumulative change in accounting
and the retroactive change in the corporate tax rate
aggregated a net charge of approximately $750,000 during the
six month period ending January 31, 1994.
PART II. Other Information
Item 1. Legal Proceedings
See Item 3 of the Form 10-K of the Company for the
year ended July 31, 1993 which is hereby incorporated herein.
Item 5. Other Information
The Forum Shops at Caesars (the Forum) is a
shopping complex located on approximately eight acres owned
by the Company at the north end of Caesars Palace in Las
Vegas having approximately 235,000 square feet of gross
leasable area. The Company leases the land to an independent
development company which provided its own financing to
construct the Forum and which owns the development and pays
rent to the Company. The Company has agreed in principle to
lease approximately four additional acres adjacent to the
site to the independent development company in order for them
to add an approximate 160,000 square foot expansion to the
Forum, including parking and new entertainment features. The
project is expected to be completed in fiscal 1995 and is
subject to finalizing a new lease agreement, the independent
development company obtaining the necessary financing and
obtaining regulatory approvals.
A partnership with two other gaming companies in
which the Company has a one-third interest has been selected
as the "preferred developer" for the first casino development
to be constructed in the Province of Ontario, Canada. The
partnership will be the manager, responsible for day-to-day
operations of the casino/hotel development and will receive
a management fee. The provincial government will actually
own the business. This development will be located in
Windsor, Ontario and is currently expected to open in early
1996 with approximately 75,000 square feet of casino space
and about 2,000 slot machines and 125 table games. It will
also include a 300 room hotel, showroom, meeting facilities,
waterfront amphitheater, other public facilities and a
variety of food and beverage outlets. The current projected
cost is approximately $300 million. In addition, a temporary
casino of approximately 50,000 square feet is currently
planned to open in the Spring of 1994. The final completion
of this project will depend on the successful negotiation and
consummation of an operating agreement and other matters with
the Province of Ontario, the obtaining of appropriate
regulatory and other approvals and completion of financing.
In October 1993, the Casino Reinvestment
Development Authority (CRDA) of the State of New Jersey
announced it had selected a joint venture comprised of
Doubletree Hotel Corporation, a subsidiary of the Company and
an independent developer and operator to build in two phases,
a 1,000 room non-gaming Convention Center Headquarters Hotel
in Atlantic City. The first phase will be a 600 room first
class hotel whose opening will coincide with the opening of
the new Atlantic City Convention Center in 1996. As
currently proposed, in exchange for a non-controlling
interest in the joint venture and receipt of certain CRDA
credits, the Company will guarantee a portion of the first
mortgage note on the property. The project is subject to
final agreements among all the parties, including
governmental regulatory agencies and the obtaining of third-
party financing for the project.
Subsidiaries of the Company have entered into joint
ventures to seek opportunities to own and operate riverboats
in Michigan City, Indiana and St. Louis, Missouri. With
respect to the St. Louis project, the joint venture has
announced that it had proposed the "Joint Venture Proposal",
a $210 million casino and hotel development at Laclede's
Landing which includes a $110 million 976-room convention
center hotel with parking, and a 152,000 square foot,
dockside casino barge and entertainment complex expected to
cost approximately $100 million including a $10 million
investment for parking. The current plan calls for 2,658
slot machines and 170 gaming tables on two 2,000 gaming
position barges to be built in phases about two years apart.
The City of St. Louis has announced that the Joint Venture
Proposal was ranked first among the six proposals the City
had received and the City planned to commence negotiations
for a berthing lease with the joint venture. Representatives
of the City cautioned, however, that it had some concerns
about the Joint Venture Proposal and if negotiations did not
eliminate those concerns or were otherwise unsuccessful, it
would move to the second-ranked candidate. Recently, the
Missouri gaming law was declared unconstitutional insofar as
it allowed slot machines, baccarat, craps, roulette, and
other games which do not require skill in deciding the
outcome. The legislature has proposed a voter initiative
legalizing such games that do not require skill for an April
5, 1994 election. Once a lease is negotiated, City agency
and board of alderman approval and state licensing will be
required. The ultimate outcome of these negotiations,
approvals and the election are uncertain at this time. The
joint venture currently expects to finance about 80% of the
project through mortgage bonds. The Company expects to have
a 37.5% interest in the ultimate limited partnership and a
50% interest in management companies that will manage the
hotel and casino under the Joint Venture Proposal.
The Company also is in the process of working with
the Agua Caliente Tribe in completing land acquisitions and
regulatory approvals with respect to the proposed management
project for the Tribe in Palm Springs, California. The
ultimate timing of this project is uncertain at this time.
A subsidiary of the Company has submitted, with a
joint venture partner, an application for a gaming license in
Greece. In the event of the successful awarding of the
license to the venture the Company expects to invest
approximately $3.5 million in a casino/hotel project in
Greece. The prospects and timing for this project are
presently uncertain, however, the Company has been advised
that it is possible the government will act in the spring of
1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith (the * denotes
documents included in this filing):
*10(a) Caesars World, Inc. 401(k) Retirement
Savings Plan dated January 1, 1994.
*10(b) Master Trust Agreement between Caesars
World, Inc. and State Street Bank and Trust Company dated
January 1, 1994.
*10(c) Form of Contingent Severance Agreement
as revised December 7, 1993.
*15 Review Report of Independent Public
Accountants
(b) During the quarter ended January 31, 1994 no
reports on Form 8-K were filed with the Securities Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CAESARS WORLD, INC.
(Registrant)
Principal Financial Officer:
Date: March 7, 1994 /s/ Roger Lee
Roger Lee
Senior Vice President-
Finance and
Administration
Principal Accounting Officer:
Date: March 7, 1994 /s/ Bruce C. Hinckley
Bruce C. Hinckley
Vice President and
Corporate Controller
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CAESARS WORLD, INC.
(Registrant)
Principal Financial Officer:
Date: March 7, 1994
Roger Lee
Senior Vice President-
Finance and Administration
Principal Accounting Officer:
Date: March 7, 1994
Bruce C. Hinckley
Vice President and Corporate
Controller
Article 1. Definitions
1.01 "Accounts" means a Participant's Before-Tax Savings
Account, Company Matching Savings Account, Company Savings
Account, Company Supplemental Savings Account and Rollover
Account.
1.02 "Actual Contribution Percentage" means, with respect
to a specified group of Eligible Employees, the average of
the ratios, calculated separately for each Eligible Employee
in that group, of:
(a) the amount of Company Matching Contributions made
pursuant to Section 3.04(a) for a Plan Year, to
(b) Statutory Compensation for that Plan Year,
provided that upon direction of the Committee, Statutory
Compensation for a Plan Year shall only be counted if
received during the period an Employee is, or is eligible to
become, a Participant.
1.03 "Actual Deferral Percentage" means, with respect to a
specified group of Eligible Employees, the average of the
ratios, calculated separately for each Eligible Employee in
that group, of:
(a) the amount of Before-Tax Contributions made
pursuant to Section 3.01 for a Plan Year (whether or not such
contributions are returned to the Participant pursuant to
Sections 3.01(d) and 3.01(e)) and Company Contributions made
pursuant to Section 3.04(b) for a Plan Year, to
(b) Statutory Compensation for that Plan Year,
provided that upon direction of the Committee, Statutory
Compensation for a Plan Year shall only be counted if
received during the period an Employee is, or is eligible to
become, a Participant.
1.04 "Adjustment Factor" means the cost-of-living
adjustment factor prescribed by the Secretary of the Treasury
under Code Section 415(d) applied to such items and in such
manner as the Secretary shall provide.
1.05 "Affiliated Employer" means any company not
participating in the Plan which is a member of a controlled
group of corporations (determined under Code Section 414(b))
which also includes the Company as a member, or any trade or
business under common control (as defined in Code Section
414(c)) with the Company, or a member of an affiliated
service group (as defined in Code Section 414(m)) which
includes the Company, and any other entity required to be
aggregated with the Company pursuant to regulations under
Code Section 414(o). Notwithstanding the foregoing, for the
purposes of Section 3.08, the definition in Code Sections
414(b) and 414(c) shall be modified as provided in Code
Section 415(h).
1.06 "Annual Dollar Limit" means $150,000, except that if
for any calendar year after 1994 the Cost-of-Living
Adjustment as hereafter defined is equal to or greater than
$10,000, then the Annual Dollar Limit (as previously adjusted
under this Section 1.06) for any Plan Year beginning in any
subsequent calendar year shall be increased by the amount of
such Cost-of-Living Adjustment, rounded to the next lowest
multiple of $10,000. The Cost-of-Living Adjustment shall
equal the excess of (i) $150,000 increased by the adjustment
made under Code Section 415(d) for the calendar year except
that the base period for purposes Code Section 415(d)(1)(A)
shall be the calendar quarter beginning October 1, 1993 over
(ii) the Annual Dollar Limit in effect for the Plan Year
beginning in the calendar year. In determining the
compensation of a Participant for purposes of the Annual
Dollar Limit, the rules of Code Section 414(q)(6) shall
apply, except in applying such rules the term "family" shall
include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19
before the close of the year. If, as a result of the
application of such rules the adjusted Annual Dollar Limit is
exceeded, then the Annual Dollar Limit shall be prorated
among the affected individuals in proportion to each such
individual's compensation, as determined under Section 1.21
or Section 1.49(b), whichever is applicable, prior to the
application of such limit.
1.07 "Before-Tax Contributions" means any amounts
contributed by the Partici-pant on a before-tax basis to the
Plan pursuant to Section 3.01. Before-Tax Contribu-tions
shall consist of the following two components:
(a) Before-Tax Contributions as described in Section
3.01(a) and which are matched by Company Matching
Contributions; and
(b) Before-Tax Contributions as described in Section
3.01(b) and which are not matched by Company Matching
Contributions.
1.08 "Before-Tax Savings Account" means a Participant's
Account into which shall be credited Before-Tax Contributions
and investment earnings and losses thereon.
1.09 "Beneficiary" means any person, persons, entity or
entities named by a Participant by written designation filed
with the Company to receive benefits payable in the event of
the Participant's death, provided that if the Participant is
married and designates other than his spouse as the
Beneficiary, he obtains Spousal Consent.
1.10 "Board of Directors" means the Board of Directors of
the Company.
1.11 "Break in Service" means a 12-month period described
in Section 1.54 in which an Employee completes less than 501
Hours of Service.
Solely for the purpose of determining when a Break in
Service occurs, an Employee shall be credited with up to 501
Hours of Service during a period of absence by reason of:
(a) The Employee's pregnancy;
(b) The birth of a child of the Employee;
(c) Placement of a child with the Employee in
connection with the Employee's adoption of such child; or
(d) Caring for such child for a period beginning
immediately following such birth or placement.
Hours of Service credited by reason of the above
period of absence shall be credited in the Plan Year in which
the absence occurs if those Hours of Service are needed to
prevent a Break in Service in that year; otherwise, they
shall be credited in the immediately following Plan Year.
Such Hours of Service shall be equal to the normal
number of Hours of Service which would have been credited to
the Employee but for the above period of absence; however, in
no event shall more than 501 Hours of Service be credited.
1.12 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.13 "Committee" means the Administrative Committee as
provided for in Article 9.
1.14 "Company" means Caesars World, Inc. and Subsidiaries.
1.15 "Company Contributions" means contributions made by
the Company in accordance with Section 3.04(b). Such
contributions shall be "qualified nonelective contributions"
as defined under IRS regulation 1.401(k)-1(g)(13)(ii).
1.16 "Company Matching Contributions" means contributions
made by the Company to the Plan on behalf of Participants
pursuant to Section 3.04(a).
1.17 "Company Matching Savings Account" means a
Participant's account into which shall be credited Company
Matching Contributions and investment earnings and losses
thereon.
1.18 "Company Savings Account" means a Participant's
account into which shall be credited Company Contributions
and investment earnings and losses thereon.
1.19 "Company Supplemental Savings Account" means a
Participant's account into which shall be credited Company
Supplemental Contributions and investment earnings and losses
thereon.
1.20 "Company Supplemental Contributions" means
contributions made by the Company to the Plan on behalf of
Participants pursuant to Section 3.04(c).
1.21 "Compensation" means earnings (including overtime pay,
vacation pay, holiday pay, sick pay, jury duty pay, birthday
pay and shift differentials), plus tips and commissions paid
to an Employee during a Plan Year for services rendered to
the Company. Compensation shall include Before-Tax
Contributions made pursuant to Section 3.01 and before-tax
contributions made pursuant to a cafeteria plan as described
in Code Section 125. Compensation shall not, for Plan
purposes, exceed the Annual Dollar Limit for the Plan Year.
1.22 "Disability" means a disability resulting from a
bodily or mental injury or disease, either occupational or
non-occupational in cause (but excluding disabilities
resulting from service in the Armed Forces of any country),
which would prevent a Participant from engaging in any
occupation or performing any work for compensa-tion or profit
for the remainder of the Participant's life, as confirmed by
medical evidence satisfactory to the Company.
1.23 "Effective Date" of the Plan means January 1, 1994.
1.24 "Eligible Employee" means an Employee of the Company
who is not included in a group of Employees covered by a
collective bargaining agreement if there is evidence that
retirement benefits were the subject of good-faith bargaining
and the collective bargaining agreement does not provide for
such individual's participation in the Plan. An Eligible
Employee shall not include any Leased Employee or any
Seconded Employee.
1.25 "Employee" means any person receiving compensation for
services rendered to the Company or an Affiliated Employer
whose compensation is subject to income tax withholding
and/or for whom Social Security contributions are made by the
Company or an Affiliated Employer, including any Leased
Employee and any Seconded Employee but excluding any person
who serves solely as a director or independent contractor.
1.26 "Employment Commencement Date" means the first date as
of which an Employee is credited with an Hour of Service with
the Company or an Affiliated Employer.
1.27 "Enrollment Date" means the effective date of a
Participant's enrollment in the Plan in accordance with
Section 2.02. Such date shall mean the first day of the
first payroll cycle which coincides with or which follows the
date an Eligible Employee meets the requirements of Section
2.01.
1.28 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.29 "Fund" means the fund consisting of all Before-Tax
Contributions, Company Contributions, Company Matching
Contributions, Company Supplemental Contributions, rollovers
and all investment earnings and losses thereon.
The Fund shall be divided into four subfunds:
o Fund A -- Money Market Fund.
o Fund B -- Fixed Income Fund.
o Fund C -- Indexed Equity Fund.
o Fund D -- Growth Equity Fund.
The Company may change or add other Funds to the Plan
from time to time to increase the investment options
available to Participants.
1.30 "Highly Compensated Employee" means any Employee of
the Company or an Affiliated Employer (whether or not
eligible for participation in the Plan) who satisfies one or
more of the following criteria:
(a) During the current Plan Year or the preceding
Plan Year, the Employee:
(i) Was at any time a 5% owner of the Company or
an Affiliated Employer;
(ii) Received Statutory Compensation in excess of
$75,000 multiplied by the Adjustment Factor;
(iii)Received Statutory Compensation in excess of
$50,000 mul-tiplied by the Adjustment Factor and was among
the highest 20% of Employees for that year when ranked by
Statutory Compensation paid for that year, excluding, for
purposes of determining the number of such Employees, such
Employees as the Company may determine on a consistent basis
pursuant to Code Section 414(q)(8); or
(iv) Was at any time an officer of the Company or
an Affiliated Employer (subject to the limitations of Code
Section 414(q)(5)) and received Statutory Compensation
greater than 50% of the dollar limitation on maximum benefits
under Code Section 415(b)(1)(A) for such Plan Year.
(b) Notwithstanding the foregoing, an Employee who
meets the criteria under Section 1.30(a)(ii), 1.30(a)(iii) or
1.30(a)(iv) for the current Plan Year but not for the
preceding Plan Year shall not be considered a Highly
Compensated Employee for the current Plan Year unless the
Employee is one of the 100 highest-paid Employees of all
Affiliated Employers.
(c) Notwithstanding the foregoing, Employees who are
nonresident aliens and who receive no earned income from the
Company or an Affiliated Employer which constitutes income
from sources within the United States shall be disregarded
for all purposes of this Section 1.30.
(d) To the extent permitted under regulations, the
Company may elect to determine the status of Highly
Compensated Employees on a current calendar-year basis.
(e) The provisions of this Section 1.30 shall be
further subject to such additional requirements as are
described in Code Section 414(q) and its applicable
regulations, which shall override any aspects of this Section
1.30 inconsistent therewith.
1.31 "Hour of Service" means:
(a) For the purposes of Sections 1.38 and 1.46, each
hour for which an Employee is paid or entitled to be paid for
the performance of duties for the Company or an Affiliated
Employer.
(b) For the purposes of Sections 1.11, 1.26, 1.42 and
1.54, with respect to any applicable computation period:
(i) Each hour for which an Employee is paid or
entitled to be paid for the performance of duties for the
Company or an Affiliated Employer;
(ii) Each hour for which an Employee is paid or
entitled to be paid by the Company or an Affiliated Employer,
whether or not the employment relationship has terminated, on
account of a period during which no duties were performed due
to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or Leave of
Absence, but not more than 501 hours for any single
continuous period; and
(iii)Each hour for which back pay, irrespective
of mitigation of damages, is either awarded or agreed to by
the Company or an Affiliated Employer, excluding any hour
credited under Sections 1.31(b)(i) or 1.31(b)(ii), which
shall be credited to the computation period or periods to
which the award, agreement or payment pertains rather than to
the computation period in which the award, agreement or
payment is made.
No hours shall be credited on account of any period
during which the Employee performs no duties and receives
payment solely for the purpose of complying with unemployment
compensation, workers' compensation or disability insurance
laws. The Hours of Service credited shall be determined as
required by Title 29 of the Code of Federal Regulations,
Section 2530.200b-2(b) and (c).
1.32 "Income" means the amount of income to be returned
with any excess deferrals, excess contributions or excess
aggregate contributions under Section 3.01 or Section 3.06 as
determined in accordance with regulations prescribed by the
Secretary of the Treasury under the provisions of Code
Sections 402(g), 401(k) and 401(m).
1.33 "Leased Employee" means any person as so defined in
Code Section 414(n).
1.34 "Leave of Absence" means an absence authorized by the
Company under its standard personnel practices as applied in
a uniform and nondiscriminatory manner to all persons
similarly situated.
1.35 "Non-Highly Compensated Employee" means an individual
who is not a Highly Compensated Employee.
1.36 "Normal Retirement Age" means age 65.
1.37 "Participant" means any person included for
participation in the Plan as provided in Article 2 and any
person who continues to have rights or continued rights under
the Plan.
1.38 "Period of Severance" means, for any Employee, the
period beginning on the Employee's Severance from Service
Date and ending on the date the Employee next completes an
Hour of Service.
A one-year Period of Severance is a period of 12
consecutive months beginning on the Employee's Severance from
Service Date and during which the Employee does not perform
an Hour of Service.
Subject to verification by the Company, for the
purposes of Sections 1.44 and 6.03, an Employee shall be
deemed not to have incurred a Period of Severance during the
period of 24 consecutive months that the Employee is first
absent from employment by reason of:
(a) the Employee's pregnancy;
(b) birth of a child of the Employee;
(c) placement of a child with the Employee in
connection with the Employee's adoption of the child; or
(d) caring for such child for a period beginning
immediately after the birth or placement for adoption.
1.39 "Plan" means the Caesars 401(k) Retirement Savings
Plan as set forth in this document or as amended from time to
time.
1.40 "Plan Administrator" means the Company.
1.41 "Plan Year" means a 12-month period beginning each
January 1 and ending each December 31.
1.42 "Reemployment Commencement Date" means the date an
Employee is first credited with an Hour of Service following
a prior one-year Break in Service.
1.43 "Rollover Account" means a Participant's Account into
which shall be credited rollovers made to the Plan in
accordance with Section 3.07 and investment earnings and
losses thereon.
1.44 "Rule of Parity" means a rule pursuant to which a
rehired Participant who incurs a one-year Period of Severance
shall have his years of Service which occur prior to such
one-year Period of Severance ignored or restored. (a)
If an Employee or Participant incurs a one-year Period of
Severance and has no nonforfeitable right to his Company
Matching Savings Account and, if applicable, his Company
Supplemental Savings Account at the time of his one-year
Period of Severance, his years of Service prior to such one-
year Period of Severance shall not be taken into account if
the number of consecutive one-year Periods of Severance
equals or exceeds the greater of (i) five, or (ii) his years
of Service prior to the one-year Period of Severance.
(b) If an Employee or Participant incurs a one-year
Period of Severance and (i) he has a nonforfeitable right to
his Company Matching Savings Account and, if applicable, his
Company Supplemental Savings Account, or (ii) the number of
consecutive one-year Periods of Severance is less than the
greater of (A) five, or (B) his total years of Service prior
to the one-year Period of Severance, his years of Service
prior to such one-year Period of Severance shall be restored
to him.
1.45 "Seconded Employee" means an Employee who is a non-
U.S. Citizen working abroad and who is on the U.S. payroll of
the Company or an Affiliated Employer.
1.46 "Service" means, with respect to any Employee, his
period or periods of employment with the Company or an
Affiliated Employer which are counted as "Service" in
accordance with the following rules:
(a) Each Employee shall be credited with Service
under the Plan for the period or periods during which such
Employee maintains an employment relationship with the
Company or an Affiliated Employer. An Employee's employment
relationship shall begin on the date the Employee first
renders one Hour of Service and shall end on his Severance
from Service Date. Service also shall include a Period of
Severance between an Employee's Severance from Service Date
and the first anniversary of the date on which the Employee
was first absent if the Employee completes an Hour of Service
on or before such first anniversary date.
(b) If an Employee is absent from work because of
service in the Armed Forces of the United States and returns
to work with the Company or an Affiliated Employer, having
applied to return while his reemployment rights were
protected by law, the absence shall be included in his
Service.
