PROMUS COMPANIES INC, DEFM14A, 1995-04-25

PROMUS COMPANIES INC
DEFM14A, 1995-04-25
MISCELLANEOUS AMUSEMENT & RECREATION

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1995.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 4)

Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to 240.14a-11(c) or 240.14a-12

THE PROMUS COMPANIES INCORPORATED
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

COPIES OF CORRESPONDENCE TO:

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<S> <C>
E. O. Robinson, Jr., Esq. John M. Newell, Esq.
The Promus Companies Incorporated Latham & Watkins
1023 Cherry Road 633 West Fifth Street, Suite 4000
Memphis, Tennessee 38117 Los Angeles, California 90071
</TABLE>

Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state
how it was determined):
- - --------------------------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------------------------

[X] Fee paid with preliminary materials.

[ ] Check box if any of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its filing.

(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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["THE PROMUS COMPANIES" logo] THE PROMUS COMPANIES INCORPORATED
PEOPLE PLEDGED TO EXCELLENCE

1023 CHERRY ROAD
MEMPHIS, TN 38117 USA

April 25, 1995

To Our Stockholders:

You are cordially invited to attend The Promus Companies Incorporated Annual
Meeting of Stockholders which will be held on May 26, 1995, at 11:00 a.m. at the
Winegardner Auditorium-- Dixon Gallery and Gardens, 4339 Park Avenue, Memphis,
Tennessee. All stockholders of record as of April 21, 1995, are entitled to vote
at the Annual Meeting. I urge you to be present in person or represented by
proxy at this important Annual Meeting at which stockholders will be asked to
ratify a major transaction that will separate Promus into two publicly-owned
companies.

You will be asked to consider and vote upon a group of related proposals
which provide for the distribution to stockholders, on a one-for-two basis, of
all outstanding shares of common stock of Promus Hotel Corporation, a
newly-formed wholly-owned subsidiary of the Company. The distribution will
separate the Company's hotel business from its casino entertainment business.
After the distribution, the Company will change its name to Harrah's
Entertainment, Inc. and will continue to operate and develop the casino
entertainment business. Promus Hotel will operate and develop the hotel
business.

The Company's Board of Directors believes that the distribution will
accomplish a number of important business objectives. Historically, the Company
believed that keeping the two businesses together was beneficial to both
entities for reasons including the sharing of financial resources and management
expertise, as well as the joint development of systems. Today, these benefits of
aggregation have been achieved. Separation of the casino entertainment business
and the hotel business into independent companies will allow each company to
concentrate exclusively on its own business objectives without concern for the
other company's strategic business objectives. Management believes that the
ability of the hotel business to expand and increase its profitability may be
significantly enhanced in the future if it is no longer controlled by the
Company. In particular, the Board of Directors believes that the separation of
Promus Hotel from Promus will avoid conflicts in the use of limited capital
resources by the casino entertainment business and the hotel business.

Details of the distribution proposals and the other proposals to be
considered at the Annual Meeting, as well as important information relating to
the distribution, such as a description of the businesses, directors and
management of Promus Hotel, are set forth in the accompanying Proxy Statement
and should be considered carefully.

We at Promus are excited about the future prospects for both Promus Hotel
and Harrah's Entertainment as separate public companies. The Board of Directors
believes that the distribution is in the best interests of stockholders and
unanimously recommends that stockholders vote to approve the distribution
proposals and the additional proposals described in the Proxy Statement.

Whether or not you expect to attend the meeting, please complete, sign, date
and return the enclosed proxy card promptly to ensure that your shares will be
represented at the meeting. If you attend the meeting, you may vote in person
even if you have sent in your proxy card.

Sincerely,

/s/ Michael D. Rose

Michael D. Rose
Chairman of the Board
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THE PROMUS COMPANIES INCORPORATED
NOTICE OF MEETING

The Annual Meeting of Stockholders of The Promus Companies Incorporated
("Promus") will be held at the Winegardner Auditorium--Dixon Gallery and
Gardens, 4339 Park Avenue, Memphis, Tennessee, on Friday, May 26, 1995, at 11:00
a.m. The meeting will be conducted:

1. To consider and vote upon nine related proposals (the "Distribution
Proposals") described in the accompanying Proxy Statement, which provide for:

(i) Proposal One: Ratification of a distribution (the "Distribution")
in the form of a special dividend to all holders of Promus's outstanding
shares of common stock, on a one-for-two basis, of all outstanding shares of
common stock, and the associated stockholders' rights, of Promus Hotel
Corporation ("PHC"), an indirect wholly-owned subsidiary of Promus, and the
related arrangements between Promus and PHC, and the policies to be adopted
by such companies, in connection with the Distribution;

(ii) Proposal Two: Approval of an amendment of the Certificate of
Incorporation of Promus, which will change the name of Promus to Harrah's
Entertainment, Inc.;

(iii) Proposal Three: Approval of certain amendments to the Promus
1990 Stock Option Plan (a) to increase by 4,500,000 the number of shares
available under the Promus 1990 Stock Option Plan and (b) to expand the
rights of the Human Resources Committee of Promus's Board of Directors (the
"Promus HR Committee") to make certain adjustments in connection with the
Promus 1990 Stock Option Plan upon the occurrence of certain events;

(iv) Proposal Four: Approval of certain amendments to the Promus 1990
Restricted Stock Plan (a) to increase by 500,000 the number of shares
available under the Promus 1990 Restricted Stock Plan and (b) to expand the
rights of the Promus HR Committee to make certain adjustments in connection
with the Promus 1990 Restricted Stock Plan upon the occurrence of certain
events;

(v) Proposal Five: Approval and ratification of the adoption by PHC of
the PHC 1995 Stock Option Plan to provide continued employment and
performance incentives for the management of PHC;

(vi) Proposal Six: Approval and ratification of the adoption by PHC of
the PHC 1995 Restricted Stock Plan to provide continued employment and
performance incentives for the management of PHC;

(vii) Proposal Seven: Approval and ratification of the adoption by PHC
of the PHC Key Executive Officer Annual Incentive Plan to provide continued
employment and performance incentives for the management of PHC;

(viii) Proposal Eight: Approval and ratification of the adoption by PHC
of the PHC Nonmanagement Directors Stock Incentive Plan pursuant to which
non-management directors will receive up to 100% of their annual director
fees in common stock of PHC in lieu of cash; and

(ix) Proposal Nine: Ratification of the election of the eleven
directors of PHC specified herein, who will be divided into three classes,
the initial terms of which will expire in 1996, 1997, and 1998.

THE EFFECTIVENESS OF EACH OF THE DISTRIBUTION PROPOSALS IS CONDITIONED
UPON THE APPROVAL OF ALL OF THE DISTRIBUTION PROPOSALS. ACCORDINGLY, FAILURE
OF THE STOCKHOLDERS TO APPROVE ANY ONE OR MORE OF THE DISTRIBUTION PROPOSALS
WILL RESULT IN THE INEFFECTIVENESS OF ALL OF THE DISTRIBUTION PROPOSALS.

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2. To consider and vote upon the following additional proposals (the
"Additional Proposals") described in the accompanying Proxy Statement, which
provide for:

(x) Proposal Ten: The election of Philip G. Satre, Boake A. Sells and
Shirley Young to Promus's Board of Directors as Class II directors for
three-year terms expiring at the 1998 Annual Meeting;

(xi) Proposal Eleven: Approval of an amendment to Promus's Certificate
of Incorporation permitting the redemption of Promus's common stock in
certain circumstances to facilitate Promus's participation in certain gaming
joint ventures;

(xii) Proposal Twelve: Approval of a Promus Key Executive Officer Annual
Incentive Plan to provide continued employment and performance incentives
for the management of Promus;

(xiii) Proposal Thirteen: Approval of a Promus Nonmanagement Directors
Stock Incentive Plan pursuant to which nonmanagement directors will receive
up to 100% of their annual directors fees in Promus common stock in lieu of
cash; and

(xiv) Proposal Fourteen: Ratification of the appointment of Arthur
Andersen LLP as independent auditors of Promus.

THE EFFECTIVENESS OF ANY OF THE ADDITIONAL PROPOSALS IS NOT CONDITIONED
ON THE APPROVAL OF ANY OTHER ADDITIONAL PROPOSALS OR OF THE DISTRIBUTION
PROPOSALS.

Stockholders of record at the close of business on April 21, 1995, are
entitled to vote. The list of stockholders will be available for examination for
the ten days prior to the meeting at The Promus Companies Incorporated,
Corporate Secretary's Office, 1023 Cherry Road, Memphis, Tennessee 38117.

PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.

/s/ E. O. Robinson, Jr.