(c) All periods of an Employee's Service, whether or
not consecutive, shall be aggregated. Service shall be
measured in elapsed years and fractions of years whereby each
12 calendar months shall constitute one year and each 30 days
shall constitute one-twelfth of a year.
1.47 "Severance from Service Date" means the earlier of:
(a) the date as of which an Employee's employment
with the Company or an Affiliated Employer is terminated,
whether due to voluntary termination, dismissal, retirement
or death; or
(b) the first anniversary of the first date of a
period in which an Employee remains absent from work (with or
without pay) with the Company or an Affiliated Employer for
any reason (other than resignation, retirement, discharge or
death), such as vacation, holiday, sickness, Disability,
Leave of Absence or layoff.
1.48 "Spousal Consent" means written consent given by a
Participant's spouse to the Participant's election specifying
a form of benefit and designating the Participant's
Beneficiary. The specified form or designated Beneficiary
shall not be changed unless further Spousal Consent is given
or unless the spouse expressly waives the right to consent to
any future changes. Spousal Consent shall be duly witnessed
by a Plan representative or notary public and shall
acknowledge the effect of the Participant's election on the
spouse. The requirement for Spousal Consent may be waived by
the Company if it establishes to its satisfaction that there
is no spouse or that the spouse cannot be located, or because
of such other circumstances as may be established in
accordance with applicable law. Spousal Consent shall be
applicable only to the particular spouse who provides such
consent.
1.49 "Statutory Compensation" means:
(a) for the purposes of Section 1.30, compensation as
defined under Section 1.414(s)-1(c)(2) of the Income Tax
Regulations, plus amounts contributed in accordance with Code
Sections 125, 402(e)(3) and 402(h)1(B); and
(b) for the purposes of Sections 1.02, 1.03 and 3.06,
compensation as defined under Sections 1.414(s)-1(c)(2) or
1.414(s)-1(c)(3) of the Income Tax Regulations. As permitted
under such regulations, compensation under this Section
1.49(b) may or may not include amounts contributed in
accordance with Code Sections 125, 402(e)(3) and 402(h)1(B).
However, in no event may compensation under this Section
1.49(b) exceed the Annual Dollar Limit for the Plan Year.
1.50 "Subsidiary" means an entity more than 50% owned by
Caesars World, Inc. which is included in the Plan by the
Board of Directors of Caesars World, Inc. and by its own
Board of Directors or other governing body if not a
corporation. Subsidiaries are listed in Appendix A.
1.51 "Trustee" means the trustee that holds the funds of
the Plan, as provided in Article 10.
1.52 "Valuation Date" means the date or dates in each
calendar month on which any valuation is made. Procedures
shall be established for determining Valuation Dates, which
shall apply for allocations, withdrawals, distributions or
other relevant purposes. Valuation Dates need not be the
same for all purposes.
1.53 "Vested Portion" means the portion of the Accounts in
which the Participant has a nonforfeitable interest, as
provided in Article 6.
1.54 "Year of Eligibility Service" means the first 12-month
period (measured initially from the Participant's Employment
Commencement Date to the first anniversary of his Employment
Commencement Date and thereafter from the January 1 that next
follows his Employment Commencement Date) during which the
Participant earns at least 1,000 Hours of Service.
Article 2. Eligibility and Participation
2.01 Eligibility
(a) Each Eligible Employee who has completed a Year
of Eligibility Service on the Effective Date shall
automatically become a Participant in the Plan on January 1,
1994.
(b) Each other Employee shall become eligible to
participate in the Plan on any Enrollment Date that coincides
with or next follows (i) the date he completes a Year of
Eligibility Service, or (ii) the date he becomes an Eligible
Employee, whichever occurs later.
(c) If a Participant incurs a one-year Break in
Service, he shall be eligible to recommence participation in
the Plan on his Reemployment Commencement Date, if he is an
Eligible Employee at that time.
(d) If an Employee incurs a one-year Break in Service
prior to becoming a Participant in the Plan and his
Reemployment Date occurs before he accrues five consecutive
one-year Breaks in Service, he shall be eligible to
participate in the Plan on any Enrollment Date that coincides
with or next follows (i) the date on which he completes a
Year of Eligibility Service, (ii) his Reemployment
Commencement Date, or (iii) the date he becomes an Eligible
Employee, whichever occurs last.
(e) If an Employee incurs a one-year Break in Service
prior to becoming a Participant in the Plan and his
Reemployment Date occurs after he accrues five or more
consecutive one-year Breaks in Service, he shall be
considered to be a new Employee for all purposes of the Plan
and he must satisfy the conditions described in Section
2.01(b) based on his Reemployment Commencement Date.
2.02 Participation
An Employee shall become a Participant as of the first
Enrollment Date after he satisfies the requirements of
Section 2.01 and he shall be eligible to contribute to the
Plan as of the first day of any payroll cycle after the date
he files an enrollment form with the Company authorizing the
Company to make Before-Tax Contributions on his behalf
through payroll deductions.
2.03 Transferred Participants
(a) A Participant who remains in the employ of the
Company or an Affiliated Employer but who ceases to be an
Eligible Employee shall continue to be a Participant in the
Plan but shall not be eligible to make Before-Tax
Contributions or receive Company Contributions while his
employment status is other than that of an Eligible Employee.
(b) An Employee who transfers from an Affiliated
Employer and becomes an Eligible Employee shall become
eligible to participate in the Plan on any Enroll-ment Date
that coincides with or next follows (i) the date he completes
a Year of Eligibility Service, or (ii) the date he becomes an
Eligible Employee, whichever occurs later.
2.04 Termination of Participation
An Eligible Employee's participation in the Plan shall
terminate on the date he terminates employment with the
Company or an Affiliated Employer unless the Participant is
entitled to benefits under the Plan, in which event his
participation shall terminate when all those benefits have
been distributed to him.
Article 3. Contributions
3.01 Before-Tax Contributions
(a) Commencing with the first (second for Caesars
Palace) payroll cycle, which includes pay for services
rendered in 1994, a Participant shall be permitted to
contribute to the Plan 2% to 4% of his Compensation per
payroll cycle (in whole percentages) on a before-tax basis.
Such contributions shall be matched by the Company in
accordance with Section 3.04(a).
(b) A Participant who contributes the maximum
permitted under Section 3.01(a) shall be permitted to
contribute an additional 1% to 8% of his Compensation per
payroll cycle (in whole percentages) on a before-tax basis.
Such contributions shall not be matched by the Company.
(c) Notwithstanding the foregoing, in no event shall
a Participant's Before-Tax Contributions in a calendar year
to the Plan and any other plan maintained by the Company or
an Affiliated Employer exceed $7,000 multiplied by the
Adjustment Factor. If a Participant's Before-Tax
Contributions in a calendar year reach that dollar
limitation, his election of Before-Tax Contributions for the
remainder of the calendar year shall be suspended. As of the
first day of the first payroll cycle of the following
calendar year, the Participant's election of Before-Tax
Contributions shall again become effective in accordance with
his previous election.
(d) If the sum of the Participant's Before-Tax
Contributions and before-tax contributions to any other
qualified defined contribution plan maintained by the Company
exceeds the dollar limitation described in Section 3.01(c),
the excess ("excess deferrals") over such dollar limitation,
together with Income thereon, shall be returned to the
Participant no later than the April 15 following the end of
the calendar year in which the excess deferrals were made;
and the Participant shall be deemed to have elected to
receive such return of his excess deferrals.
(e) If a Participant makes before-tax contributions
under another qualified defined contribution plan or
simplified employee pension plan for any calendar year and
those contributions, when added to his Before-Tax
Contributions under the Plan, exceed the dollar limitation
described in Section 3.01(c) for that calendar year, the
Participant may determine that such excess deferrals shall
apply to the Plan. In that event, the excess deferrals,
together with Income thereon, shall be returned to the
Participant no later than the April 15 following the end of
the calendar year in which the excess deferrals were made.
However, the Plan shall not return such excess deferrals
unless the Participant notifies the Company in writing, by
March 1 of that following calendar year, of the amount of
excess deferrals allocated to the Plan.
(f) In the event that any Before-Tax Contributions
returned under Sections 3.01(d) and 3.01(e) were matched by
Company Matching Contributions, those Company Matching
Contributions shall be forfeited and used to reduce future
Company Matching Contributions.
3.02 Change in Contributions
A Participant may change the rate of his Before-Tax
Contributions as of the first day of the first payroll cycle
of any calendar quarter by giving the Company at least 15
days' prior written notice. Such change shall take effect on
the first day of the first payroll cycle of any calendar
quarter that follows the Company's receipt of the 15-day
written notice.
3.03 Suspension of Contributions
(a) A Participant may suspend his Before-Tax
Contributions while he is actively employed by providing the
Company with written notice thereof. Suspensions shall
become effective as of the first day of the payroll cycle
that follows the Company's receipt of the 15-day written
notice. The Participant may resume making Before-Tax
Contributions by giving the Company 15 days' prior written
notice. Such resumption shall be effective as of the first
day of the first payroll cycle of any calendar quarter that
follows the Company's receipt of the 15-day written notice.
(b) No makeup of Before-Tax Contributions is
permitted during any period of suspension.
3.04 Company Contributions
(a) Each payroll cycle the Company shall contribute
Company Matching Contributions to the Plan on behalf of each
Participant in an amount equal to 50% of the Participant's
Before-Tax Contributions made in accordance with Section
3.01(a).
(b) As of the end of each Plan Year, the Company
shall contribute to the Plan on behalf of each Participant
who is on the payroll of the Company on December 1 an amount
equal to 1% of his Compensation earned during the Plan Year.
Notwithstanding the foregoing, in the event an Employee
becomes a Participant during the Plan Year, only Compensation
he earns subsequent to the time he satisfies the requirements
of Sections 2.01(b), 2.01(c), 2.01(d), or 2.03(b), whichever
is applicable, shall be considered for the purposes of this
Section 3.04(b).
(c) At the discretion of the Board of Directors, the
Company may contribute an additional amount to the Plan on
behalf of each Participant who is on the payroll of the
Company on December 31. The amount of such contributions, if
any, shall be determined by the Board of Directors on an
annual basis.
3.05 Timing of Contributions
Contributions made in accordance with Sections 3.01
and 3.04(a) shall be forwarded to the Trustee as soon as
practicable after the end of each payroll cycle and
contributions made in accordance with Sections 3.04(b) and
3.04(c) shall be forwarded to the Trustee as soon as
practical after the end of the Plan Year.
3.06 Limitations Affecting Highly Compensated Employees
(a) Limitation Based on Actual Deferred Percentage:
The Actual Deferral Percentage for Highly Compensated
Employees who are Participants or who are eligible to become
Participants shall not exceed the Actual Deferral Percentage
for all Non-Highly Compensated Employees who are Participants
or who are eligible to become Participants, multiplied by
1.25. If the Actual Deferral Percentage does not meet the
foregoing test, an "alternative test" shall be applied.
Under the alternative test, the Actual Deferral Percentage
for Highly Compensated Employees may not exceed the lesser of
(i) the Actual Deferral Percentage for all Non-Highly
Compensated Employees who are Participants or who are
eligible to become Participants plus two percentage points,
or (ii) such Actual Deferral Percentage multi-plied by 2.0
(or such lesser amount as the Company determines satisfies
the provi-sions of Section 3.06(c)). The Company may
implement rules limiting the Before-Tax Contributions that
may be made by some or all Highly Compensated Employees so
that this limitation is satisfied. If the Company determines
that the limitation under this Section 3.06(a) has been
exceeded in any Plan Year, the following provisions shall
apply:
(i) The amount of Before-Tax Contributions
and/or Company Contributions made on behalf of some or all
Highly Compensated Employees shall be reduced by leveling the
highest percentage rates made on behalf of the Highly Com-
pensated Employees until the provisions of this Section
3.06(a) are satisfied. Such percentage rates shall be
rounded to the nearest one-hundredth of 1% of the
Participant's Statutory Compensation.
(ii) Before-Tax Contributions and/or Company
Contributions subject to reduction under this Section 3.06(a)
("excess contributions"), together with Income thereon, shall
be paid to the Participant before the close of the Plan Year
following the Plan Year in which the excess contributions
were made and, to the extent practicable, within 2 1/2 months of
the close of the Plan Year in which the excess con-tributions
were made. However, any excess contributions for any Plan
Year shall be reduced by any Before-Tax Contributions
previously returned to the Participant under Section 3.01(d)
or 3.01(e) for that Plan Year. In the event that any Before-
Tax Con-tributions returned under this Section 3.06(a) were
matched by Company Matching Contributions, such corresponding
Company Matching Contributions, together with Income thereon,
shall be forfeited and used to reduce future Company Matching
Contributions.
(b) Limitation Based on Actual Contribution
Percentage: The Actual Contribution Percentage for Highly
Compensated Employees who are Participants or who are
eligible to become Participants shall not exceed the Actual
Contribution Percentage for all Non-Highly Compensated
Employees who are Participants or who are eligible to become
Participants, multiplied by 1.25. If the Actual Contribution
Percentage does not meet the foregoing test, an "alternative
test" shall be applied. Under the alternative test, the
Actual Contribution Percentage for Highly Compensated
Employees may not exceed the lesser of (i) the Actual
Contribution Percentage for all Non-Highly Compensated
Employees who are Participants or who are eligible to become
Participants plus two percentage points, or (ii) such Actual
Contribution Percentage multiplied by 2.0 (or such lesser
amount as the Company determines satisfies the provisions of
Section 3.06(c)). If the Company determines that the
limitation under this Section 3.06(b) has been exceeded in
any Plan Year, the following provisions shall apply:
(i) The amount of Company Matching Contributions
made on behalf of some or all Highly Compensated Employees in
the Plan Year shall be reduced, to the extent necessary to
ensure that the provisions of this Section 3.06(b) are
satisfied, by leveling the highest percentage rates of the
Highly Compensated Employees. Such percentage rates shall be
rounded to the nearest one-hundredth of 1% of a Participant's
Statutory Compensation.
(ii) Any Company Matching Contributions subject
to reduction under this Section 3.06(b) ("excess aggregate
contributions"), together with Income thereon, shall be
reduced and the amount of vested Company Matching
Contributions together with Income thereon shall be paid to
the Participant and the amount of nonvested Company Matching
Contributions together with Income thereon shall be forfeited
and used to reduce future Company Matching Contributions.
(iii)Any repayment or forfeiture of excess
aggregate contributions shall be made before the close of the
Plan Year following the Plan Year for which the excess
aggregate contributions were made and, to the extent
practicable, any repayment shall be made within 2 1/2 months of
the close of the Plan Year in which the excess aggregate
contributions were made.
(c) If after applying the provisions of Sections
3.06(a) and 3.06(b) multiple use of the alternative test is
necessary, in no event shall the sum of the Actual Deferral
Percentage of the group of eligible Highly Compensated
Employees and the Actual Contribution Percentage of such
group exceed the "aggregate limit," as such term is defined
under regulations to Code Section 401(m). In the event the
aggregate limit is exceeded for any Plan Year, the Actual
Contribution Percentage for the Highly Compensated Employees
shall be reduced to the extent necessary to satisfy the
aggregate limit in accordance with the procedure set forth in
Section 3.06(b).
(d) The Company may elect to use Before-Tax
Contributions or Company Contributions to satisfy the tests
described in Sections 3.06(b) and 3.06(c) provided that at
least one of the tests described in Section 3.06(a) is met
prior to such election and continues to be met following the
Company's election to shift the application of those Before-
Tax Contributions or Company Contributions from the tests
described in Section 3.06(a) to the tests described in
Section 3.06(b)
(e) If any Highly Compensated Employee is either (i)
a 5% owner, or (ii) one of the 10 highest-paid Highly
Compensated Employees, then any benefit or con-tribution paid
to or made on behalf of any member of his "family" (as
defined under Code Section 414(q)(6)(B)) shall be deemed paid
to or made on behalf of such Highly Compensated Employee for
purposes of Sections 3.06(a), 3.06(b) and 3.06(c) to the
extent required under regulations prescribed by the Secretary
of the Treasury or his delegate under Code Sections 401(k)
and 401(m). Any return of excess contributions or excess
aggregate contributions required under Section 3.06(a),
3.06(b) or 3.06(c) with respect to the family group shall be
made in accordance with such regulations. The total benefit
shall be apportioned among the Highly Compensated Employee
and the members of his "family" (as defined under Code
Section 414(q)(6)(B)) in a manner determined by the Company
and shall be uniformly applicable to all Employees similarly
situated. Furthermore, in the determination of the
Compensation and Statutory Compensation of such Highly
Compensated Employee, the rules of Code Section 414(q)(6)
shall apply, except that the term "family" shall include only
the spouse of the Employee and any lineal descendants of the
Employee who have not attained age 19 before the close of the
calendar year.
(f) If any Highly Compensated Employee is a
participant of another qualified plan of the Company or an
Affiliated Employer, other than an employee stock ownership
plan described in Code Section 4975(e)(7), under which
deferred cash contributions or matching contributions are
made on behalf of the Highly Compensated Employee or under
which the Highly Compensated Employee makes after-tax
contributions, the Company shall implement rules to take into
account all such contributions for the Highly Compensated
Employee under all such plans in applying the limitations of
this Section 3.06. Such rules shall be uniformly applicable
to all Employees similarly situated.
(g) In the event that the Plan is aggregated with one
or more other plans to satisfy the requirements of Code
Sections 401(a)(4) and 410(b) (other than for purposes of the
average benefit percentage test) or if one or more other
plans is aggregated with the Plan to satisfy the requirements
of such sections of the Code, then the provisions of Sections
3.06(a), 3.06(b) and 3.06(c) shall be applied by determining
the Actual Deferral Percentage and Actual Contribution
Percentage of employees as if all such plans were a single
plan. If this Plan is permissively aggregated with any other
plan or plans for purposes of satisfying the provisions of
Code Section 401(k)(3), the aggregated plans also must
satisfy the provisions of Code Sections 401(a)(4) and 410(b)
as though they were a single plan. Plans may be aggregated
under this Section 3.06(g) only if they have the same plan
year.
3.07 Rollovers
With the Company's permission and without regard to
any limitations on contributions set forth in this Article 3,
the Plan may receive from an Eligible Employee, in cash, any
amount previously received by him from an "eligible
retirement plan" as defined in Code Section 402(c)(8) and its
applicable regulations, provided that (i) such amount is an
"eligible rollover" as defined in Code Section 402(c)(4) and
its applicable regulations, and (ii) the Eligible Employee
provides evidence satisfactory to the Company that such
amount qualifies for rollover treatment. The rollover must
either be (i) paid to the Trustee on or before the 60th day
after the day it was received by the Eligible Employee, or
(ii) transferred directly to the Trustee from an eligible
retirement plan. Any rollovers shall be credited to an
Eligible Employee's Rollover Account.
3.08 Maximum Annual Additions
(a) The annual addition to a Participant's Accounts
for any Plan Year, which shall be considered the "limitation
year" for purposes of Code Section 415, when added to the
Participant's annual addition for that Plan Year under any
other qualified plan of the Company or an Affiliated
Employer, shall not exceed an amount that is equal to the
lesser of (i) 25% of the Participant's aggregate remuneration
for that Plan Year, or (ii) the greater of $30,000 or 25% of
the dollar limitation in effect under Code Section
415(b)(1)(A).
(b) For purposes of this Section 3.08, the "annual
addition" to a Participant's Accounts under the Plan or any
other qualified plan maintained by the Company or an
Affiliated Employer for the Plan Year shall include:
(i) Total contributions, including Before-Tax
Contributions, Company Contributions, Company Matching
Contributions and Company Supplemental Contributions made on
the Participant's behalf by the Company or any Affiliated
Employer to the Plan or any other qualified defined
contribution plan;
(ii) Forfeitures, if applicable, that have been
allocated to the Participant's accounts under any other
qualified defined contribution plan maintained by the Company
or any Affiliated Employer;
(iii)Voluntary or mandatory contributions made by
the Participant under any qualified defined benefit plan
maintained by the Company or any Affiliated Employer; and
(iv) Contributions made on a Participant's behalf
to an "individual medical benefit account" under a qualified
pension or annuity plan maintained by the Company or any
Affiliated Employer, as described and to the extent required
under Code Section 415(l).
(c) For purposes of this Section 3.08, the term
"remuneration" with respect to any Participant shall mean the
wages, salaries and other amounts paid with respect to that
Participant by the Company or any Affiliated Employer for
personal services actually rendered, determined after any
Before-Tax Contributions are made pursuant to Section 3.01 or
pursuant to a cafeteria plan as described in Code Section
125, including, but not limited to, bonuses, overtime
payments and commissions, but excluding:
(i) Company contributions to the Plan or to any
other deferred compensation plan maintained by the Company or
any Affiliated Employer;
(ii) Amounts realized from the exercise of a non-
qualified stock option;
(iii)Amounts realized when restricted stock is no
longer subject to substantial risk of forfeiture;
(iv) Amounts realized from the disposition of a
qualified stock option; or
(v) Other amounts that receive special tax
benefits.
(d) If the annual addition to a Participant's
Accounts for any Plan Year would otherwise exceed the
limitation set forth in Section 3.08(a), the excess annual
additions to such Participant's Accounts for such Plan Year
shall be reduced to the extent necessary in the following
order:
(i) The Participant's unmatched Before-Tax
Contributions shall be reduced to the extent necessary. The
amount of the reduction shall be returned to the Participant,
together with any earnings on the contributions to be
returned.
(ii) The Participant's Company Supplemental
Contributions, if any, shall be reduced to the extent
necessary. The amount of the reduction shall be forfeited
and used to reduce future Company Supplemental Contributions.
(iii)The Participant's matched Before-Tax
Contributions and corre-sponding Company Matching
Contributions shall be reduced to the extent necessary. The
amount of the reduction attributable to the Participant's
matched Before-Tax Contributions shall be returned to the
Participant, together with any earnings on those
contributions to be returned, and the amount attributable to
the Company Matching Contributions shall be forfeited and
used to reduce future Company Matching Contributions.
(iv) The Participant's Company Contributions
shall be reduced to the extent necessary. The amount of the
reduction shall be forfeited and used to reduce future
Company Contributions.
(e) If a Participant has at any time participated in
both a qualified defined benefit plan and a qualified defined
contribution plan maintained by the Company or an Affiliated
Employer for a Plan Year, the sum of the Participant's
defined benefit plan fraction and defined contribution plan
fraction for such Plan Year shall not exceed 1.0.
The terms "defined benefit plan fraction" and
"defined contribution plan fraction" shall mean the
following:
(i) "Defined benefit plan fraction" for any
calendar year is a fraction --
(A) the numerator of which is the projected
annual benefit of the Participant (determined as of the close
of the calendar year) under all qualified defined benefit
plans maintained by the Company or an Affiliated Employer;
and
(B) the denominator of which is the lesser
of (1) or (2) below:
(1) the product of 1.25 multiplied by
the defined benefit plan dollar limitation under Code Section
415(b)(1)(A) (as multiplied by the Adjustment Factor) in
effect for such calendar year; or
(2) the product of 1.4 multiplied by
an amount that is 100% of the Participant's average
remuneration for the three consecutive years in which his
compensation was the highest.
(ii) "Defined contribution plan fraction" for any
calendar year is a fraction --
(A) the numerator of which is the sum of
the annual additions made on behalf of a Participant for such
calendar year and all prior calendar years; and
(B) the denominator of which is the sum of
the lesser of (1) or (2) below determined for such calendar
year and for each prior year of service with the Company or
an Affiliated Employer:
(1) the product of 1.25 multiplied by
the defined con-tribution plan dollar limitation under Code
Section 415(c)(1)(A) (as multiplied by the Adjustment Factor)
in effect for such calendar year; or
(2) the product of 1.4 multiplied by
an amount equal to 25% of the Participant's remuneration for
such year.
In the event the sum of a Participant's defined
benefit fraction and defined contribution fraction exceeds
1.0, his benefit under any defined benefit plan maintained by
the Company shall be decreased until such sum equals 1.0.
3.09 Return of Contributions
Except as provided below, at no time shall any
contributions (or portions thereof) revert to the Company
prior to the discharge of all liabilities under the Plan.
(a) If a contribution is conditioned on initial
qualification of the Plan under Code Section 401(a) and if
the Commissioner of Internal Revenue, on timely application
made after the establishment of the Plan, determines that the
Plan is not initially so qualified, or refuses, in writing,
to issue a determination as to whether the Plan is so
qualified, said contribution shall be returned to the Company
without interest. The return shall be make within one year
after the date of the final determination of the denial of
qualification. The provisions of this Section 3.09(a) shall
apply only if the application for the determination is made
by the time prescribed by law for filing the Company's return
for the taxable year in which the Plan was adopted, or such
later date as the Secretary of the Treasury may prescribe.
(b) If all or part of the Company's deductions under
Code Section 404 for contributions to the Plan are disallowed
by the Internal Revenue Service, the portion of the
contributions to which that disallowance applies shall be
returned to the Com-pany without interest but reduced by any
investment loss attributable to those contributions. The
return shall be made within one year after the disallowance
of the deduction.
(c) A Company may recover without interest the amount
of its contribu-tions to the Plan made on account of a
mistake of fact, reduced by any investment loss attributable
to those contributions, if recovery is made within one year
after the date of those contributions.
(d) In the event that Before-Tax Contributions made
under Section 3.01 are returned to the Company in accordance
with the provisions of this Section 3.09, the elections to
reduce compensation which were made by Participants on whose
behalf those contributions were made shall be void
retroactively to the beginning of the period for which those
contributions were made. The Before-Tax Contributions so
returned shall be distributed in cash to those Participants
for whom those contributions were made.
Article 4. Investment of Contributions
4.01 Funds
Contributions to the Plan shall be invested in one or
more of the Funds described in Section 1.29.
4.02 Investment of Participant's Accounts
(a) A Participant shall direct that the total of his
Before-Tax Contributions made pursuant to Section 3.01 shall
be invested in 10% increments in one or more of the Funds
described in Section 1.29.
(b) A Participant's Company Contributions, Company
Matching Contributions and Company Supplemental Contributions
shall be invested in accordance with the election made under
Section 4.02(a).
(c) An Eligible Employee who makes a rollover in
accordance with Section 3.07, shall direct that the total of
such rollover shall be invested in 10% increments in one or
more of the funds described in Section 1.29.
(d) In the event that the Participant or, if
applicable, an Eligible Employee makes no investment
election, his Accounts shall be invested in Fund A.
4.03 Responsibility for Investments
Each Participant is solely responsible for the
selection of his investment options. The Trustee, the
Company and the officers, supervisors and other Employees of
the Company are not empowered to advise a Participant as to
the manner in which his Accounts shall be invested. The fact
that a Fund is available to Participants for investment under
the Plan shall not be construed as a recommendation for
investment in that Fund.
4.04 Change of Election
A Participant may change his future investment
election in 10% increments as of any business day.
4.05 Reallocation of Accounts Among Funds
A Participant may elect to reallocate his Accounts
among the investment Funds, in multiples of 10%, as of any
business day; however, he may not reallocate his Accounts
among the investment Funds more than four times in each
calendar quarter.
4.06 Administrative Fees
As of the beginning of each Plan Year, the Company
shall determine the per capita amount that shall be deducted
from Participants' Accounts to share the cost of providing
for individual investment directions. Notwithstanding the
foregoing, the Company shall pay all administrative expenses
for any Participant who is actively employed. In the event
a Participant is not employed for the entire Plan Year, he
shall pay a pro rata share of the administrative expenses for
such Plan Year.
Article 5. Valuation of Accounts
5.01 Valuation of the Funds
As of each Valuation Date, the Trustee shall allocate
the amount of income or loss of each Fund since the last
Valuation Date (which shall mean the net income or net loss
of each Fund, including the net appreciation or net
depreciation in the value of each Fund).
5.02 Account Adjustments
Each Participant's proportionate share of each of the
Funds shall be determined as of each Valuation Date.
Whenever an event requires a determination of the value of a
Participant's Accounts, the value shall be computed as of the
Valuation Date coincident with or immediately following the
date of determination. However, the Company reserves the
right to change from time to time the procedures used in
valuing the Account or crediting (or debiting) the Accounts
if it concludes that such action is justified in that it
results in a more accurate reflection of the fair market
value of assets. In the event of a conflict between the
provisions of this Article 5 and such new administrative
procedures, those new administrative procedures shall
prevail.
5.03 Statement of Accounts
Not less frequently than quarterly, each Participant
shall be furnished with a statement setting forth the value
of his Accounts.
Article 6. Vested Portion of Accounts
6.0\ Before-Tax Savings Account, Company Savings Account
and Rollover Account
A Participant shall at all times be 100% vested in and
have a nonforfeitable right to the value of his Before-Tax
Savings Account, Company Savings Account and Rollover
Account.
6.02 Company Matching Savings Account and Company
Supplemental Savings Account
A Participant shall be vested in and have a
nonforfeitable right to the value of his Company Matching
Savings Account and his Company Supplemental Savings Account
in accordance with the following schedule:
Completed Years
Nonforfeitable of Service
Percentage
0 but less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
In the event that the vesting schedule changes in the
future, in the case of a Participant who had completed at
least three years of Service as of that date, the vesting
provisions in effect prior to that date shall continue to
apply to the extent that they provide the Participant with a
greater Vested Portion of his Company Matching Savings
Account and, if applicable, his Company Supplemental Savings
Account than that provided under the new vesting provisions.
Notwithstanding the foregoing, a Participant shall be
100% vested in and have a nonforfeitable right to the value
of his Company Matching Savings Account and his Company
Supplemental Savings Account upon (i) termination of
employment from the Company or an Affiliated Employer due to
death or Disability, (ii) termination of employment on or
after attainment of age 55, or (iii) attainment of age 65,
whichever occurs first.
6.03 Disposition of Forfeitures
(a) Upon termination of employment, a Participant who
is not fully vested in his Company Matching Savings Account
and, if applicable, his Company Supplemental Savings Account
shall forfeit the nonvested portion of his Company Matching
Savings Account and his Company Supplemental Savings Account.
(b) Forfeitures shall be used (i) first, to restore
Participants' Accounts in accordance with Section 6.03(c)
below, and (ii) then, to reduce future Company Matching
Contributions or, if applicable, Company Supplemental
Contributions. Forfeitures also may be used to pay expenses
that arise in connection with the administration of the Plan.
(c) If an Employee is rehired after incurring a one-
year Period of Severance which does not cause him to lose his
prior Service in accordance with the Rule of Parity, the
Service he had earned prior to his termination shall be added
to the Service he earns after his Reemployment Commencement
Date. (i) In the event that an Employee incurs
fewer than five consecu-tive one-year Periods of Severance
between his date of termination and his Reemployment
Commencement Date and he has received a distribution in
accordance with Section 8.04, the amount of his Company
Matching Savings Account and Company Supplemental Savings
Account, which he forfeited upon termination shall be
restored to his Company Matching Savings Account and Company
Supplemental Savings Account without taking into account any
gains or losses of the Fund which have occurred since the
effective date of the forfeiture, provided that, the Employee
repays to the Plan his total distribution attributable to
Company Matching Contributions and, if applicable, Company
Supplemental Contributions prior to (i) the date he incurs
five one-year Periods of Severance, or (ii) five years after
his Reemployment Commencement Date, whichever occurs earlier.
(ii) In the event that an Employee incurs fewer
than five consecutive one-year Periods of Severance between
his date of termination and his Reemployment Commencement
Date and he has not received a distribution in accordance
with Section 8.04, the amount of his Company Matching Savings
Account and his Company Supplemental Savings Account, which
he forfeited upon termination shall be restored to his
Company Matching Savings Account and his Company Supplemental
Savings Account plus any gains or losses of the Fund which
have occurred since the effective date of the forfeiture.
(iii)In the event an Employee incurs five or more
consecutive one-year Periods of Severance between his
termination date and his Reemployment Com-mencement Date or
he fails to repay to the Plan his total distribution
attributable to Company Matching Contributions and Company
Supplemental Contributions in accordance with Section
6.03(c)(i), the amount of his Company Matching Savings
Account and Company Supplemental Savings Account which he
forfeited shall not be restored.
Article 7. In-Service Withdrawals
7.01 Withdrawals On or After Attainment of Age 59 1/2
A Participant who has attained at least age 59 1/2 may
withdraw all or a portion of the value of his Before-Tax
Contribution Account and all or a portion of the Vested
Portion of the value of his Company Matching Savings Account.
In no event, however, can a Participant withdraw less than
$500.
7.02 Rollover Withdrawals
A Participant may withdraw all or a portion of the
value of his Rollover Account. In no event, however, can a
Participant withdraw less than $500.
7.03 Hardship Withdrawals
(a) A Participant may withdraw all or a portion of
his Before-Tax Contributions (subject to the restrictions
described in Section 7.03(b)(ii)), and the Vested Portion of
the value of his Company Matching Savings Account by giving
notice in the manner prescribed by the Company, provided that
he needs such withdrawal to cover any of the following
financial emergencies:
(i) Medical expenses, as
defined in Code Section 213(d), for the Participant, his
spouse and/or dependents;
(ii) Purchase (excluding mortgage payments) of a
principal residence for the Participant;
(iii)Tuition payments and related educational
fees for the next 12 months of post-secondary education for
the Participant, his spouse and/or dependents; and
(iv) Amounts necessary to prevent the eviction of
the Participant from his principal residence or foreclosure
on the mortgage of the Participant's principal residence.
(b) The minimum amount that can be withdrawn is $500
and the maximum amount that can be withdrawn is the amount
necessary to cover the financial emergency, plus the amount
necessary to pay any taxes or penalties due on the amount
withdrawn. To the extent necessary, withdrawals shall be
taken in the following order:
(i) The Vested Portion of the value of the
Participant's Company Matching Savings Account; and
(ii) The Participant's Before-Tax Contributions
(or the value of his Before-Tax Savings Account if less).
(c) The distribution must be necessary to satisfy the
Participant's immediate and heavy financial need. A
distribution shall be deemed to satisfy this requirement if:
(i) The distribution is not in excess of the
amount of the Participant's immediate and heavy financial
need;
(ii) The Participant has obtained all
distributions, other than hardship distributions subject to
these same requirements, and all non-taxable loans which are
currently available under the Plan and all qualified plans
maintained by the Company or an Affiliated Employer;
(iii)The Participant makes no contributions to
any qualified plan (except to a defined benefit plan that
requires mandatory employee contributions) maintained by the
Company or an Affiliated Employer for at least 12 months; and
(iv) Any amounts contributed by the Participant
on a before-tax basis to any qualified plan maintained by the
Company or an Affiliated Employer in the taxable year
following the year of distribution under this Section 7.03
shall be restricted to the limitation applicable to such
year, reduced by any contributions made on a before-tax basis
to any qualified plan in the year the distribution is made.
7.04 Timing and Procedures and Form of Payment
To make a withdrawal under Sections 7.01, 7.02 or
7.03, a Participant shall give 15 days' written notice to the
Company on the appropriate form provided by the Company. The
Participant shall also provide any supporting data that shall
be requested by the Company.
(a) In service withdrawals shall be determined as of
the Valuation Date that follows the receipt of the written
notice and shall be paid as soon as administratively feasible
after such date.
(b) Withdrawals shall be made pro-rata across the
Funds within each money type withdrawn.
(c) A withdrawal described in Sections 7.01, 7.02 or
7.03 shall be made in cash in the form of a single lump-sum
distribution and, according to the election of the
Participant, shall be made in accordance with one of the
methods of payment described in Section 8.03.
7.05 Participant Loans
A Participant may borrow from the Plan up to 50% of
the Vested Portion of his Account balances, subject to the
following (and subject to the Plan's loan rules, which are
considered to be part of the Plan and which may be changed
from time to time):
(a) A Participant's loan shall be in $1.00
increments, shall not be for less than $1,000 and shall not
exceed the lesser of:
(i) $50,000 reduced by the highest loan balance
of the Participant's loan outstanding during the immediately
prior 12-month period (ending the day before the new loan is
granted); or
(ii) 50% of the Participant's Vested Portion of
his Accounts.
For purposes of the Plan's loan provisions, all
qualified plans maintained by the Company and any Affiliated
Employer shall be treated as a single plan.
(b) The Participant may have no more than one loan
outstanding at any time and may not request more than one
loan in each Plan Year.
(c) The period of repayment for any loan, which must
be in whole months only, shall be arrived at by mutual
agreement between the Company and the Participant, but all
loans shall become due and payable following termination of
employment. Upon such termination, loans may be paid back by
a distribution, to the extent necessary, of the Participant's
Vested Portion of his Accounts, whether or not he elects to
defer payment of the remainder of such Accounts in accordance
with Article 8. The period of maturity for a loan shall not
exceed five years and shall not be for less than six months.
(d) Each loan shall bear a reasonable rate of
interest, which shall be specified in the Plan's loan rules.
The Company shall determine the appropriate rate of interest
for each loan in a uniform manner for all Participants.
(e) Each loan shall be evidenced by a promissory note
payable to the Plan.
(f) Payments of principal and interest shall be made
in accordance with the Plan's loan rules.
(g) No new loans can be taken out after termination
or retirement.
(h) Loans shall be paid in accordance with the Plan's
loan rules.
Article 8. Distribution of Accounts Upon Termination of
Employment
8.0N Eligibility
Upon a Participant's retirement, termination or death,
the Vested Portion of his Accounts, as determined under
Article 6, shall be distributed as provided in this Article
8.
8.02 Form of Distribution
Distribution of the Vested Portion of a Participant's
Accounts shall be made in cash in the form of a single lump-
sum distribution.
8.03 Method of Payment
(a) According to the Participant's election, his
taxable distribution under this Article 8 or under Sections
7.01, 7.02, or 7.03, shall be paid in accordance with one of
the following methods:
(i) The total distribution shall be paid
directly to the Participant; or
(ii) If the distribution exceeds $200:
(A) All of the distribution (or,
alternatively, a portion of the distribution if such
distribution exceeds $500), which is an eligible rollover
distribution shall be transferred directly to an eligible
retirement plan that accepts eligible rollovers; and
(B) The balance of the distribution, if
any, shall be paid directly to the Participant.
(b) Not less than 30 days or more than 90 days prior
to the date benefits are to commence, the Company shall
provide the Participant with an election form and a notice
that satisfies the requirements of 1.411(a)-11(c) of the
Income Tax Regulations and Code Section 402(f). In the event
the Participant does not return the signed election form by
the date benefits are to commence, he shall be deemed to have
elected the option described in Section 8.03(a)(i).
(c) Notwithstanding the foregoing, distributions may
commence less than 30 days after the material described in
Section 8.03(b) is given to the Participant provided that:
(i) the Participant is notified that he has the
right to a period of at least 30 days after receipt of the
material to consider whether or not to elect a distribution;
and
(ii) he affirmatively elects to receive a
distribution.
For the purposes of this Section 8.03, "eligible
rollover distribution" and "eligible retirement plan" are
defined in Section 11.05.
8.04 Distribution Upon Retirement or Termination
Except as provided for in Section 8.06, upon
retirement, termination or Disability, a Participant may
elect to receive his distribution as soon as administratively
feasible after the Valuation Date that follows either:
(a) The date he retires, terminates or incurs a Disability;
or
(b) The date he makes a written election to take his
distribution but in no event later than the date specified in
Section 8.07; or
(c) Attainment of Normal Retirement Age.
Notwithstanding the foregoing, in no event can a
distribution be made under this Section 8.04 prior to the
Participant's attainment of Normal Retirement Age, unless he
elects in writing to receive such distribution.
8.05 Distribution Upon Death
(a) Except as provided for in Section 8.05(b), upon
the death of a Participant, his Beneficiary shall receive a
full distribution as soon as administratively feasible after
the Valuation Date that follows the Participant's date of
death.
(b) Notwithstanding the foregoing, if the Beneficiary
is the Participant's spouse, she may elect to defer receipt
of her distribution until as soon as administra-tively
feasible after the Valuation Date that follows the
Participant's date of death but in no event later than (i)
the December 31 of the calendar year in which the Participant
would have attained age 70 1/2, or (ii) the December 31 of the
calendar year that follows the calendar year in which the
Participant dies, whichever occurs last.
(c) A spouse Beneficiary may elect to be paid in
accordance with either of the methods of payment described in
Section 8.03, except that in the event the spouse elects the
method described in Section 8.03(a)(ii), the distribution can
only be transferred directly to an individual retirement
account or an individual retirement annuity. A non-spouse
Beneficiary shall be paid in accordance with the method of
payment described in Section 8.03(a)(i). For the purposes of
this Section 8.05(c), "Beneficiary" shall replace
"Participant" in each place that "Participant" appears in
Section 8.03.
8.06 Small Payments
Notwithstanding the provisions of Sections 8.04 and
8.05, whichever is applicable, in the event that the total
Vested Portion of a Participant's Accounts amounts to $3,500
or less, distribution of such Accounts shall be made as soon
as administratively feasible after the Valuation Date that
follows the date an event in Section 8.04 or 8.05 occurs.
8.07 Minimum Required Distributions
(a) Notwithstanding anything to the contrary
contained in this Article 8, unless the Participant elects
otherwise, in no event can distribution of the Vested Portion
of a Participant's Accounts occur later than 60 days after
the close of the Plan Year in which (i) the Participant
terminates employment, or (ii) the Participant attains Normal
Retirement Age, whichever occurs last.
(b) In no event, however, shall the provisions of
this Article 8 operate so as to allow the distribution of a
Participant's Accounts to begin later than the April 1
following the calendar year in which the Participant attains
age 70 1/2. Notwithstanding the foregoing, distributions to a
Participant shall not be required until the April 1 following
the calendar year in which he retires if (i) he does not own
more than 5% of the outstanding stock of the Company (or
stock possessing more than 5% of the total combined voting
power of all Company stock, a "5% owner"), and (ii) he
attained age 70 1/2 prior to January 1, 1988.
(c) In the event that a Participant is required to
begin receiving payments while employed under the provisions
of Section 8.07(b), the Participant may elect to receive
payments while in service in accordance with options under
clause (i) or (ii) as follows:
(i) A Participant may receive one lump-sum
payment on or before the Participant's required beginning
date equal to his entire Account balances and annual lump-sum
payments thereafter of amounts accrued during each calendar
year; or
(ii) A Participant may receive annual payments of
the minimum amount necessary to satisfy the minimum
distribution requirements of Code Section 401(a)(9). Such
minimum amount shall be determined on the basis of the joint
life expectancy of the Participant and his Beneficiary. Such
life expectancy shall not be recalculated. The minimum
distribution amount shall be allocated among the Funds in
proportion to the value of the Participant's Accounts as of
the date of each withdrawal.
A Participant shall make an election under this
Section 8.07(c) by giving written notice to the Company
within the 90-day period prior to his required beginning
date. Upon the Participant's subsequent termination of
employment, payment of the Participant's Accounts shall be
made in accordance with the provi-sions of Section 8.02. In
the event that a Participant fails to make an election under
this Section 8.07(c), payment shall be made in accordance
with clause (ii) above.
8.08 Status of Accounts Pending Distribution
Until distributed, the Accounts of a Participant who
is entitled to a distribu-tion shall continue to be invested
as provided under Article 4. A terminated Participant shall
continue to have the opportunity to make investment
reallocations in accordance with Section 4.05.
8.09 Proof of Death and Right of Beneficiary or Other
Person The Company may require and rely upon such
proof of death and such evidence of the right of any
Beneficiary or other person to receive the value of the
Accounts of a deceased Participant as the Company may deem
proper, and its deter-mination of death and of the right of
that Beneficiary or other person to receive payment shall be
made in accordance with Section 9.09.
8.10 Failure to Locate Recipient
In the event that the Company is unable to locate a
Participant or Beneficiary who is entitled to payment under
the Plan within five years from the date such payment was to
have been made, the amount to which such Participant or
Beneficiary was entitled shall be declared a forfeiture and
shall be used to reduce future Company Matching
Contributions, Company Contributions and Company Supplemental
Contributions to the Plan. If the Participant or Beneficiary
is later located, the benefit that was previously forfeited
hereunder shall be restored by means of additional Company
contributions to the Plan or, in the event of prior
termination of the Plan, by the Company.
8.11 Distribution Limitation
Notwithstanding any other provision of this Article 8,
all distributions from the Plan shall conform to the
regulations issued under Code Section 401(a)(9), including
the incidental death benefit provisions of Code Section
401(a)(9)(G). Further, such regulations shall override any
Plan provision that is inconsistent with Code Section
401(a)(9).
Article 9. Administration of the Plan
9.01 Administration
(a) The Plan shall be administered by the
Administrative Committee (the "Committee") consisting of at
least three members.
(b) The Committee, in its sole and absolute
discretion, shall resolve questions relating to the
interpretation of the Plan, the eligibility of Employees to
participate and the amount of benefits payable in each
individual case, as well as questions relating to the
financial aspects of the Plan.
(c) The Committee shall have the power, duty and
responsibility to direct the administration of the Plan in
accordance with the provisions herein. The Committee shall
have the authority to appoint recordkeepers, Certified Public
Accoun-tants, investment counsellors, trustees, attorneys and
other experts, and may delegate responsibility to these
experts whenever necessary to enable the Committee to carry
out its assigned duties under the Plan.
(d) All decisions of the Committee as to the facts of
any case or the meaning and intent of any of the provisions
of the Plan or of any ruling or regulation and its
application to any case shall be final, subject to any appeal
in accordance with Section 9.09.
9.02 Individual Accounts
The Committee shall maintain, or cause to be
maintained, records showing the individual balances in each
Participant's Accounts. However, maintenance of those
records and Accounts shall not require any segregation of the
Funds.
9.03 Action of Majority
Any act that the Company authorizes or requires the
Committee to do may be done by a majority of its members.
The action of that majority expressed from time to time by a
vote at a meeting, whether in person or by conference call,
or in writing without a meeting, shall constitute the action
of the Committee and shall have the same effect for all
purposes as if agreed to by all Committee members.
9.04 Compensation and Bonding
No Employee or Committee member shall receive any
compensation from the Plan for his services as such. The
Committee shall purchase such bonds as may be required under
ERISA.
9.05 Prudent Conduct
The Committee shall use that degree of care, skill,
prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in his conduct of a
similar situation.
9.06 Service in More Than One Fiduciary Capacity
Any individual, entity or group of persons may serve
in more than one fiduciary capacity with respect to the Plan
and/or the Funds.
9.07 Indemnification
The Committee, the Board of Directors and the
officers, Employees and agents of the Company and any
Affiliated Employer shall be indemnified against any and all
liabilities arising by reason of any act or failure to act in
relation to the Plan or the Funds, including, without
limitation, expenses reasonably incurred in the defense of
any claim relating to the Plan or the Funds, and reasonable
amounts paid in any compromise or settlement relating to the
Plan or the Funds, except for actions or failures to act made
in bad faith.
9.08 Expenses of Administration
All expenses that arise in connection with the
administration of the Plan, including, but not limited to,
the compensation of the Trustee, administrative expenses,
proper charges and disbursements of the Trustee, and
compensation and other expenses and charges of any counsel,
recordkeeper, accountant, specialist or other person employed
by the Company in connection with the administration of the
Plan shall be paid from the Fund to the extent not paid by
the Company.
9.09 Claims Procedures
(a) If any Participant or Beneficiary makes a written
claim for benefits under the Plan and such benefits are
denied, the Committee, within 90 days of the date the claim
is filed (or, if special circumstances require an extension
of time for processing the claim and written notice is given
to the claimant of such extension, and such notice describes
the circumstances requiring the extension and the date the
Committee expects to render a final decision, up to 180 days
after the original claim is filed), shall give the claimant
written notice of the denial of claimed benefits, setting
forth specific reasons for the denial, references to
pertinent Plan provisions, the reason for and description of
any additional material or information needed to perfect the
claim and an explanation of the review procedure.
(b) The decision of the Committee shall be final
unless the claimant, within 60 days after receipt of notice
of the Committee's decision, submits a written request to the
Committee for review of the decision. The claimant or his
authorized repre-sentative shall have 30 days after
submitting a written request for review during which Plan
documents may be reviewed and written issues and comments may
be submitted. Within 60 days after receipt of the written
request for review, the Com-mittee shall issue a written
decision, including reasons for the decision and references
to controlling Plan provisions. Such decision shall be
final.
Article 10. Management of the Funds
10.01 Trust Agreement
The Funds shall be held by a Trustee appointed from
time to time by the Company under a trust agreement adopted,
or as amended, by the Company for use in providing the
benefits of the Plan and paying its expenses not paid
directly by the Company. The Company shall have no liability
for the administration of the Funds held by the Trustee.
10.02 Exclusive Benefit Rule
Except as otherwise provided in the Plan, no part of
the corpus or income of the Funds shall be used for or
diverted to purposes other than for the exclusive benefit of
Participants and other persons entitled to benefits under the
Plan. No person shall have any interest in or right to any
part of the earnings of the Funds, or any right in or to any
part of the assets held under the Plan, except as and to the
extent expressly provided for in the Plan.
Article 11. General Provisions
11.01 Nonalienation
Except as required by any applicable law, no benefit
under the Plan shall in any manner be anticipated, assigned
or alienated, and any attempt to do so shall be void.
However, payment shall be made in accordance with the
provisions of any judgment, decree or order which:
(a) Creates for, or assigns to, a spouse, former
spouse, child or other dependent of a Participant the right
to receive all or a portion of the Participant's benefits
under the Plan for the purpose of providing child support,
alimony payments or marital property rights to that spouse,
child or dependent;
(b) Is made pursuant to a state domestic relations
law;
(c) Does not require the Plan to provide any type of
benefit, or any option, not otherwise provided under the
Plan; and
(d) Otherwise meets the requirements of Section
206(d) of ERISA or Code Section 414(p), as amended, as a
"qualified domestic relations order," as determined by the
Company.
Any distribution due an alternate payee under a
qualified domestic relations order may be made as soon as
practicable following the earliest date specified in such
order, or as otherwise permitted under such order pursuant to
an agreement between the Plan and the alternate payee;
however, if the amount of the distribution exceeds $3,500,
the alternate payee must consent to the distribution. At the
time benefits become payable to the alternate payee, such
alternate payee shall have the right to be make a direct
rollover in accordance with Section 11.05 provided the
alternate payee is the Participant's current or former
spouse.
11.02 Conditions of Employment Not Affected by the Plan
The establishment of the Plan shall not confer any
legal rights upon any Employee or other person for a
continuation of employment, nor shall it interfere with the
rights of the Company to discharge any Employee and to treat
him without regard to the effect which that treatment might
have upon him as a Participant or potential Participant in
the Plan.
11.03 Facility of Payment
If the Company finds that a Participant or other
person entitled to a benefit is unable to care for his
affairs because of illness or accident or is a minor, the
Company may direct that any benefit due him, unless a claim
shall have been made for the benefit by a duly appointed
legal representative, be paid to his spouse, a child, a
parent or other blood relative, or to a person with whom he
resides. Any payment so made shall be a complete discharge
of the liabilities of the Plan for that benefit.
11.04 Information
Each Participant, Beneficiary or other person entitled
to a benefit, before any benefit is payable to him or on his
account under the Plan, shall file with the Company the
information that it requires to establish his rights and
benefits under the Plan.
11.05 Eligible Rollover Distributions
Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election
under this Section 11.05, a distributee may elect, at the
time and in the manner prescribed by the Company, and in
accordance with Section 8.03, to have an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover. The
following definitions apply to the terms used in this Section
11.05 and, where applicable, to the terms used in Section
8.03:
(a) "Eligible rollover distribution" means any
distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9) and the
portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(b) "Eligible retirement plan" means an individual
retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or
a qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(c) "Distributee" includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under
qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
(d) "Direct rollover" means a payment by the plan to
the eligible retirement plan specified by the distributee.
11.06 Top-Heavy Provisions
(a) For purposes of this Section 11.06, the Plan
shall be "top-heavy" with respect to any Plan Year if, as of
the applicable determination date, the top-heavy ratio
exceeds 60%. The top-heavy ratio shall be determined as of
the applicable Valuation Date in accordance with Code
Sections 416(g)(3) and 416(g)(4) and Article 5 of the Plan.
For purposes of determining whether the Plan is top-heavy,
the Account balances under the Plan shall be combined with
the account balances or the present value of accrued benefits
under each other qualified plan in the required aggregation
group and, at the Company's discretion, may be combined with
the account balances or the present value of accrued benefits
under any other qualified plan in the permissive aggregation
group.
(b) The following provisions shall be applicable to
Participants for any Plan Year with respect to which the Plan
is top-heavy:
(i) An additional Company contribution shall
be allocated on behalf of each Participant (and each Employee
eligible to become a Participant) who is a non-key employee
and who has not separated from service as of the last day of
the Plan Year, to the extent that the contributions made on
his behalf under Sections 3.01 and 3.04 for the Plan Year
would otherwise be less than 3% of his remuneration.
However, if the greatest percentage of remuneration
contributed on behalf of a key employee under Sections 3.01
and 3.04 for the Plan Year would be less than 3%, that lesser
percentage shall be substituted for "3%" in the preceding
sentence. Notwith-standing the foregoing provisions of this
Section 11.06(b)(i), no minimum contribution shall be made
under the Plan with respect to a Participant (or an Employee
eligible to become a Participant) if the required minimum
benefit under Code Section 416(c)(1) is provided to him by
any other qualified pension plan of the Company or an
Affiliated Employer. For the purposes of this Section
11.06(b)(i), "remuneration" has the same meaning as set forth
in Section 3.08(c) and shall not exceed the Annual Dollar
Limit.
(ii) The multiplier "1.25" in Sections
3.08(e)(i)(B)(1) and 3.08(e)(ii)(B)(1) shall be reduced to
"1.0."
(c) The following definitions apply to the terms
used in this Section 11.06:
(i) "Applicable determination date" means the
last day of (A) the first Plan Year, or (B) the preceding
Plan Year, whichever occurs last.
(ii) "Applicable Valuation Date" means the
Valuation Date coincident with the last day of the preceding
Plan Year. Where two or more plans are aggregated and do not
have the same Plan Year, the applicable Valuation Date for
each plan shall be such date for each plan which falls within
the same calendar year.
(iii) "Key employee" means an employee who is in
a category of employees determined in accordance with the
provisions of Code Sections 416(i)(1) and 416(i)(5) and any
regulations thereunder, and, where applicable, on the basis
of the Employee's remuneration (as defined in Section
3.08(c)) from the Company or an Affiliated Employer.
(iv) "Non-key employee" means any Employee who
is not a key employee.
(v) "Permissive aggregation group" means each
qualified plan in the required aggregation group and any
other qualified plan(s) of the Company or an Affiliated
Employer in which all members are non-key employees if the
resulting aggregation group continues to meet the
requirements of Code Sections 401(a)(4) and 410.
(vi) "Required aggregation group" means each
qualified plan of the Company or an Affiliated Employer in
which there are participants who are key employees or which
enables the Plan or any other such plan to meet the
requirements of Code Sections 401(a)(4) or 410.
(vii) "Top-heavy ratio" means the ratio of (A)
the value of the aggregate of the Accounts under the Plan for
key employees to (B) the value of the aggregate of the
Accounts under the Plan for all key employees and non-key
employees. (Where the "top-heavy ratio" is being determined
for a defined benefit plan that is part of the required or
permissive aggregation group, "present value of accrued
benefits" shall be substituted for "Accounts" in this
definition.) In the determination of the top-heavy ratio for
a Plan Year, distributions made during the five-year period
ending on the determination date shall be taken into account,
and the Account balance(s) of Participants who have not
performed services for the Company or an Affiliated Employer
during the five-year period ending on the determination date
shall not be taken into account.
11.07 Construction
(a) The Plan shall be construed, regulated and
administered under ERISA, the Code and the laws of the State
of California to the extent not preempted by ERISA and the
Code.
(b) The masculine pronoun shall mean the feminine
wherever appropriate, and the feminine pronoun shall mean the
masculine whenever appropriate.
(c) The titles and headings of the articles and
sections in the Plan are for convenience only. In the case
of ambiguity or inconsistency, the text rather than the
titles or headings shall control.
Article 12. Amendment, Merger and Termination
12.01 Amendment of the Plan
The Company reserves the right at any time and from
time to time, and retroactively if deemed necessary or
appropriate, to amend in whole or in part any or all of the
provisions of the Plan, except as otherwise provided by law.
However, no amendment shall make it possible for any of the
Funds to be used for or diverted to purposes other than for
the exclusive benefit of persons entitled to benefits under
the Plan, except as otherwise provided by law. No amendment
shall be made which has the effect of decreasing the balance
of the Accounts of any Participant or of reducing the
nonforfeitable percentage of the balance of the Accounts of
a Participant below the nonforfeitable percentage computed
under the Plan as in effect on the date on which the
amendment is adopted or, if later, the date on which the
amendment becomes effective.
12.02 Merger or Consolidation
The Plan may be merged with another qualified plan at
the discretion of the Company and subject to any applicable
legal requirements. However, the Plan may not be merged or
consolidated with, and its assets or liabilities may not be
transferred to, any other plan unless each person entitled to
benefits under the Plan would, if the resulting plan were
then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to
receive immediately before the merger, consolidation or
transfer if the Plan had then terminated.
12.03 Acquisitions and Additional Participating Companies
If any company is or becomes a subsidiary of or
associated with the Company, the Company may include the
employees of that subsidiary or associated company as
Participants in the Plan upon appropriate action by the Board
of Directors and by that subsidiary or company. In that
event, or if any persons become Employees as the result of
merger or consolidation or as the result of acquisition of
all or part of the assets or business of another company, the
Company shall determine to what extent, if any, previous
service with the subsidiary, associated company or prior
company shall be recognized under the Plan, but subject to
the continued qualification of the Trust for the Plan as tax-
exempt under the Code. Notwithstanding the foregoing,
nothing in the Plan shall require any credit to be given for
such prior service.
12.04 Termination of the Plan
The Company may terminate the Plan or completely
discontinue contribu-tions under the Plan for any reason and
at any time. In case of termination or partial termination
of the Plan, or complete discontinuance of Company
contributions to the Plan, the rights of affected Employees
to their Accounts under the Plan as of the date of the
termination or discontinuance shall be nonforfeitable. The
total amount in each Employee's Accounts shall be
distributed, as the Company directs, to him or for his
benefit or continued in trust for his benefit.
IN WITNESS WHEREOF, Caesars World, Inc. and Subsidiaries has
adopted the Plan to be effective January 1, 1994
Caesars World, Inc. and Subsidiaries
By:
Title:
By:
Title:
APPENDIX A TO
CAESARS 401(k)
RETIREMENT SAVINGS PLAN
PARTICIPATING SUBSIDIARIES
Boardwalk Regency Corporation
Brookdale on the Lake
Caesars World Entertainment
Caesars World Gaming Development Corporation
Caesars World Marketing Corporation
Caesars World Merchandising, Inc.
Caesars World Resorts, Inc.
Cove Haven, Inc.
Desert Palace, Inc. dba Caesars Palace
Desert Palace, Inc. dba Caesars Tahoe
Paradise Stream, Inc.
Pocono Palace, Inc.
CAESARS 401(k)
RETIREMENT SAVINGS PLAN
Effective January 1, 1994
TABLE OF CONTENTS Page
Preamble . . . . . . . . . . . . . . . . . . . . . . . . (v)
Article 1. Definitions. . . . . . . . . . . . . . . . . . 1
1.01 Accounts . . . . . . . . . . . . . . . . . . 1
1.02 Actual Contribution Percentage . . . . . . . 1
1.03 Actual Deferral Percentage . . . . . . . . . 1
1.04 Adjustment Factor. . . . . . . . . . . . . . 2
1.05 Affiliated Employer. . . . . . . . . . . . . 2
1.06 Annual Dollar Limit. . . . . . . . . . . . . 3
1.07 Before-Tax Contributions . . . . . . . . . . 3
1.08 Before-Tax Savings Account . . . . . . . . . 4
1.09 Beneficiary. . . . . . . . . . . . . . . . . 4
1.10 Board of Directors . . . . . . . . . . . . . 4
1.11 Break in Service . . . . . . . . . . . . . . 4
1.12 Code . . . . . . . . . . . . . . . . . . . . 5
1.13 Committee. . . . . . . . . . . . . . . . . . 5
1.14 Company. . . . . . . . . . . . . . . . . . . 5
1.15 Company Contributions. . . . . . . . . . . . 6
1.16 Company Matching Contributions . . . . . . . 6
1.17 Company Matching Savings Account . . . . . . 6
1.18 Company Savings Account. . . . . . . . . . . 6
1.19 Company Supplemental Savings Account . . . . 6
1.20 Company Supplemental Contributions . . . . . 6
1.21 Compensation . . . . . . . . . . . . . . . . 6
1.22 Disability . . . . . . . . . . . . . . . . . 7
1.23 Effective Date . . . . . . . . . . . . . . . 7
1.24 Eligible Employee. . . . . . . . . . . . . . 7
1.25 Employee . . . . . . . . . . . . . . . . . . 8
1.26 Employment Commencement Date . . . . . . . . 8
1.27 Enrollment Date. . . . . . . . . . . . . . . 8
1.28 ERISA. . . . . . . . . . . . . . . . . . . . 8
1.29 Fund . . . . . . . . . . . . . . . . . . . . 8
1.30 Highly Compensated Employee. . . . . . . . . 9
1.31 Hour of Service. . . . . . . . . . . . . . .11
1.32 Income . . . . . . . . . . . . . . . . . . .12
1.33 Leased Employee. . . . . . . . . . . . . . .13
1.34 Leave of Absence . . . . . . . . . . . . . .13
1.35 Non-Highly Compensated Employee. . . . . . .13
1.36 Normal Retirement Age. . . . . . . . . . . .13
1.37 Participant. . . . . . . . . . . . . . . . .13
1.38 Period of Severance. . . . . . . . . . . . .13
1.39 Plan . . . . . . . . . . . . . . . . . . . .14
1.40 Plan Administrator . . . . . . . . . . . . .14
1.41 Plan Year. . . . . . . . . . . . . . . . . .14
1.42 Reemployment Commencement Date . . . . . . .15
1.43 Rollover Account . . . . . . . . . . . . . .15
1.44 Rule of Parity . . . . . . . . . . . . . . .15
1.45 Seconded Employee. . . . . . . . . . . . . .16
1.46 Service. . . . . . . . . . . . . . . . . . .16
1.47 Severance from Service Date. . . . . . . . .17
1.48 Spousal Consent. . . . . . . . . . . . . . .17
1.49 Statutory Compensation . . . . . . . . . . .18
1.50 Subsidiary . . . . . . . . . . . . . . . . .18
1.51 Trustee. . . . . . . . . . . . . . . . . . .19
1.52 Valuation Date . . . . . . . . . . . . . . .19
1.53 Vested Portion . . . . . . . . . . . . . . .19
1.54 Year of Eligibility Service. . . . . . . . .19
Article 2. Eligibility and Participation. . . . . . . . .20
2.01 Eligibility. . . . . . . . . . . . . . . . .20
2.02 Participation. . . . . . . . . . . . . . . .21
2.03 Transferred Participants . . . . . . . . . .21
2.04 Termination of Participation . 22
Article 3. Contributions. . . . . . . . . . . . . . . . .23
3.01 Before-Tax Contributions . . . . . . . . . .23
3.02 Change in Contributions. . . . . . . . . . .25
3.03 Suspension of Contributions. . . . . . . . .25
3.04 Company Contributions. . . . . . . . . . . .26
3.05 Timing of Contributions. . . . . . . . . . .27
3.06 Limitations Affecting Highly Compensated
Employees. . . . . . . . . . . . . . . . . .27
3.07 Rollovers. . . . . . . . . . . . . . . . . .33
3.08 Maximum Annual Additions . . . . . . . . . .34
3.09 Return of Contributions. . . . . . . . . . .39
Article 4. Investment of Contributions. . . . . . . . . .41
4.01 Funds. . . . . . . . . . . . . . . . . . . .41
4.02 Investment of Participant's Accounts . . . .41
4.03 Responsibility for Investments . . . . . . .42
4.04 Change of Election . . . . . . . . . . . . .42
4.05 Reallocation of Accounts Among Funds . . . .42
4.06 Administrative Fees. . . . . . . . . . . . .42
Article 5. Valuation of Accounts. . . . . . . . . . . . .44
5.01 Valuation of the Funds . . . . . . . . . . .44
5.02 Account Adjustments. . . . . . . . . . . . .44
5.03 Statement of Accounts. . . . . . . . . . . .44
Article 6. Vested Portion of Accounts . . . . . . . . . .45
6.01 Before-Tax Savings Account, Company
Savings Account and Rollover Account . . . .45
6.02 Company Matching Savings Account and Company
Supplemental Savings Account . . . . . . . .45
6.03 Disposition of Forfeitures . . . . . . . . .46
Article 7. In-Service Withdrawals . . . . . . . . . . . .49
7.01 Withdrawals On or After Attainment of
Age 59 1/2 . . . . . . . . . . . . . . . . .49
7.02 Rollover Withdrawals . . . . . . . . . . . .49
7.03 Hardship Withdrawals . . . . . . . . . . . .49
7.04 Timing and Procedures and Form of Payment. .51
7.05 Participant Loans. . . . . . . . . . . . . .52
Article 8. Distribution of Accounts Upon Termination of
Employment . . . . . . . . . . . . . . . . . .55
8.01 Eligibility. . . . . . . . . . . . . . . . .55
8.02 Form of Distribution . . . . . . . . . . . .55
8.03 Method of Payment. . . . . . . . . . . . . .55
8.04 Distribution Upon Retirement or
Termination. . . . . . . . . . . . . . . . .57
8.05 Distribution Upon Death. . . . . . . . . . .57
8.06 Small Payments . . . . . . . . . . . . . . .58
8.07 Minimum Required Distributions . . . . . . .59
8.08 Status of Accounts Pending Distribution. . .60
8.09 Proof of Death and Right of Beneficiary
or Other Person. . . . . . . . . . . . . . .61
8.10 Failure to Locate Recipient. . . . . . . . .62
8.11 Distribution Limitation. . . . . . . . . . .62
Article 9. Administration of the Plan . . . . . . . . . .63
9.01 Administration . . . . . . . . . . . . . . .63
9.02 Individual Accounts. . . . . . . . . . . . .64
9.03 Action of Majority . . . . . . . . . . . . .64
9.04 Compensation and Bonding . . . . . . . . . .64
9.05 Prudent Conduct. . . . . . . . . . . . . . .64
9.06 Service in More Than One Fiduciary Capacity.65
9.07 Indemnification. . . . . . . . . . . . . . .65
9.08 Expenses of Administration . . . . . . . . .65
9.09 Claims Procedures. . . . . . . . . . . . . .66
Article 10. Management of the Funds . . . . . . . . . . .67
10.01 Trust Agreement. . . . . . . . . . . . . . .67
10.02 Exclusive Benefit Rule . . . . . . . . . . .67
Article 11. General Provisions. . . . . . . . . . . . . .68
11.01 Nonalienation. . . . . . . . . . . . . . . .68
11.02 Conditions of Employment Not Affected
by the Plan. . . . . . . . . . . . . . . . .69
11.03 Facility of Payment. . . . . . . . . . . . .69
11.04 Information. . . . . . . . . . . . . . . . .70
11.05 Eligible Rollover Distributions. . . . . . .70
11.06 Top-Heavy Provisions . . . . . . . . . . . .71
11.07 Construction . . . . . . . . . . . . . . . .75
Article 12. Amendment, Merger and Termination . . . . . .76
12.01 Amendment of the Plan. . . . . . . . . . . .76
12.02 Merger or Consolidation. . . . . . . . . . .76
12.03 Acquisitions and Additional Participating
Companies. . . . . . . . . . . . . . . . . .77
12.04 Termination of the Plan. . . . . . . . . . .77
APPENDIX A TO CAESARS 401(k) . . . . . . . . . . . . . . .80
PREAMBLE
This document sets forth the provisions of the Caesars 401(k)
Retirement Savings Plan (the "Plan").
The Plan has been established for domestic non-union
employees of Caesars World, Inc. and Subsidiaries (the
"Company"). It is intended that (i) the Plan will be a
qualified plan that meets the requirements of Section 401(a)
of the Internal Revenue Code of 1986 (the "Code"), (ii)
Company contributions that are made to the Plan be allowable
as deductions from income in accordance with Code Section
404, and (iii) the funds established hereunder are entitled
to exemption from income tax under the provisions of Code
Section 501. It is further intended that the provisions of
the Plan that pertain to Before-Tax Contributions constitute
a cash or deferred arrangement under Code Section 401(k).
MASTER TRUST AGREEMENT
Between
CAESARS WORLD, INC.
and
STATE STREET BANK AND TRUST COMPANY
CWORLDMT.DOC
TABLE OF CONTENTS
PAGE
1. TRUST FUND . . . . . . . . . . . . . . . . . . 2
1.1 Receipt of Assets . . . . . . . . . . . . 2
1.2 Employers . . . . . . . . . . . . . . . . 2
1.3 Plans . . . . . . . . . . . . . . . . . . 3
1.4 Account for a Plan's Undivided
Interest in the Trust Fund . . . . . . 3
1.5 No Trustee Duty Regarding Contributions . 4
2. DISBURSEMENTS FROM THE TRUST FUND. . . . . . . 4
3. RESPONSIBILITIES RELATING TO INVESTMENT
FUNDS AND INVESTMENT ACCOUNTS . . . . . . . 5
3.1 Investment Funds. . . . . . . . . . . . . 5
3.2 Investment Manager Appointment. . . . . . 7
3.3 Company Directed Investment Accounts. . . 9
3.4 Trustee Directed Investment Accounts. . . 10
4. POWERS OF THE TRUSTEE. . . . . . . . . . . . . 10
4.1 Investment Power of the Trustee . . . . . 10
4.2 Administrative Powers of the Trustee. . . 16
5. INDEMNIFICATION. . . . . . . . . . . . . . . . 17
6. SECURITIES . . . . . . . . . . . . . . . . . . 17
7. COMPUTERIZED REPORTING SERVICES. . . . . . . . 18
7.1 Protection of Equipment, Confidential or
Proprietary Programs and Information. . 18
7.2 Company Acknowledgment. . . . . . . . . . 19
8. SECURITY CODES . . . . . . . . . . . . . . . . 20
9. TAXES AND TRUSTEE COMPENSATION . . . . . . . . 20
10. ACCOUNTS OF THE TRUSTEE. . . . . . . . . . . . 21
11. RELIANCE ON COMMUNICATIONS . . . . . . . . . . 23
12. RESIGNATION AND REMOVAL OF TRUSTEE . . . . . . 24
13. AMENDMENT. . . . . . . . . . . . . . . . . . . 25
14. TERMINATION. . . . . . . . . . . . . . . . . . 25
<PAGE>
TABLE OF CONTENTS
(cont.)
PAGE
15. PARTICIPATION OF OTHER EMPLOYERS. . . . . . . . 26
15.1 Adoption by Other Employers; Withdrawals 26
15.2 Powers and Authorities of Other Employers
to be Exercised Exclusively
by the Company. . . . . . . . . . . . 27
16. MISCELLANEOUS. . . . . . . . . . . . . . . . . 28
16.1 Governing Law . . . . . . . . . . . . . 28
16.2 No Reversion to Employers . . . . . . . 28
16.3 Non-Alienation of Benefits. . . . . . . 29
16.4 Duration of Trust . . . . . . . . . . . 30
16.5 No Guarantees . . . . . . . . . . . . . 30
16.6 Duty to Furnish Information . . . . . . 30
16.7 Withholding . . . . . . . . . . . . . . 30
16.8 Parties Bound . . . . . . . . . . . . . 30
16.9 Necessary Parties to Disputes . . . . . 31
16.10 Unclaimed Benefit Payments. . . . . . . 31
16.11 Severability. . . . . . . . . . . . . . 32
16.12 References. . . . . . . . . . . . . . . 32
16.13 Headings. . . . . . . . . . . . . . . . 32
16.14 No Liability for Acts of Predecessor
and Successor Trustees . . . . . . . 32
16.15 Counterparts. . . . . . . . . . . . . . 32
<PAGE>
CAESARS WORLD, INC.
MASTER TRUST AGREEMENT
Agreement made as of January 1, 1994, by and between
CAESARS WORLD, INC., a corporation organized under the laws
of Florida (hereinafter referred to as the "Company") and
STATE STREET BANK AND TRUST COMPANY, a trust company
organized under the laws of the Commonwealth of
Massachusetts (hereinafter referred to as the "Trustee").
WITNESSETH:
WHEREAS, the Company maintains (or may maintain)
certain tax-qualified employee benefit plans described in
Exhibit A hereto (hereinafter referred to as the "Plans")
for the exclusive benefit of certain of its employees;
WHEREAS, the authority to conduct the general
operation and administration of the Plans is vested in the
Company, acting through its officers, as "Administrator" of
the Plans, who shall have the authorities and shall be
subject to the duties with respect to the trust specified
in the Plans and in this Trust Agreement;
WHEREAS, the Administrator may appoint an
Administrative Committee and delegate to such Committee
such of its authorities and duties as it may determine;
WHEREAS, the Company has appointed State Street Bank
and Trust Company as Trustee effective January 1, 1994.
NOW, THEREFORE, the Company and the Trustee do hereby
adopt this Trust Agreement as the funding vehicle for the
Plans, upon the terms and conditions hereinafter set forth:
1. TRUST FUND
1.1 Receipt of Assets. The Trustee shall receive and
accept for the purposes hereof all sums of money and other
property paid to it by or at the direction of the Company
or any Employer, and pursuant to the terms of this Trust
Agreement shall hold, invest, reinvest, manage, administer
and distribute such monies and other property and the
increments, proceeds, earnings and income thereof for the
exclusive benefit of participants in the Plans and their
beneficiaries. The Trustee need not inquire into the
source of any money or property transferred to it nor into
the authority or right of the transferor of such money or
property to transfer such money or property to the Trustee.
All assets held by the Trustee in the trust pursuant to the
provisions of this Trust Agreement at the time of reference
are referred to herein as the "Trust Fund".
1.2 Employers. For purposes of this Trust Agreement
the term "Employer" means any corporation which is a member
of a controlled group of corporations of which the Company
is a member as determined under Section 1563(a) of the
Internal Revenue Code of 1986, as amended without regard to
Section 1563(a)(4) and Section 1563(e)(3)(C) of such Code,
and which corporation has adopted this Trust Agreement in
accordance with the provisions of Section 15.1.
1.3 Plans. References in this Trust Agreement to the
"Plan" or the "Plans" shall, unless the context indicates
to the contrary, mean the tax-qualified employee benefit
plan or plans of the Company or the tax-qualified employee
benefit plan or plans of any Employer that has adopted the
trust as the funding vehicle for such plan or plans as the
case may be.
The Company shall be responsible for verifying that
while any assets of a particular Plan are held in the Trust
Fund, that Plan (i) is "qualified" within the meaning of
Section 401(a) of the Code; (ii) is permitted by existing
or future rulings of the United States Treasury Department
to pool its funds in a group trust; and (iii) permits its
assets to be commingled for investment purposes with the
assets of other such Plans by investing such assets in this
Trust Fund whether or not its assets will in fact be held
in a separate Investment Fund.
1.4 Accounting for a Plan's Undivided Interest in the
Trust Fund. All transfers to, withdrawals from, and other
transactions regarding the Trust Fund shall be conducted in
such a way that the proportionate interest in the Trust
Fund of each Plan and the fair market value of that
interest may be determined at any time. Whenever the
assets of more than one Plan are commingled in the Trust
Fund or in any Investment Fund, the undivided interest
therein of that Plan shall be debited or credited (as the
case may be) (i) for the entire amount of every
contribution received on behalf of that Plan, every benefit
payment, or other expense attributable solely to that Plan,
and every other transaction relating only to that Plan; and
(ii) for its proportionate share of every item of collected
or accrued income, gain or loss, and general expense; and
other transactions attributable to the Trust Fund or that
Investment Fund as a whole. As of each date when the fair
market value of the investments held in the Trust Fund or
an Investment Fund are determined as provided for in
Article 10, the Trustee shall adjust the value of each
Plan's interest therein to reflect the net increase or
decrease in such values since the last such date. For all
of the foregoing purposes, fractions of a cent may be
disregarded.
1.5 No Trustee Duty Regarding Contributions. The
Trustee shall not be under any duty to require payment of
any contributions to the Trust Fund, or to see that any
payment made to it is computed in accordance with the
provisions of the Plans, or otherwise be responsible for
the adequacy of the Trust Fund to meet and discharge any
liabilities under the Plans.
2. DISBURSEMENTS FROM THE TRUST FUND.
The Trustee shall from time to time on the directions
of the Administrator make payments out of the Trust Fund to
such persons, including the Administrative Committee, if
any, or any member thereof, in such manner, in such amounts
and for such purposes as may be specified in the directions
of the Administrator.
The Administrator shall be responsible for insuring
that any payment directed under this Article conforms to
the provisions of the Plans, this Trust Agreement, and the
provisions of the Employee Retirement Income Security Act
of 1974, as amended (referred to herein as "ERISA"). Each
direction of the Administrator shall be in writing and
shall be deemed to include a certification that any payment
or other distribution directed thereby is one which the
Administrator is authorized to direct, and the Trustee may
conclusively rely on such certification without further
investigation. Payments by the Trustee may be made by its
check to the order of the payee. Payments or other
distributions hereunder may be mailed to the payee at the
address last furnished to the Trustee by the Administrator
or if no such address has been so furnished, to the payee
in care of the Administrator. The Trustee shall not incur
any liability or other damage on account of any payments or
other distributions made by it in accordance with the
written directions of the Administrator.
3. RESPONSIBILITIES RELATING TO INVESTMENT FUNDS AND
INVESTMENT ACCOUNTS.
3.1 Investment Funds. The Administrator, from time
to time and in accordance with provisions of the Plans, may
direct the Trustee to establish one or more separate
investment accounts within the Trust Fund, each separate
account being hereinafter referred to as an "Investment
Fund". The Trustee shall transfer to each such Investment
Fund such portion of the assets of the Trust Fund as the
Administrator directs in accordance with the specific
provisions of each Plan. The Trustee shall be under no
duty to question, and shall not incur any liability on
account of following, any direction of the Administrator.
The Trustee shall be under no duty to review the investment
guidelines, objectives and restrictions established, or the
specific investment directions given, by the Administrator
for any Investment Fund, or to make suggestions to the
Administrator in connection therewith. To the extent that
directions from the Administrator to the Trustee represent
investment elections of the Plans' members, the Trustee
shall have no responsibility for such investment elections
and shall incur no liability on account of investing the
assets of the Trust Fund in accordance with such
directions.
All interest, dividends and other income received with
respect to, and any proceeds received from the sale or
other disposition of, securities or other property held in
an Investment Fund shall be credited to and reinvested in
such Investment Fund. All expenses of the Trust Fund which
are allocable to a particular Investment Fund shall be so
allocated and charged. Subject to the provisions of the
Plans, the Administrator may direct the Trustee to
eliminate an Investment Fund or Funds, and the Trustee
shall thereupon dispose of the assets of such Investment
Fund and reinvest the proceeds thereof in accordance with
the directions of the Administrator.
If, and to the extent specifically authorized by the
Plans, the Administrator may direct the Trustee to
establish one or more Investment Funds all of the assets of
which shall be invested in securities which constitute
"qualifying employer securities" or "qualifying employer
real property" within the meaning of Section 407 of ERISA.
It shall be the duty of the Administrator to determine that
such investment is not prohibited by Sections 406 or 407 of
ERISA.
3.2 Investment Manager Appointment. The
Administrator, from time to time and in accordance with the
provisions of the Plans, may appoint one or more
independent Investment Managers, pursuant to a written
investment management agreement describing the powers and
duties of the Investment Manager, to direct the investment
and reinvestment of all or a portion of the Trust Fund or
an Investment Fund (hereinafter referred to as an
"Investment Account").
The Administrator shall be responsible for
ascertaining that while each Investment Manager is acting
in that capacity hereunder, the following requirements are
satisfied:
(a) The Investment Manager is either (i)
registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, (ii)
a bank as defined in that Act or (iii) an
insurance company qualified to perform the
services described in (b) below under the laws of
more than one state.
(b) The Investment Manager has the power to
manage, acquire or dispose of any assets of the
Plans for which it is responsible hereunder.
(c) The Investment Manager has acknowledged in
writing to the Administrator and the Trustee that
he or it is a fiduciary with respect to the Plans
within the meaning of Section 3(21)(A) of ERISA.
The Administrator shall furnish the Trustee with
written notice of the appointment of each Investment
Manager hereunder, and of the termination of any such
appointment. Such notice shall specify the assets which
shall constitute the Investment Account. The Trustee shall
be fully protected in relying upon the effectiveness of
such appointment and the Investment Manager's continuing
satisfaction of the requirements set forth above until it
receives written notice from the Administrator to the
contrary.
The Trustee shall conclusively presume that each
Investment Manager, under its investment management
agreement, is entitled to act, in directing the investment
and reinvestment of the Investment Account for which it is
responsible, in its sole and independent discretion and
without limitation, except for any limitations which from
time to time the Administrator and the Trustee agree (in
writing) shall modify the scope of such authority.
The Trustee shall have no liability (i) for the acts
or omissions of any Investment Manager; (ii) for following
directions, including investment directions of an
Investment Manager, the Administrator or the Committee,
which are given in accordance with this Trust Agreement; or
(iii) for any loss of any kind which may result by reason
of the manner of division of the Trust Fund or Investment
Fund into Investment Accounts.
An Investment Manager shall certify, at the request of
the Trustee, the value of any securities or other property
held in any Investment Account managed by such Investment
Manager, and such certification shall be regarded as a
direction with regard to such valuation. The Trustee shall
be entitled to conclusively rely upon such valuation for
all purposes under this Trust Agreement.
3.3 Company Directed Investment Accounts. The
Trustee shall, if so directed in writing by the
Administrator, segregate all or a portion of the Trust Fund
held by it into one or more separate investment accounts to
be known as Company Directed Accounts, with respect to
which the Administrator shall have the powers and duties
granted to an Investment Manager under this Agreement. The
Administrator, by written notice to the Trustee, may at any
time relinquish its powers under this Section 3.3 and
direct that a Company Directed Account shall no longer be
maintained. In addition, during any time when there is no
Investment Manager with respect to an Investment Account
(such as before an investment management agreement takes
effect or after it terminates), the Administrator shall
direct the investment and reinvestment of such Investment
Account. Whenever the Administrator is directing the
investment and reinvestment of an Investment Account or a
Company Directed Account, the Administrator shall have the
powers and duties which an Investment Manager would have
under this Trust Agreement if an Investment Manager were
then serving and the Trustee shall be protected in relying
on the Administrator's directions without reviewing
investments or making suggestions to the same extent as it
would be protected under this Trust Agreement if it had
relied on the directions of an Investment Manager.
3.4 Trustee Directed Investment Accounts. The
Trustee shall have no duty or responsibility to direct the
investment and reinvestment of the Trust Fund, any
Investment Fund or any Investment Account unless expressly
agreed to in writing between the Trustee and the
Administrator. In the event that the Trustee enters into
such an agreement, it shall have the powers and duties of
an Investment Manager under this Trust Agreement with
regard to such Investment Account.
4. POWERS OF THE TRUSTEE.
4.1 Investment Powers of the Trustee. The Trustee
shall have and exercise the following powers and authority
(i) over Investment Accounts where it has express
investment management discretion as provided in Section 3.4
or (ii) upon direction of the Investment Manager of an
Investment Account or (iii) upon direction of the
Administrator for a Company Directed Account, for voting
and tendering of qualifying employer securities, and for
lending to participants in the Plans:
(a) To purchase, receive, or subscribe for any
securities or other property and to retain in
trust such securities or other property.
(b) To acquire and hold qualifying employer
securities and qualifying employer real property,
as such investments are defined in Section 407(d)
of ERISA.
(c) To sell for cash or on credit, to grant
options, convert, redeem, exchange for other
securities or other property, to enter into
standby agreements for future investment, either
with or without a standby fee, or otherwise to
dispose of any securities or other property at
any time held by it.
(d) To settle, compromise or submit to
arbitration any claims, debts, or damages, due or
owing to or from the trust, to commence or defend
suits or legal proceedings and to represent the
trust in all suits or legal proceedings in any
court of law or before any other body or
tribunal.
(e) To trade in financial options and futures,
including index options and options on futures
and to execute in connection therewith such
account agreements and other agreements in such
form and upon such terms as the Investment
Manager or the Administrator shall direct.
(f) To exercise all voting rights, tender or
exchange rights, any conversion privileges,
subscription rights and other rights and powers
available in connection with any securities or
other property at anytime held by it; to oppose
or to consent to the reorganization,
consolidation, merger, or readjustment of the
finances of any corporation, company or
association, or to the sale, mortgage, pledge or
lease of the property of any corporation, company
or association any of the securities which may at
any time be held by it and to do any act with
reference thereto, including the exercise of
options, the making of agreements or
subscriptions and the payment of expenses,
assessments or subscriptions, which may be deemed
necessary or advisable by the Investment Manager
or Administrator in connection therewith, and to
hold and retain any securities or other property
which it may so acquire; and to deposit any
property with any protective, reorganization or
similar committee, and to pay and agree to pay
part of the expenses and compensation of any such
committee and any assessments levied with respect
to property so deposited.
(g) To exercise all voting or tender offer
rights with respect to all qualifying employer
securities held by it except that portion, if
any, for which it has received voting or tender
offer instructions from participants in the Plans
as provided in this paragraph. The Administrator
shall inform the Trustee of the voting and tender
offer provisions of each Plan. Each participant
entitled to do so may direct the Trustee,
confidentially, how to vote or whether or not to
tender the qualifying employer securities
representing his proportionate interest in the
assets of the Plans. The Administrator shall
furnish the Trustee with the name of each
participant and the number of shares held for the
participant's account as near as practicable to
the record date fixed for the determination of
shareholders entitled to vote and shall provide
the Trustee with all other information and
assistance which the Trustee may reasonably
request. Shares for which the Trustee has not
received timely voting or tender instructions
shall be voted or tendered by the Trustee to the
extent permitted by the Plans or required by law
in its uncontrolled discretion.
(h) To lend to participants in the Plans such
amounts andupon such terms and conditions as the
Administrator may direct. Any such
direction shall be deemed to include a
certification by the Administrator that such
lending is in accordance with the provisions
of ERISA and the Plans.
(i) To borrow money in such amounts and upon
such terms and conditions as shall be deemed
advisable or proper by the
Administrator or Investment Manager to
carry out the purposes of the trust and
to pledge any securities or other
property for the repayment of any such
loan.
(j) To invest all or a portion of the Trust Fund
in contracts issued by insurance companies,
including contracts under which the insurance
company holds Plan assets in a separate account
or commingled separate account managed by the
insurance company. The Trustee shall be entitled
to rely upon any written directions of the
Administrator or the Investment Manager under
this Section 4.1, and the Trustee shall not be
responsible for the terms of any insurance
contract that it is directed to purchase and hold
or for the selection of the issuer thereof or for
performing any functions under such contract
(other than the execution of any documents
incidental thereto on the instructions of the
Administrator or the Investment Manager).
(k) To manage, administer, operate, lease for
any number ofyears, develop, improve, repair, alter,
demolish, mortgage, pledge, grant options
with respect to, or otherwise deal with any
real property or interest therein at any
time held by it, and to hold any such real
property in its own name or in the name of a
nominee, with or without the addition of
words indicating that such property is held
in a fiduciary capacity, all upon such terms
and conditions as may be deemed advisable by
the Investment Manager or Administrator.
(l) To renew, extend or participate in the
renewal orextension of any mortgage, upon such
terms as may be deemed advisable by the
Investment Manager or Administrator, and to
agree to a reduction in the rate of interest
on any mortgage or of any guarantee
pertaining thereto in any manner and to any
extent that may be deemed advisable by the
Investment Manager or Administrator for the
protection of the Trust Fund or the
preservation of the value of the investment;
to waive any default, whether in the
performance of any covenant or condition of
any mortgage or in the performance of any
guarantee, or to enforce any such default in
such manner and to such extent as may be
deemed advisable by the Investment Manager
or Administrator; to exercise and enforce
any and all rights of foreclosure, to bid on
property on foreclosure, to take a deed in
lieu of foreclosure with or without paying
consideration therefor, and in connection
therewith to release the obligation on the
bond secured by such mortgage, and to
exercise and enforce in any action, suit or
proceeding at law or in equity any rights or
remedies in respect to any such mortgage or
guarantee.
(m) To hold part or all of the Trust Fund uninvested.
(n) To employ suitable agents and counsel and to
pay their reasonable and proper expenses and
compensation.
(o) To purchase and sell foreign exchange and
contracts forforeign exchange, including
transactions entered into with State Street
Bank and Trust Company, its agents or
subcustodians.
(p) To form corporations and to create trusts to
hold titleto any securities or other property,
all upon such terms and conditions as may be
deemed advisable by the Investment Manager
or Administrator.
(q) To register any securities held by it
hereunder in itsown name or in the name of a
nominee with or without the addition of
words indicating that such securities
are held in a fiduciary capacity and to
hold any securities in bearer form and
to deposit any securities or other
property in a depository or clearing
corporation.
(r) To make, execute and deliver, as Trustee,
any and alldeeds, leases, mortgages, conveyances,
waivers, releases, or other instruments in
writing necessary or desirable for the
accomplishment of any of the foregoing
powers.
(s) To invest at State Street Bank and Trust
Company (i) in any type of interest bearing
investments (including, but not limited
to savings accounts, money market
accounts, certificates of deposit and
repurchase agreements) and (ii) in
noninterest bearing accounts (including
but not limited to checking accounts).
(t) To invest in collective investment funds
maintained byState Street Bank and Trust Company or
by others for the investment of the assets
of employee benefit plans qualified under
Section 401 of the Code, whereupon the
instruments establishing such funds, as
amended, shall be deemed a part of this
Trust Agreement and incorporated by
reference herein.
Except as otherwise provided in this Trust Agreement,
the Investment Manager of an Investment Account or the
Administrator in the case of a Company Directed Account
shall have the power and authority, to be exercised in its
sole discretion at any time and from time to time, to issue
orders for the purchase or sale of securities directly to a
broker. Written notification of the issuance of each such
order shall be given promptly to the Trustee by the
Investment Manager or the Administrator and the
confirmation of each such order shall be confirmed to the
Trustee by the broker. Unless otherwise directed by the
Administrator or Investment Manager, such notification
shall be authority for the Trustee to pay for securities
purchased or to deliver securities sold as the case may be.
Upon the direction of the Investment Manager or the
Administrator, the Trustee will execute and deliver
appropriate trading authorizations, but no such
authorization shall be deemed to increase the liability or
responsibility of the Trustee under this Trust Agreement.
The Trustee shall transmit promptly to the
Administrator or the Investment Manager, as the case may
be, all notices of conversion, redemption, tender,
exchange, subscription, class action, claim in insolvency
proceedings or other rights or powers relating to any of
the securities in the Trust Fund, which notices are
received by the Trustee from its agents or custodians, from
issuers of the securities in question and from the party
(or its agents) extending such rights. The Trustee shall
have no obligation to determine the existence of any
conversion, redemption, tender, exchange, subscription,
class action, claim in insolvency proceedings or other
right or power relating to any of the securities in the
Trust Fund of which notice was given prior to the purchase
of such securities by the Trust Fund, and shall have no
obligation to exercise any such right or power unless the
Trustee is informed of the existence of the right or power.
The Trustee shall not be liable for any untimely
exercise or assertion of such rights or powers described in
the paragraph immediately above in connection with
securities or other property of the Trust Fund at any time
held by it unless (i) it or its agents or custodians are in
actual possession of such securities or property and (ii)
it receives directions to exercise any such rights or
powers from the Administrator or the Investment Manager, as
the case may be, and both (i) and (ii) occur at least three
business days prior to the date on which such rights or
powers are to be exercised.
If the Trustee is directed by the Administrator or an
Investment Manager to purchase securities issued by any
foreign government or agency thereof, or by any corporation
or other entity domiciled outside of the United States, it
shall be the responsibility of the Administrator or
Investment Manager, as the case may be, to advise the
Trustee in writing with respect to any laws or regulations
of any foreign countries or any United States territory or
possession which shall apply in any manner whatsoever to
such securities, including, without limitation, receipt by
the Trustee of dividends, interest or other distributions
on such securities.
4.2 Administrative Powers of the Trustee.
Notwithstanding the appointment of an Investment Manager,
the Trustee shall have the following powers and authority,
to be exercised in its sole discretion, with respect to the
Trust Fund:
(a) To employ suitable agents, custodians and
counsel and to pay their reasonable expenses and
compensation.
(b) To appoint ancillary trustees to hold any
portion ofthe assets of the trust and to pay
their reasonable expenses and compensation.
(c) To register any securities held by it
hereunder in itsown name or in the name of a
nominee with or without the addition of
words indicating that such securities
are held in a fiduciary capacity and to
hold any securities in bearer form and
to deposit any securities or other
property in a depository or clearing
corporation.
(d) To make, execute and deliver, as Trustee,
any and alldeeds, leases, mortgages, conveyances,
waivers, releases or other instruments in
writing necessary or desirable for the
accomplishment of any of the foregoing
powers.
(e) Generally to do all ministerial acts,
whether or not expressly authorized, which
the Trustee may deem necessary or
desirable in carrying out its duties
under this Trust Agreement.
Notwithstanding anything in the Plans or this Trust
Agreement to the contrary, the Trustee shall not be
required by the Company, the Administrator or any
Investment Manager to engage in any action, nor make any
investment which constitutes a prohibited transaction or is
otherwise contrary to the provisions of ERISA or which is
otherwise contrary to law or to the terms of the Plans or
this Trust Agreement.
The Trustee may consult with legal counsel concerning
any question which may arise with reference to this Trust
Agreement and its powers and duties hereunder. The written
opinion of such counsel shall be full and complete
protection of the Trustee in respect to any action taken or
suffered by the Trustee hereunder in good faith reliance on
said opinion.
5. INDEMNIFICATION.
The Company shall indemnify and save harmless the
Trustee for and from any loss or expense (including
reasonable attorneys' fees) arising (a) out of any matter
as to which this Trust Agreement provides that the Trustee
is directed, protected, not liable, or not responsible, or
(b) by reason of any breach of any statutory or other duty
owed to the Plans by the Company, any Employer, the
Administrator, any Investment Manager or any delegate of
any of them (and for the purposes of this sentence the
Trustee shall not be considered to be such a delegate),
whether or not the Trustee may also be considered liable
for that other person's breach under the provisions of
Section 405(a) of ERISA.
6. SECURITIES OR OTHER PROPERTY.
The words "securities or other property", used in this
Trust Agreement, shall be deemed to refer to any property,
real or personal, or part interest therein, wherever
situated, including, without limitation, governmental,
corporate or personal obligations, trust and participation
certificates, partnership interests, annuity or investment
contracts issued by an insurance company, leaseholds, fee
titles, mortgages and other interests in realty, preferred
and common stocks, certificates of deposit, financial
options and futures or any other form of option, evidences
of indebtedness or ownership in foreign corporations or
other enterprises or indebtedness of foreign governments,
and any other evidences of indebtedness or ownership,
including securities or other property of the Company, even
though the same may not be legal investment for trustees
under any law other than ERISA.
7. COMPUTERIZED REPORTING SERVICES.
7.1 Protection of Equipment, Confidential or
Proprietary Programs and Information. The Company agrees
to use the equipment, computer programs and other
information supplied by the Trustee under this Contract
solely for its own internal use and benefit and not for
resale or other transfer or disposition to, or use by or
for the benefit of, any other person or organization
without the prior written approval of the Trustee.
The Company acknowledges that the data bases, computer
programs, screen formats, screen designs, report formats,
interactive design techniques, and other information
furnished to the Company by the Trustee constitute
copyrighted trade secrets or proprietary information of
substantial value to the Trustee. Such data bases,
programs and other information are collectively referred to
below as "Proprietary Information". The Company agrees
that it shall treat all Proprietary Information as
proprietary to the Trustee and that it shall not divulge
any Proprietary Information to any person or organization
except as expressly permitted hereunder. Without limiting
the foregoing, the Company agrees for itself and its
employees and agents:
(a) to use such programs and data bases (i)
solely on the Trustee's approved computers, (ii)
solely from equipment at Company locations agreed
to between the Company and the Trustee and (iii)
solely in accordance with the Trustee's
applicable user documentation;
(b) to use equipment supplied or approved by the
Trustee solely with programs supplied by the
Trustee and no other programs or software;
(c) to refrain from copying or duplicating in
any way (other than in the normal course of
performing processing on Trustee's computers) any
part of any Proprietary Information;
(d) to refrain from obtaining unauthorized
access to anyprograms, data or other information not
owned by the Company, and if such access is
accidentally obtained, to respect and
safeguard the same as Proprietary
Information;
(e) to refrain from causing or allowing
informationtransmitted from the Trustee's computer to
the Company's terminals to be retransmitted
to another computer, terminal or other
device;
(f) that the Company shall have access to only
thoseauthorized transactions as agreed to between the
Company and the Trustee;
(g) to honor reasonable written requests made by
theTrustee to protect at the Trustee's expense the
rights of the Trustee in Proprietary Information at
common law, under the Federal copyright statutes and
under other Federal and state statutes.
7.2 Company Acknowledgment. The Company hereby
acknowledges that the data and information it will be
accessing from Trustee is unaudited and may not be accurate
due to inaccurate pricing of securities, delays of a day or
more in updating the Account and other causes for which
Trustee will not be liable to the Company, provided such
inaccuracies are not due to negligence of the Trustee.
8. SECURITY CODES.
If the Trustee has issued to the Company, or to any
Investment Manager appointed by the Company, security codes
or passwords in order that the Trustee may verify that
certain transmissions of information, including directions
or instructions, have been originated by the Company or the
Investment Manager, as the case may be, the Trustee shall
be kept indemnified by and be without liability to the
Company for any action taken or omitted by it in reliance
upon receipt by the Trustee of transmissions of information
with the proper security code or password, including
communications purporting to be directions or instructions,
which the Trustee reasonably believes to be from the
Company or Investment Manager.
9. TAXES AND TRUSTEE COMPENSATION.
The Trustee shall pay out of the Trust Fund all real
and personal property taxes, income taxes and other taxes
of any and all kinds levied or assessed under existing or
future laws against the Trust Fund. Until advised to the
contrary by the Administrator, the Trustee shall assume
that the Trust is exempt from Federal, State and local
income taxes, and shall act in accordance with that
assumption. The Administrator shall timely file all
Federal, State and local tax and information returns
relating to the Plans and Trust.
The Trustee shall be paid such reasonable compensation
as shall from time to time be agreed upon by the Company
and the Trustee. Such compensation and all reasonable and
proper expenses of administration of the Trust, including
counsel fees,
shall be withdrawn by the Trustee out of the Trust Fund
unless paid by the Company, but such compensation and
expenses shall be paid by the Company if the same cannot by
operation of law be withdrawn from the Trust Fund.
All payments from the Trust Fund under this Article 9
may be made without approval or direction of the
Administrator.
10. ACCOUNTS OF THE TRUSTEE.
The Trustee shall maintain or cause to be maintained
suitable records, data and information relating to its
functions hereunder.
The Trustee shall keep accurate and detailed accounts
of all investments, receipts, disbursements, and other
actions hereunder. Its books and records relating thereto
shall be open to inspection and audit at all reasonable
times by the Administrator or its duly authorized
representatives and each Investment Manager. The Trustee
shall be entitled to reasonable compensation and
reimbursement of its reasonable expenses incurred in
connection with such audits or inspections.
Within sixty days after the close of each fiscal year
of the trust and at more frequent intervals if agreed to by
the parties hereto, and within sixty days after the removal
or resignation of the Trustee as provided hereunder, the
Trustee shall render to the Company a written statement and
account showing in reasonable summary the investments,
receipts, disbursements, and other transactions engaged in
during the preceding fiscal year or period, and setting
forth the assets and liabilities of the trust. Unless the
Company shall have filed with the Trustee written
exceptions or objections to any such statement and account
within sixty days after receipt thereof, the Company shall
be deemed to have approved such statement and account, and
in such case or upon written approval by the Administrator
of any such statement and account, the Trustee shall be
released and discharged with respect to all matters and
things embraced in such statement and account as though it
had been settled by a decree of a court of competent
jurisdiction in an action or proceeding in which the
Company, all other necessary parties and all persons having
any beneficial interest in the Trust Fund were parties.
The Trustee shall determine the fair market value of
assets of the Trust Fund based upon valuations provided by
Investment Managers, information and financial publications
of general circulation, statistical and valuation services,
records of security exchanges, appraisals by qualified
persons, transactions and bona fide offers in assets of the
type in question and other information customarily used in
the valuation of property.
The Company or its delegate, each Investment Manager,
and the Trustee shall file such descriptions and reports
and make such other publications, disclosures,
registrations and other filings as are required of them
respectively by ERISA.
Nothing contained in this Trust Agreement or in the
Plans shall deprive the Trustee of the right to have a
judicial settlement of its account. In any proceeding for
a judicial settlement of the Trustee's accounts or for
instructions in connection with the trust, the only
necessary party thereto in addition to the Trustee shall be
the Company, and no participant or other person having or
claiming any interest in the Trust Fund shall be entitled
to any notice or service of process (except as required by
law). Any judgment, decision or award entered in any such
proceeding or action shall be conclusive upon all
interested persons.
11. RELIANCE ON COMMUNICATIONS.
The Trustee may rely upon a certification of the
Administrator (or any member thereof if an Administrative
Committee is appointed Administrator) with respect to any
instruction, direction or approval of such Administrator
(or any member thereof if an Administrative Committee is
appointed Administrator) and may rely upon a certification
of the Company as to the membership of the Committee as it
then exists, and may continue to rely upon such
certification until a subsequent certification is filed
with the Trustee.
The Trustee shall be fully protected in acting upon
any instrument, certificate, or paper of the Company, its
Board of Directors, the Administrator (or any member
thereof if an Administrative Committee is appointed),
believed by it to be genuine and to be signed or presented
by any authorized person, and the Trustee shall be under no
duty to make any investigation or inquiry as to any
statement contained in any such writing but may accept the
same as fully authorized by the Company, its Board of
Directors or the Administrator (or any member thereof if an
Administrative Committee is appointed), as the case may be.
The Trustee shall be further protected in relying upon
a certification from any Investment Manager appointed by
the Company as to the person or persons authorized to give
instructions or directions on behalf of such Investment
Manager and may continue to rely upon such certification
until a subsequent certification is filed with Trustee.
12. RESIGNATION AND REMOVAL OF TRUSTEE.
Any Trustee acting hereunder may resign at any time by
giving sixty days' prior written notice to the Company,
which notice may be waived by the Company. The Company may
remove the Trustee at any time upon sixty days' prior
written notice to the Trustee, which notice may be waived
by the Trustee. In case of the resignation or removal of
the Trustee, the Company shall appoint a successor trustee.
Any successor trustee shall have the same powers and duties
as those conferred upon the Trustee named in this Trust
Agreement. The removal of a Trustee and the appointment of
a new Trustee shall be by a written instrument delivered to
the Trustee. Upon the appointment of a successor trustee
and after the final account of the resigning or removed
Trustee has been approved or settled, as provided in
Article 10, the resigning or removed Trustee shall transfer
or deliver the Trust Fund to such successor trustee.
13. AMENDMENT.
This Trust Agreement may be amended by agreement
between the Trustee and the Company at any time or from
time to time and in any manner, and the provisions of any
such amendment may be applicable to the Trust Fund as
constituted at the time of the amendment as well as to the
part of the Trust Fund subsequently acquired.
14. TERMINATION.
This Trust Agreement and the trust created hereby may
be terminated at any time by the Company, and upon such
termination or upon the dissolution or liquidation of the
Company, in the event that a successor to the Company by
operation of law or by the acquisition of its business
interests shall not elect to continue the Plans and the
trust, the Trust Fund shall be paid out by the Trustee
after the settlement of its final account when directed by
the Administrator. Notwithstanding the foregoing, the
Trustee shall not be required to pay out any assets of the
Trust Fund upon termination of the Trust until the Trustee
has received written certification from the Administrator:
(i) that all provisions of law with respect to such
termination have been complied with; and (ii) (after the
Trustee has made a determination of the fair market value
of the Plans' assets) that the Plans' assets are sufficient
to discharge when due all obligations of the Plans required
by law. The Trustee shall rely conclusively on such
written certification, and shall be under no obligation to
investigate or otherwise determine its propriety.
15. PARTICIPATION OF OTHER EMPLOYERS.
15.1 Adoption by Other Employers; Withdrawals. The
Trust is maintained by the Company for use as the funding
vehicle for the Plans which it maintains for various groups
of employees and for use as the funding vehicle for the
Plans of any Employer.
(a) Any Employer which has been certified to the
Trustee by the Company as being authorized and as
having adopted this Trust with the consent of the
Company as a funding vehicle for its own Plans
may, at any time thereafter, become a party to
this Trust Agreement by filing with the Trustee a
certified copy of a resolution of its Board of
Directors evidencing its election so to do; and
(b) Any Employer which is a party to this Trust
Agreement and which has been certified to
the Trustee by the Company as having adopted one
or more other Plans and as being authorized to
adopt this Trust as the funding medium for such
other Plan or Plans may, at any time thereafter,
adopt this Trust for the purposes of such other
Plan or Plans by filing with the Trustee a
certified copy of a resolution of its Board of
Directors evidencing its election so to do.
Thereafter, the Trustee shall receive and hold as a
part of the Trust Fund, subject to the provisions of this
Trust Agreement, any deposits made to it under such Plans
by or at the direction of such Employer. Should this
paragraph become operative:
(a) In the event of the withdrawal of a Plan
from the trust or in the event of the Company's
or an Employer's election to terminate or to fund
separately the benefits provided under any of its
Plans, the Company shall cause a valuation to be
made of the share of the Trust Fund which is held
for the benefit of persons having an interest
therein under such Plans. The Trustee shall
thereupon segregate and dispose of such share in
accordance with the written direction of the
Company accompanied by its certification to the
Trustee that such segregation and disposition is
in accordance with the terms of the Plans and the
requirements of the law.
(b) If the Company or any Employer receives
notice that one or more of its Plans is no
longer qualified under the provisions
of Section 40l of the Code or the
corresponding provisions of any future
Federal revenue act, the Company shall
immediately cause a valuation to be
made of the share of the Trust Fund
which is held for the benefit of such
persons having an interest under such
disqualified Plan or Plans. The
Trustee shall thereupon segregate,
withdraw from the Trust Fund, and
dispose of such share in accordance
with the terms of the disqualified Plan
or Plans. The Company may direct the
Trustee to dispose of such share by the
transfer and delivery of such share to
itself as trustee of a separate trust,
the terms and conditions of which shall
be identical with those of this Trust
Agreement, except that either the
Company or the Employer maintaining
such disqualified Plan or Plans and the
Trustee shall be the only parties
thereto.
(c) In the event that any group of employees
covered by a Plan is withdrawn from such
Plan, the Company shall, if required by
the terms of such Plan, cause a
valuation to be made of the share of
the Trust Fund which is held for the
benefit of such group of employees.
The Trustee shall thereupon segregate
and dispose of such share in accordance
with the direction of the Company
accompanied by its certification to the
Trustee that such segregation and
disposition is in accordance with the
terms of such Plan and the requirements
of the law.
The Trustee shall have no duty to see that the
valuation of any share in accordance with the provisions of
this Section l5.l is caused to be made by the Company, nor
to segregate and dispose of any such share in the absence
of the written direction of the Company to do so.
15.2 Powers and Authorities of Other Employers to be
Exercised Exclusively by Company. Each Employer, other
than the Company, which is or shall become a party to this
Trust Agreement, hereby irrevocably gives and grants to the
Company full and exclusive power and authority to exercise
all of the powers conferred upon it by the terms of this
Trust Agreement and to take or refrain from taking any and
all action which such Employer might otherwise take or
refrain from taking with respect to this Trust Agreement,
including the sole and exclusive power to exercise, enforce
or waive any rights whatsoever which such Employer might
otherwise have with respect to the Trust Fund, and each
such Employer, by becoming a party to this Trust Agreement,
irrevocably appoints the Company its agent for such
purposes. The Trustee shall have no obligation to account
to any such Employer or to follow the instructions of or
otherwise deal with any such Employer, the intention being
that the Trustee shall deal solely with the Company as if
the Trustee and the Company were the only parties in this
Trust Agreement.
16. MISCELLANEOUS.
16.1 Governing Law. To the extent not inconsistent
with ERISA, as heretofore or hereafter amended, the
provisions of this Trust Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth
of Massachusetts.
16.2 No Reversion to Employers. Except as provided
herein, no portion of the principal or the income of the
Trust Fund shall revert to or be recoverable by the Company
or any Employer or ever be used for or diverted to any
purpose other than for the exclusive benefit of
participants in the Plans and persons claiming under or
through them pursuant to the Plans, provided, however,
that:
(a) if a contribution is conditioned upon the
deductibility of the contribution under Section
404 of the Code, then, to the extent the
deduction is disallowed, the Trustee shall, upon
written request of the affected Employer or the
Company, return such amounts as may be permitted
by law to such Employer or the Company, as
appropriate, within one year after the date the
deduction is disallowed; and
(b) if a contribution or any portion thereof is
made by theCompany or an Employer by a mistake of
fact, the Trustee shall, upon written
request of the Company or such Employer,
return such amounts as may be permitted by
law to the Company or such Employer, as
appropriate, within one year after the date
of payment to the Trustee; and
(c) if a contribution is conditioned upon the
qualificationof the Plans and Trust under Section
40l and 50l of the Code, the contributions
of the Company or an Employer to the Trust
for all Plans Years, with the gains and
losses thereon, shall be returned by the
Trustee to the Company or such Employer, as
appropriate, within one year in the event
that the Commissioner of Internal Revenue
fails to rule that the Plans and Trust were
as of such date qualified and tax-exempt
(within the meaning of Sections 40l and 50l
of the Code); and
(d) in the event that a Plan whose assets are
held in theTrust Fund is terminated, assets of
such Plan may be returned to the Employer if
all liabilities to participants and
beneficiaries of such Plan have been
satisfied; and
(e) assets may be returned to the Employer to
the extent that the law permits such transfer.
The Trustee shall be under no obligation to return any
part of the Trust Fund as provided in this Section l6.2
until the Trustee has received a written certification from
the Administrator that such return is in compliance with
this Section 16.2, the Plans and the requirements of the
law. The Trustee shall rely conclusively on such written
certification and shall be under no obligation to
investigate or otherwise determine its propriety.
16.3 Non-Alienation of Benefits. No benefit to which
a participant or his beneficiary is or may become entitled
under a Plan shall at any time be subject in any manner to
alienation or encumbrance, nor be resorted to, appropriated
or seized in any proceeding at law, in equity or otherwise.
No participant or other person entitled to receive a
benefit under a Plan shall, except as specifically provided
in such Plans, have power in any manner to transfer,
assign, alienate or in any way encumber such benefit under
such Plan, or any part thereof, and any attempt to do so
shall be void.
16.4 Duration of Trust. Unless sooner terminated,
the trust created under this Trust Agreement shall continue
for the maximum period of time which the laws of the
Commonwealth of Massachusetts shall permit.
16.5 No Guarantees. Neither the Company, nor any
Employer, nor the Trustee guarantees the Trust Fund from
loss or depreciation, nor the payment of any amount which
may become due to any person under the Plans or this Trust
Agreement.
16.6 Duty to Furnish Information. Both the Company
and the Trustee shall furnish to the other any documents,
reports, returns, statements, or other information that the
other reasonably deems necessary to perform its duties
imposed under the Plans or this Trust Agreement or
otherwise imposed by law.
16.7 Withholding. The Administrator shall withhold
any tax which by any present or future law is required to
be withheld from any payment under the Plans, unless the
Trustee shall have agreed in writing to do so. The
Administrator shall provide all information reasonably
requested by the Trustee to enable the Trustee to so
withhold.
16.8 Parties Bound. This Trust Agreement shall be
binding upon the parties hereto, all participants in the
Plans and persons claiming under or through them pursuant
to the Plans, and, as the case may be, the heirs,
executors, administrators, successors, and assigns of each
of them. The provisions of Articles 5, 7 and 8 shall
survive termination of the Trust created under this Trust
Agreement or resignation or removal of the Trustee for any
reason.
In the event of the merger or consolidation of the
Company or any Employer or other circumstances whereby a
successor person, firm or company shall continue to carry
on all or a substantial part of its business, and such
successor shall elect to carry on the provisions of the
Plan or Plans applicable to such business, as therein
provided, such successor shall be substituted hereunder for
the Company or such Employer, as the case may be, upon the
filing in writing of its election so to do with the
Trustee. The Trustee may, but need not, rely on the
certification of an officer of the Company, and a certified
copy of a resolution of the Board of Directors of such
successor, reciting the facts, circumstances and
consummation of such succession and the election of such
successor to continue the said Plan or Plans as conclusive
evidence thereof, without requiring any additional
evidence.
16.9 Necessary Parties to Disputes. Necessary
parties to any accounting, litigation or other proceedings
shall include only the Trustee, the Company and any
appropriate Employers and the settlement or judgment in any
such case in which the Company, the appropriate Employers
and the Trustee are duly served or cited shall be binding
upon all participants in the Plans and their beneficiaries
and estates, and upon all persons claiming by, through or
under them.
16.10 Unclaimed Benefit Payments. If any check or
share certificate in payment of a benefit hereunder which
has been mailed by regular US mail to the last address of
the payee furnished the Trustee by the Company is returned
unclaimed, the Trustee shall notify the Company and shall
discontinue further payments to such payee until it
receives the further instruction of the Company.
16.11 Severability. If any provisions of this Trust
Agreement shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining
provisions of this Trust Agreement shall continue to be
fully effective.
16.12 References. Unless the context clearly
indicates to the contrary, a reference to a statute,
regulation, document or provision shall be construed as
referring to any subsequently enacted, adopted or executed
counterpart.
16.13 Headings. Headings and subheadings in this
Trust Agreement are inserted for convenience of reference
only and are not to be considered in the construction of
its provisions.
16.14 No Liability for Acts of Predecessor and
Successor Trustees. The Trustee shall have no liability
for the acts or omissions of any predecessors or successors
in office.
16.15 Counterparts. This Trust Agreement may be
executed in one or more counterparts, each of which shall
constitute an original.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers
as of the day and year first above written.
ATTEST: CAESARS WORLD, INC.
_________________ BY:_______________________________
TITLE:____________________________
ATTEST: STATE STREET BANK AND TRUST
COMPANY
________________ BY:_______________________________
Vice President
<PAGE>
INCUMBENCY CERTIFICATE
CAESARS WORLD, INC. (the "Company"), hereby certifies
that the persons whose names appear below are authorized to
act on its behalf, including the authorization to give
instructions, with respect to the Master Trust Agreement
between the Company and STATE STREET BANK AND TRUST
COMPANY, as Trustee, dated as of January 1, 1994. The
Company further certifies that the true signature of each
such person is set forth below opposite his name, and that
the Trustee may rely upon this certificate until such time
as it receives another certificate bearing a later date.
NAME SIGNATURE
_____________________ _________________________
_____________________ _________________________
_____________________ _________________________
____________________________
CAESARS WORLD, INC.
BY:__________________________
TITLE:_______________________
DATE:________________________
NOTICE OF APPOINTMENT
OF
INVESTMENT MANAGERS
CAESARS WORLD, INC. (the "Company"), certifies to
STATE STREET BANK AND TRUST COMPANY (the "Trustee"),
through the duly authorized person whose signature appears
below, that the firms whose names are set forth below have
been appointed as Investment Managers for the Company with
respect to the Master Trust Agreement between the Company
and the Trustee dated as of January 1, 1994, with authority
over the portions of its assets indicated opposite their
names. The Company further certifies that the Trustee may
rely upon this certificate until such time as it receives
another certificate bearing a later date.
INVESTMENT MANAGER PORTION OF ASSETS
________________________ _________________________
________________________ _________________________
________________________ _________________________
________________________ _________________________
_________________________
CAESARS WORLD, INC.
BY:______________________
TITLE:___________________
DATE:____________________
MASTER TRUST
DOCUMENTARY REQUIREMENTS CHECKLIST
1. Duly-executed copy of the Trust Agreement.
2. A certified copy of votes of the Company's Board
of Directors authorizing execution of the Trust
Agreement by the officers who in fact signed it
on the Company's behalf.
3. A certified copy of votes of the Board of
Directors authorizing designated officers,
committees, or other persons to act under
the Trust Agreement on behalf of the Company
in giving the Trustee directions, notices,
instructions, consents and certifications of
authority.
4. Certificate as to the incumbency and sample
signatures ofthe persons authorized to sign the
Trust Agreement and give directions, etc.,
to the Trustee on behalf of the Company.
5. Notice of Appointment of Investment Managers.
6. An acknowledgment by each Investment Manager that
it is afiduciary (as defined in Section 3 (21)(A)
of ERISA), with respect to the Plans under the
Trust Agreement.
7. Certificate as to the incumbency and sample
signatures ofthe persons authorized to give
directions, etc., to the Trustee on behalf
of Investment Manager.
8. Investment Manager instructions to use STIF.
9. Fee Schedule.
10 Copy of each Plan Document.
11. Copy of IRS Determination letter for each Plan.
12. Letter furnishing (a) name, address and Employer
identification Number (EIN) of each employer
participating in the Plan and Trust; (b) the Plan
Number for each Plan; and (c) the Tax Identification
Number (TIN) for the Trust (Notify State Street if no
TIN exists).
mastertr.doc
CONTINGENT SEVERANCE AGREEMENT
THIS AGREEMENT dated __________ __, 19__, is made by
and between Caesars World, Inc., a Florida corporation or
any successor entity by way of merger or consolidation (the
"Company"), and (the "Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the
recruitment and continuous employment of key management
personnel; and
WHEREAS the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many
publicly-held corporations, the possibility of a Change in
Control (as defined in Section 15 hereof) may exist and
that such possibility, and the uncertainty and questions
which it may raise among management, may result in the
departure or distraction of management personnel to the
detriment of the Company and its shareholders or interfere
with the ability of the Company to recruit qualified
executives; and
WHEREAS the Board has determined that appropriate
steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company's management, including the Executive, to their
assigned duties without distraction in the face of
potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company, although
no such change is now anticipated;
NOW THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the Company and the
executive hereby agree as follows:
1. Defined Terms. Capitalized terms in this
Agreement are defined terms with special meanings, as used
in this Agreement. Their definitions are provided in
Section 15 hereof.
2. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect for ten
(10) years and this Agreement shall terminate upon the
termination of Executive's employment with the Company,
provided however, if a Change in Control shall have
occurred during the period of such employment, this
Agreement shall continue in effect for a period of thirty-
six (36) months beyond the month in which such Change in
Control occurred and shall then terminate except with
respect to obligations of either the Company or the
Executive which by their terms are to be performed
following termination of employment.
3. Company's Covenants Summarized. In order to
induce the Executive to remain in the employ of the Company
and in consideration of the Executive's covenants set forth
in Section 4 hereof, the Company agrees to pay the
Executive the "Severance Payments" described in Section
6(A) hereof, under the circumstances described therein, and
the other payments and benefits described herein under the
respective conditions described herein, in the event the
Executive's employment with the Company is terminated
following a Change in Control. Except as provided by the
second sentence of Section 6(A) hereof or the last sentence
of Section 9(A) hereof, no amount or benefit shall be
payable under this Agreement unless there shall have been a
termination of the Executive's employment with the Company
following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of
employment and, except as otherwise agreed in a written
instrument between the Executive and the Company which is
signed by the Executive and by an officer of the Company in
behalf of the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees
that, subject to the terms and conditions of this
Agreement, in the event of a potential Change in Control,
the Executive will remain in the employ of the Company
until the earliest of (i) a date which is six (6) months
from the occurrence of such Potential Change of Control,
(ii) the date of occurrence of a Change in Control, (iii)
the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death,
Disability or Retirement at or after age 65, or (iv) the
termination by the Company of the Executive's employment
for any reason. The executive agrees that, if any amount
or benefit becomes payable pursuant to Section 6 hereof,
then, during the Benefit Period, (i) the Executive will be
available to answer questions and provide advice to the
Company; provided, however, that such requirement shall not
unreasonably interfere with any other activities the
Executive is then pursuing; and (ii) the Executive will
retain in confidence any and all material confidential
information known to the Executive concerning the Company
and its businesses and shall not use or disclose such
information without the approval of the Company where such
disclosure would cause material financial loss to the
Company, except as required by law or to the extent such
information is already public or becomes otherwise disclosed.
5. Normal Compensation Related to Termination.
5(A) Following a Change in Control and during
the term of this Agreement, during any period that the
Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical
or mental illness, the Company shall pay the Executive's
full salary at the rate in effect at the commencement of
any such period, together with all compensation payable to
the Executive under any incentive compensation or bonus
plan maintained by the Company during such period, until
the Executive's employment is terminated by the Company for
Disability.
5(B) If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall pay
the Executive's full salary through the Date of Termination
at the rate in effect at the time the Notice of Termination
is given, together with all compensation payable to the
Executive under any compensation plan maintained by the
Company at such time.
5(C) If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Executive's normal
post-termination benefits shall consist (just as they would
if such termination occurred prior to a Change in Control)
of (i) any vested, but previously unpaid, benefits of the
Executive under the Company's retirement, insurance and
other compensation programs in effect at any time, and (ii)
such additional benefits as shall be determined under the
Company's retirement, insurance and other compensation
programs then in effect. All post-termination benefits
shall be paid in accordance with the terms of the
applicable program. Unless Section 6(A), 6(C), 6(D), 7(C)
or 7(D) otherwise provides, the Company shall have no
further payment obligations to the Executive under this
Agreement.
6. Severance Payments and Reimbursement for Legal
Fees.
6(A) Subject to Section 6(B) hereof, if a Change
in Control shall have occurred, the Company shall provide
the Executive the payments and benefits described in this
Section 6(A) (the "Severance Payments") upon the
termination of the Executive's employment with the Company
following a Change in Control and during the term of this
Agreement unless such termination is (i) by the Company for
Cause or Disability, (ii) by the Executive without Good
Reason, or (iii) because of the Executive's death. For
purposes of the immediately preceding sentence, if a
termination of the Executive's employment occurs prior to a
Change in Control, but following a Potential Change in
Control in which a Person has entered into an agreement
with the Company the consummation of which will constitute
a Change in Control, such termination shall be deemed to
have followed a Change in Control and to have been (i) by
the Company without Cause, if the Executive's employment is
terminated without Cause at the direction of such Person,
or (ii) by the Executive with Good Reason, if the Executive
terminates his employment with Good Reason and the act (or
failure to act) which constitutes Good Reason occurs
following such Potential Change in Control and at the
direction of such Person.
(I) In lieu of any further salary
payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay
as severance pay to the Executive a lump sum severance
payment equal to the amount of salary the Executive would
have earned during the Benefit Period, at the greater of
the Executive's annual base salary in effect immediately
prior to the occurrence of the Change in Control or the
Executive's annual base salary in effect immediately prior
to the occurrence upon which the Notice of Termination is
based.
(II) Notwithstanding any provision of any
incentive compensation or bonus plan, the Company shall pay
to the Executive a lump sum amount equal to the product of
multiplying a fraction, the numerator of which is the
number of days in the Benefit Period and the denominator of
which is three hundred and sixty-five (365) days, times the
greater of (x) the amount of the bonus and incentive
compensation granted to or earned by the Executive for the
fiscal year immediately preceding the year in which the
Change in Control occurs, or (y) the bonus or incentive
compensation that would have been payable to the Executive
if the Company's earnings (determined in accordance with
the provisions of the applicable incentive compensation or
bonus plan as they existed immediately prior to the Change
in Control) for the portion of the fiscal year immediately
prior to the occurrence of the Change in Control were
annualized.
(III) Upon the Date of Termination, all ISOs and
Options held by the Executive pursuant to grants from the
Company which have been outstanding at least six (6) months
and one (1) day on the Date of Termination and which are
not canceled pursuant to the foregoing shall become fully
vested and exercisable by the Executive.
(IV) Upon the Date of Termination, all stock
grants and awards (including Derivative Assets as defined
therein) held by or with respect to the Executive under the
Company Key Employees Stock Bonus Plan, Key Employees Stock
Grant Plan and Key Employees Incentive Share Grant
Agreements shall become fully vested. All company shares
(and other assets, including Derivative Assets as therein
defined, if any) held in escrow for the Executive under the
Company Key Employees Stock Bonus Plan and Key Employees
Stock Grant Plan or distributable to Executive upon meeting
specified conditions under a Key Employee Incentive Share
Grant Agreement shall be then distributed to the Executive.
Unless a subsequent separate written agreement between the
Company and the Executive specifically so provides, this
Section 6(A)(IV) shall have no effect on, or application
to, grants or awards under any other stock compensation
plan established by the Company.
(V) If the Executive elects to continue Company
health and life insurance during the Benefit Period, the
Company shall reimburse Executive for the premiums paid by
the Executive for such insurance as such premiums are paid
until such time as the continued insurance terminates or
the Executive obtains replacement full time employment,
whichever occurs first. Such reimbursement shall be
reduced for an amount equivalent to the amounts charged
such Executive for health coverage prior to the Change in
Control.
(VI) If, immediately prior to the Change in
Control, the Executive received an auto allowance, the
Executive will receive such auto allowance during the
Benefit Period but all ancillary auto benefits such as
insurance, maintenance and repairs will cease.
6(B) In the event that any payment or benefit
received or to be received by the Executive in connection
with a Change in Control or the termination of the
Executive's employment with the Company (whether pursuant
to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, including, but
not limited to, the Company's 1983 Long-Term Stock
Incentive Program, and plans thereunder, the Company's
Executive Security Plan and the Company's 1985 Executive
Security Plan, or any other plan, arrangement or agreement
with any Person whose actions result in a Change in Control
or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") would
not be deductible (in whole or part), as a result of
section 280G or Section 162(m) of the Code, by the Company,
an affiliate or other Person making such payment or
providing such benefit, then, to the extent necessary to
make such portion of the Total Payments deductible, (i) the
payment pursuant to Section 6(A)(V) hereof shall first be
reduced (if necessary, to zero), (ii) the payments pursuant
to Section 6(A)(III) and 6(A)(IV) (in that order) shall
then be reduced (if necessary, to zero), (iii) the
remaining Severance Payments shall next be reduced (if
necessary, to zero), (iv) all other payments pursuant to
this Agreement shall next be reduced (if necessary, to
zero) and, (v) other portions of the Total Payments shall
be reduced as necessary. For purposes of this limitation,
(i) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively
waived in writing prior to the date of payment of the
Severance Payments shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the
Executive does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code, (iii) the
Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those
referred to in clauses (i) or (ii) in their entirety
constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the
Code or does not constitute applicable employee
remuneration with respect to a covered employee under
Section 162(m) of the Code in excess of $1 million or are
otherwise not subject to disallowance as deductions under
either Section 280G or Section 162(m), in the opinion of
the tax counsel referred to in clause (ii)); and (iv) the
value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined
by the Company's independent auditors in accordance with
the principles of sections 280G(d)(3) and (4) of the Code.
6(C) The payments and distributions provided for
in Section 6(A)(I), 6(A)(II), 6(A)(III), and 6(A)(IV)
hereof shall be made not later than the fifth day following
the Date of Termination, provided, however, that if the
amounts of such payments, and the limitation on such
payments set forth in Section 6(B) hereof, cannot be
finally determined on or before such day, the Company shall
pay to the Executive on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such
payments and shall pay the remainder of such payments
(together with interest at the rate provided in section
1274(d) of the Code, compounded quarterly) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the
Executive, repayable on the fifth day after demand by the
Company (together with interest a the rate provided in
section 1274(d) of the Code, compounded quarterly).
6(D) The Company also shall pay to the Executive
all reasonable expenses and legal fees incurred by the
Executive as a result of a termination in seeking to obtain
or enforce any right or benefit provided by this Agreement
or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder
(whether or not the Executive is successful in such audit
or proceeding or in obtaining or enforcing such right or
benefit), except to the extent that the payment of such
fees and expenses would not be, or would cause any other
portion of the Total Payments not to be, deductible by
reason of section 280G of the Code Such payments shall be
made at the later of the times specified in Section 6(C)
hereof, or within five (5) days after the Executive's
request for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may
require.
6(E) If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this
Section 6, the aggregate "parachute payments" paid to or
for the Executive's benefit are in an amount that would
result in any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code,
then the Executive shall have an obligation to pay the
Company upon demand an amount equal to the sum of (i) the
excess of the Aggregate "parachute payments" paid to or for
the Executive's benefit over the aggregate "parachute
payments" that could have been paid to or for the
Executive's benefit without any portion of such "parachute
payments" not being deductible by reason of section 280G of
the Code; and (ii) interest on the amount set forth in
clause (i) of this sentence at the rate provided in section
1274(d) of the Code, compounded quarterly, from the date of
the Executive's receipt of such excess until the date of
such payment.
7. Termination Procedures and Compensation During
Dispute.
7(A) Notice of Termination. After a Change in
Control and during the term of this Agreement, any
purported termination of the Executive's employment shall
be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under
the provision so indicated.
7(B) Date of Termination. "Date of
Termination", with respect to any purported termination of
the Executive's employment after a Change in Control and
during the term of this Agreement, shall mean (i) if the
Executive's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty
(30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination
by the Company, shall not be less than thirty (30) days,
and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of
Termination is given).
7(C) Dispute Concerning Termination.
(I) If within fifteen (15) days after
any Notice of Termination for Good Reason is given by the
Executive, or, if later, prior to the Date of Termination
(as determined without regard to this Section 7(C)(I)), the
Company notifies the Executive that a dispute exists
concerning the termination, the Date of Termination, shall
be the date on which the dispute is finally determined,
either by mutual written agreement of the parties or by a
final determination in accordance with Section 7(C)(II)
hereof; provided further that the Date of Termination shall
be extended by a notice of dispute from the Company only if
such notice is given in good faith and the Company pursues
the resolution of such dispute with reasonable diligence.
The Executive shall have the right to notify the Company
that a dispute exists within fifteen (15) days after any
Notice of Termination is given by the Company, or, if
later, prior to the Date of Termination determined pursuant
to Section 7(B) hereof; provided, however, that the
Executive shall have no right to dispute the termination
itself or the Date of the Termination, although the
Executive shall have the right to dispute any denial of the
payments and benefits described in this Agreement and to
dispute the amount of such payments and benefits.
(II) Except for matters covered under
Section 6(B) hereof, any disagreement, dispute,controversy
or claim arising out of or relating to this Agreement or
the interpretation hereof or any arrangements relating
hereto or contemplated herein or the breach, termination or
invalidity thereof shall be settled by arbitration in
accordance with the Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in
this Agreement) in Los Angeles, California. The arbitral
tribunal shall consist of one arbitrator. In making any
decision, the arbitrator shall apply and follow the
substantive law of California. The parties to the
arbitration jointly shall directly appoint such arbitrator
within thirty (30) days of initiation of arbitration. If
the parties shall fail to appoint such arbitrator as
provided above, such arbitrator shall be appointed by the
AAA as provided in the Arbitration Rules. The parties
hereto agree that the arbitral award may be enforced
against the parties to the arbitration proceeding or their
assets wherever they may be found and that a judgment upon
the arbitral award may be entered in any court having
jurisdiction thereof. The Company shall pay all fees and
expenses of the Arbitrator regardless of the result and
shall provide all witnesses and evidence reasonably
required by the Executive to present the Executive's case.
The Company shall pay to the Executive all reasonable
arbitration expenses and legal fees incurred by the
Executive as a result of a termination in seeking to obtain
or enforce any right or benefit provided by this Agreement
(whether or not the Executive is successful in obtaining or
enforcing such right or benefit), except to the extent that
the payment of such fees and expenses would not be, or
would cause any other portion of the Total Payments not to
be, deductible by reason of section 280G of the Code. Such
payments shall be made at the later of the times specified
in Section 6(C) hereof, or within five (5) days after the
Executive's request for payment accompanied with such
evidence of fees and expenses incurred as the Company
reasonably may require.
(III) Except for matters covered under
Section 6(B) hereof and notwithstanding Section 7(C)(II)
hereof and any provisions of this Agreement which refer to
said Section 7(C)(II), the Executive shall have the right
to elect, in the Executive's sole discretion, to use the
Caesars World, Inc. Executive Security Plan Procedure for
Claims and Review of Denial of Claims (the "Claims
Procedure"), instead of the procedures set forth in Section
7(C)(II) hereof, to settle any disagreement, dispute,
controversy or claim arising out of or relating to this
Agreement or the interpretation thereof. Any such election
shall be made by a written notice given to the Company in
accordance with section 2 of the Claims Procedure. The
Executive shall be deemed to have waived his right to use
the Claims Procedure if the Executive initiates arbitration
regarding such matters pursuant to Section 7(C)(II) hereof.
If the Executive makes such an election to use the Claims
Procedure, any provisions in the Agreement referring to the
determination or settlement of disputes in accordance with
Section 7(C)(II) hereof shall be deemed to refer to this
Section 7(C)(III). The Claims Procedures shall be adapted
for use by the Executive as follows:
(i) The word "Participant," as used
therein, shall refer to the Executive;
(ii) The word "Plan," as used therein
shall refer to this Agreement;
(iii) All references therein to
"Beneficiary" shall be deleted; and
(iv) Such additional conforming changes
may be appropriate shall be made.
7(D) Compensation During Dispute.
(I) If a purported termination by the
Executive for Good Reason occurs following a Change in
Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7(C)
hereof, the Company shall continue to pay the Executive the
full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to
the dispute was given, until the dispute is finally
resolved in accordance with Section 7(C) hereof. Amounts
paid under this Section 7(D)(I) are in addition to all
other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this
Agreement. The Executive agrees to remain in the employ of
the Company during the resolution of the dispute and to
continue to provide services unless the Executive's
employment is terminated earlier by death, Disability or
Retirement after the age of 65 years, or by action of the
Company. If the dispute is resolved by a determination
that the Executive did not have Good Reason, this
Agreement, in accordance with its terms, will continue to
apply to the circumstances of the Executive's employment by
the Company and any termination thereof.
(II) If there is a termination by the Company
followed by a dispute as to whether the Executive is
entitled to the payments and other benefits provided under
this Agreement, except a dispute covered under Section 6(B)
hereof, then, during the period of that dispute the Company
will pay the Executive fifty percent (50%) of the amount
specified in Sections 6(A)(I) and 6(A)(II) hereof, and the
Company will provide the Executive with the other benefits
provided in Section 6(A) hereof, if, but only if, the
Executive agrees in writing that if the dispute is resolved
against the Executive, the Executive will promptly refund
to the Company all payments the Executive receives under
Sections 6(A)(I) and 6(A)(II) hereof plus interest at the
rate provided in section 1274(d) of the Code, compounded
quarterly. If the dispute is resolved in the Executive's
favor, promptly after resolution of the dispute the Company
will pay the Executive the sum which was withheld during
the period of the dispute plus interest at the rate
provided in section 1274(d) of the Code, compounded
quarterly.
7(E) Executive's Termination Rights. The
Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
8. No Mitigation. The Company agrees that, if
the Executive's employment by the Company is terminated
during the term of this Agreement, the Executive is not
required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the
Company pursuant to Section 6 or Section 7(D) hereof.
Without limiting the foregoing, the amount of any payment
or benefit provided for in Section 6 or Section 7(D)
hereof, shall not be reduced by any compensation earned by
the Executive as the result of employment by another
employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company,
or otherwise.
9. Successors; Binding Agreement.
9(A) This Agreement shall not be terminated by
the Company's voluntary or involuntary dissolution or by
any merger or consolidation in which the Company is not the
surviving or resulting corporation, or on any transfer of
all or substantially all of the Company's assets. In the
event of any such merger, consolidation, or transfer of
assets, the provisions of this Agreement shall be binding
on and inure to the benefit of the surviving business
entity or the business entity to which such assets shall be
transferred. In addition to any obligations imposed by law
upon any successor to the Company, the Company will require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would
be required to perform it if no such succession had taken
place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall
entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to
terminate the Executive's employment for Good Reason after
a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination.
9(B) This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable
to the Executive hereunder, if the Executive had continued
to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or
administrators of the Executive's estate. The Executive
may make a designation by a letter to the Company marked
"Attention: Secretary" signed by the Executive and the
Executive's spouse (if any) with the signature(s) being
acknowledged before a notary public.
10. Notices. For the purpose of this
Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested,
postage prepaid, addressed to the Company at its then-
current headquarters location and to the Executive at the
Executive's address shown in the Company's records at the
Date of Termination, or to such other address as either
party may have furnished to the other in writing in
accordance herewith, except that notice of change of
address shall be effective only upon actual receipt.
11. Miscellaneous. No agreements or
representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws
of the State of California. All references to sections of
the Exchange Act or the Code shall be deemed also to refer
to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and
any additional withholding to which the Executive has
agreed. Any interest payment provided by this Agreement
shall be subject to the usury limits of applicable law, to
the extent such limits apply.
12. Waiver/Modification. No provision of this
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision
of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
13. Validity. The invalidity or
unenforceability or any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
14. Counterparts. This Agreement may be
executed several counterparts, each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
15. Definitions. For purposes of this
Agreement, the following terms shall have the meanings
indicated below:
15(A) "AAA" shall mean the American Arbitration
Association.
15(B) "Arbitration Rules" shall mean the
Commercial Arbitration Rules.
15(C) "Beneficial Owner" shall have the meaning
defined in Rules 13d-3 and 13d-5(b) under the Exchange Act.
15(D) "Benefit Period" shall mean the period
beginning on the Date of Termination and ending upon the
later of two (2) years following a Change in Control or one
(1) year after the Date of Termination.
15(E) "Board" shall mean the Board of Directors
of the Company.
15(F) "Cause" for termination by the Company of
the Executive's employment, after any Change in Control (or
after any Potential Change in Control under the
circumstances described in the second sentence of Section
6(A) hereof), shall mean (i) the willful and continued
failure by the Executive to substantially perform the
Executive's duties with the Company (other than any such
failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to
Section 7(A)) after a written demand for substantial
performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which
the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful
engaging by the Executive in conduct which is demonstrably
and materially injurious to the Company, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to
be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company.
15(G) "Change in Control" shall mean a change in
control of the Company, which shall be deemed to have
occurred upon the first fulfillment of the conditions set
forth in any one of the following four paragraphs:
(I) any Person, other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of
stock of the Company, is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of
the Company's then outstanding securities; or
(II) during any period of two consecutive
years (not including any period prior to the execution of
this Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other
than a director designated by a Person who has entered into
an agreement with the Company to effect a transaction
described in Section 15(G)(I) or 15(G)(III) hereof whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof; or
(III) the shareholders of the Company
approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation,
or the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all of substantially
all the Company's assets; or
(IV) any Person shall be or has become
the Beneficial Owner of securities of the Company
representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities
and (i) the identity of the Chief Executive Officer of the
Company is changed during the period beginning sixty (60)
days before the attainment of the twenty percent (20%)
beneficial ownership and ending two (2) years thereafter,
or (ii) individuals constituting at least one-third (1/3)
of the members of the Board at the beginning of such period
shall leave the Board during the period beginning sixty
(60) days before the attainment of the twenty percent (20%)
beneficial ownership and ending two (2) years thereafter.
15(H) "Code" shall mean the Internal Revenue Code
of 1986, as it may be amended from time to time.
15(I) "Company" shall mean Caesars World, Inc.
and, except in determining under Section 15(G) hereof
whether or not any Change in Control of the Company has
occurred in connection with such succession, it shall also
include any Person who is a successor to substantially all
assets of the Company whether by merger, consolidation,
liquidation, purchase, or otherwise and which assumes and
agrees or is legally bound to perform this Agreement by
operation of law, or otherwise.
15(J) "Company Shares" shall mean shares of
common stock, $0.10 par value, of the Company.
15(K) "Date of Termination" shall have the
meaning stated in Section 7(B) hereof.
15(L) "Disability" shall be deemed the reason for
the termination by the Company of the Executive's
employment, if, as a result of the Executive's incapacity
due to physical or mental illness, the Executive is unable
to perform the Executive's duties for a consecutive period
of at least one hundred twenty (120) days or for at least
one hundred fifty (150) days in a period of two hundred
(200) days.
15(M) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
15(N) "Executive" shall mean the individual named
in the first paragraph of this Agreement.
15(O) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the
occurrence (without the Executive's express written
consent) after any Change in Control, or after any
Potential Change in Control under the circumstances
described in the second sentence of Section 6(A) hereof
(treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a
"Potential Change in Control"), of any one of the following
acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described
in paragraphs (I) through (VIII), inclusive, below, such
acts or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in
respect thereof:
(I) the assignment to the Executive of
any duties inconsistent with the Executive's status as an
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
title, position, duties, function, working conditions or
responsibilities from those in effect immediately prior to
the Change in Control other than any such alteration
primarily attributable to the fact that the Company may no
longer be a public company, including, among other things,
removal or failure to nominate the Executive as a member of
the Board if the Executive is serving as such a member
immediately prior to the occurrence of a Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date
hereof or as the same may be increased from time to time;
(III) the relocation of the Company's
principal executive offices to a location more than twelve
(12) miles from the location of such offices immediately
prior to the Change in Control or the Company's requiring
the Executive to be based anywhere other than the Company's
principal executive offices except for required travel on
the Company's business to an extent substantially
consistent with the Executive's business travel obligations
immediately prior to the Change in Control;
(IV) the failure by the Company, without
the Executive's consent, to pay to the Executive any
portion of the Executive's current compensation or to pay
to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to
continue in effect any compensation plan in which the
Executive participates immediately prior to the Change in
Control which is material to the Executive's total
compensation, including but not limited to the Company's
incentive compensation plans and 1983 Long-Term Stock
Incentive Program, and plans thereunder, or any substitute
plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan,
or the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the terms and
conditions of such benefits, including, without limitation,
the definition of "Net Profit" in any incentive
compensation plan, and the level of the Executive's
participation relative to other participants, as such
relative level existed at the time of the Change in
Control;
(VI) the failure by the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive
under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which
the Executive was participating at the time of the Change
in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change
in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service
with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change in
Control;
(VII) the continuation or repetition,
after written notice of objection from the Executive, of
harassing or denigrating treatment inconsistent with the
Executive's position with the Company;
(VIII) the failure of the Company to obtain
a satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in Section
9(A) hereof; or
(IX) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of
Section 7(A); provided, further, that, for purposes of this
Agreement, no such purported termination shall be
effective.
15(P) "ISOs" shall mean options qualifying as
incentive stock options under section 422A of the code.
15(Q) "Notice of Termination" shall have the
meaning stated in Section 7(A) hereof.
15(R) "Options" shall mean options for Company
Shares granted after July 1, 1984 to the Executive under
the Company's 1983 Long-Term Stock Incentive Program, plans
thereunder, and any substitute program or plan, other than
ISOs granted on or before the date of this Agreement.
15(S) "Person" shall have the same meaning as it
does in section 3(a)(9) (including the definition of
"Company" under section 3(a)(19)) including a group and any
other arrangement included as a "Person" under section
13(d)(3) of the Exchange Act, provided, a person shall not
include an underwriter temporarily holding securities
pursuant to an offering of such securities.
15(T) "Potential Change in Control" shall mean a
potential change in control of the Company, which shall be
deemed to have occurred if the conditions set forth in any
one of the following four paragraphs shall have been
satisfied:
(I) the Company enters into an
agreement, the consummation of which would result in the
occurrence of a Change in Control;
(II) any Person (including the Company)
publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a
Change in Control;
(III) any Person, other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of
stock of the Company, who is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 9.9% or more of the combined voting power of
the Company's then outstanding securities, increases such
Person's beneficial ownership of such securities by 5% or
more over the percentage so owned by such Person on the
date hereof; or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
15(U) "Retirement" shall mean any voluntary
termination of employment by the Executive pursuant to
which the Executive elects benefits under either the
Company's Executive Security Plan or 1985 Executive
Security Plan, whether normal retirement benefits under
Section 3.2 thereof, early retirement benefits under
Section 3.5 thereof, optional retirement benefits under
Section 3.7 thereof or termination benefits under Section
3.11 thereof.
15(V) "Severance Payments" shall mean those
payments described in Section 6(A) hereof.
15(W) "Total Payments" shall mean those payments
described in Section 6(A) hereof.
16. Special provisions applicable to subsidiary
employees. Notwithstanding anything to the contrary in
this Agreement, so long as the Executive is employed by a
subsidiary of the Company or a person qualifying as an
Employer under Section 16(A) instead of directly by the
Company itself, then the following provisions shall apply
to, and shall control the interpretation of, this
Agreement:
16(A) For purposes of this Agreement, including
without limitation Section 6(A), the Executive shall be
deemed to be continuously employed by the Company so long
as the Executive is employed by (i) the Company, or (ii) a
Person as to which the Company directly or indirectly owns
a majority of the voting stock of such Person or other
equity interests possessing comparable voting power with
respect to electing the governing body of such Person (such
Person shall be referred to as the "Employer").
16(B) In the event that, without the prior
occurrence of a Change in Control, the Company shall cease
to own a majority of the outstanding voting stock or other
voting interests of the Employer at a time when the
Executive is actually employed by the Employer, this
Agreement shall terminate on the date of such cessation of
ownership. If the Employer shall cease to be a majority-
owned Person (as described above) of the Company following
the occurrence of a Change in Control and either such
Person or any other Person acquiring such Person's business
or substantially all of its assets shall assume the
obligation of the Employer and the Company under this
Agreement ("Assuming Person") on or before the date of such
cessation of ownership, the change in ownership of such
Person or the transfer of Executive's employment to the
Assuming Person shall not be deemed a termination of
employment with the Company or the Employer for purposes of
this Agreement.
16(C) As used in this Agreement in Section 5,
paragraphs V and VI of Section 6(A) and Section 15(O)
except for paragraph VIII, "Company" shall only mean
Employer as defined above in Section 16(A) and the
definition of "Company" set forth in Section 15(I) of this
Agreement shall not apply.
16(D) As used in Sections 4 and 15(F) and clause
(i) of the first sentence of Section 6(A) of this
Agreement, "Company" shall be deemed to mean both the
Company (as defined in Section 15(I) hereof) and Employer,
as required by the circumstances of the Executive's actual
employment.
16(E) To the extent provisions of this Agreement
call for any payment or provision of any benefit from the
Employer or Company following a Change in Control, such
obligation shall be deemed satisfied if the Company, the
Employer or the Assuming Person, or any affiliate of the
Company, the Employer, or an Assuming Person shall make any
such payment. For purposes of the foregoing, "affiliate"
of any Person shall mean any Person which directly or
indirectly controls, or is under common control with, or is
controlled by such Person and "control" or "controls" as to
any Person for this purpose shall mean beneficially owning,
directly or indirectly, a majority of the voting stock of
such Person or other equity interests possessing comparable
voting power with respect to electing the governing body of
such Person.
16(F) To the extent any payment or the provision
of any benefit required under Section 5 of this Agreement
as modified by the foregoing redefinition of "Company" is
not made by the Employer or the Assuming Person, the
Company shall make such payment.
16(G) Notwithstanding such modified reference in
Section 15(O), "Board" for purposes of paragraph I of
Section 15(O) shall be deemed to be the board of directors
of the Company as defined in Section 15(I).
16(H) Any notices by Executive to the Company
required under the sections modified by the foregoing
provisions (including without limitation Section 7(A))
shall be required to be made both to the Employer and to
the Company. Notices to Executive required under this
Agreement (including without limitation under Section 7(A))
shall be sufficient if made by either the Company or
Employer.
CAESARS WORLD, INC.
By:
_________________________
Name:
_______________________
Title:
______________________
______________________________
Executive
<PAGE>
12. Employment Agreement. Executive is a party to an
employment agreement dated September 15, 1986 with the
Company which has been amended by amendments dated August
1, 1988, February 22, 1989 and December 8, 1989. Such
employment agreement as amended and as it shall be amended
in the future shall be referred to as "the Employment
Agreement" in this Paragraph. Executive's participation in
both this Agreement and the Employment Agreement is not
intended to provide a duplication of benefits and,
accordingly, this Agreement shall be effective as to
Executive only upon receipt by the Secretary of the Company
of a written election by Executive to make this Agreement
effective as to such Executive and to waive Executive's
rights under Paragraphs 9.d. and e. of the Employment
Agreement. Until such election is made as provided above,
this Agreement shall not be applicable to Executive and
Executive shall be entitled to Executive's full rights
under the Employment Agreement. Executive may make such
election at any time during the term of this Agreement and
may also make such an election within a period of up to
thirty (30) days following a notice of termination by the
Company of Executive's employment or in Executive's notice
of termination pursuant to Paragraph 9.e. of the Employment
Agreement or notice of election to treat an act or omission
by the Company as a Wrongful Termination and terminate
under Paragraph 9.d. of the Employment Agreement. Nothing
in this Section 12 shall cause any post termination
benefits to be payable under Section 6(A) of this Agreement
except as provided in Section 6(A) or to cause a
duplication of any payments otherwise provided Executive
under the Employment Agreement.
<PAGE>
12. Employment Agreement. In addition to this
Agreement, Executive is also a party to an employment
agreement with the Company dated September 15, 1986 which
has been amended by amendments dated August 1, 1988,
February 22, 1988 and December 8, 1989 (such employment
agreement as amended and as it shall be amended in the
future shall be referred to as the "Employment Agreement"
in this Paragraph). It is intended that Executive's
participation in both this Agreement and the Employment
Agreement should not produce a duplication of payments
derived from the same compensation or benefit items.
Accordingly, in the event that either Paragraph 9.d. or
9.e. of the Employment Agreement and Section 6(A) of this
Agreement are applicable to a termination of Executive's
employment with the Company, Executive shall be entitled to
the severance pay and benefits as an aggregate under
whichever of such provisions of the two agreements provides
a greater advantage to Executive. Such determination shall
be made by Executive and shall be effected by notice to the
Company within fifteen (15) business days following the
effective date of any termination of Executive which
qualifies as a termination under this Agreement.
<PAGE>
(III) Upon the Date of Termination, all ISOs,
Options and stock appreciation rights issued under the
Company's 1983 Long-Term Stock Incentive Program held by
the Executive pursuant to awards from the Company which
have been outstanding at least six (6) months from the date
of such award on the Date of Termination and which are not
canceled pursuant to the foregoing shall become fully
vested and exercisable by the Executive.
<PAGE>
"Change in Control" shall mean a change in
control of the Company, which shall be deemed to have
occurred upon the first fulfillment of the conditions set
forth below:
(I) any Person, other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of
stock of the Company, is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of
the Company's then outstanding securities other than in a
transaction directly with the Company or a subsidiary of
the Company; or
(II) any Person, other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of
stock of the Company, is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of
the Company's then outstanding securities and during any
period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and
any new director whose election by the Board was approved
by a vote of at least a majority of the directors then
still in office who either were directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof.
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Directors of
Caesars World, Inc.:
We have reviewed the accompanying condensed consolidated
balance sheet of Caesars World, Inc. (a Florida corporation)
and subsidiaries as of January 31, 1994, and the related
consolidated statements of income for the three-month and
six-month periods ended January 31, 1994 and 1993, the
consolidated statement of shareholders' equity for the six-
month period ended January 31, 1994 and the condensed
consolidated statements of cash flows for the six-month
periods ended January 31, 1994 and 1993. These financial
statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical review procedures
to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet
of Caesars World, Inc. and subsidiaries as of July 31, 1993
(not presented herein), and, in our report dated August 24,
1993, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of July 31, 1993 is
fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN & CO.
Los Angeles, California
February 18, 1994
Exhibit 15