E. O. Robinson, Jr.
Corporate Secretary

April 25, 1995

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TABLE OF CONTENTS
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PAGE
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<S> <C>
Summary............................................................................... 1
Annual Meeting...................................................................... 1
The Distribution.................................................................... 2
PHC................................................................................. 5
Harrah's Entertainment.............................................................. 7
Summary of Selected Historical Financial Data of Promus............................. 8
Summary of Selected Historical Financial Data of PHC................................ 9
Summary of Selected Pro Forma Financial Data of PHC................................. 10
Summary of Selected Pro Forma Financial Data of Harrah's Entertainment.............. 11
Introduction.......................................................................... 12
Matters for Consideration at the Annual Meeting..................................... 12
Voting Rights and Proxy Information................................................. 14
No Appraisal Rights................................................................. 15
Recent Developments................................................................... 16
The Distribution...................................................................... 18
Background and Reasons for the Distribution......................................... 18
Opinion of Financial Advisor........................................................ 18
Manner of Effecting the Distribution................................................ 20
Federal Income Tax Aspects of the Distribution...................................... 21
Listing and Trading of PHC Common Stock............................................. 22
Listing and Trading of Harrah's Entertainment Common Stock.......................... 23
Conditions; Termination............................................................. 23
Certain Special Considerations...................................................... 24
Future Management of the Separate Companies......................................... 27
Asset Transfers..................................................................... 28
Relationship Between PHC and Harrah's Entertainment after the Distribution.......... 28
Financing........................................................................... 35
Consent Solicitation................................................................ 36
Regulatory Approvals................................................................ 36
Accounting Treatment................................................................ 36
Selected Historical Financial Data of Promus........................................ 37
Selected Historical Financial Data of PHC........................................... 38
Pro Forma Financial Data of PHC..................................................... 39
Management's Discussion and Analysis of Historical Financial Condition and Results
of Operations of PHC.............................................................. 43
Management's Discussion and Analysis of Pro Forma Financial Data of PHC............. 46
Pro Forma Financial Data of Harrah's Entertainment.................................. 46
Management's Discussion and Analysis of Pro Forma Financial Data of
Harrah's Entertainment............................................................ 50
PHC Business and Properties......................................................... 50
Harrah's Entertainment Business and Properties...................................... 55
Management of PHC................................................................... 56
Management of Harrah's Entertainment................................................ 72
</TABLE>

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<TABLE>
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PAGE
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Price Range of Promus Common Stock.................................................. 72
Ownership of PHC Common Stock....................................................... 73
Description of PHC Capital Stock.................................................... 74
Certain Provisions of the PHC Certificate and PHC Bylaws............................ 77
Liability and Indemnification of Officers and Directors of PHC...................... 80
Amendments to Promus 1990 Stock Option Plan........................................... 82
Description of Plan................................................................. 82
General Federal Income Tax Consequences............................................. 84
Proposed Amendments................................................................. 85
Amendments to Promus 1990 Restricted Stock Plan....................................... 87
Description of Plan................................................................. 87
General Federal Income Tax Consequences............................................. 88
Proposed Amendments................................................................. 88
Election of Promus Directors.......................................................... 91
Board of Directors.................................................................. 91
Ownership of Promus Securities...................................................... 92
Nominees............................................................................ 94
The Board of Directors and Committees of the Board.................................. 97
Compensation of Directors........................................................... 97
Executive Officer Compensation...................................................... 99
Certain Employment Arrangements..................................................... 101
Report of the Promus Human Resources Committee on Executive Compensation............ 104
Performance of Promus Common Stock and Dividends.................................... 108
Certain Transactions................................................................ 109
Amendment to the Promus Certificate of Incorporation Regarding Redemption of
Common Stock........................................................................ 110
Adoption of Promus Key Executive Officer Annual Incentive Plan........................ 110
Adoption of Promus Nonmanagement Directors Stock Incentive Plan....................... 112
General............................................................................. 112
General Federal Income Tax Consequences............................................. 113
Appointment of Auditors............................................................... 114
Other Matters at the Meeting.......................................................... 114
Stockholder Proposals for 1996 Annual Meeting......................................... 114
Incorporation of Certain Documents by Reference....................................... 115
Form 10-K Annual Report............................................................... 115
Index of Defined Terms................................................................ 115
Index to Financial Statements......................................................... F-1
</TABLE>

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Annexes*
Annex I: Opinion of James D. Wolfensohn Incorporated
Annex II-A: Form of PHC Amended and Restated Certificate of Incorporation
Annex II-B: Form of PHC Restated Bylaws
Annex III-A: PHC 1995 Stock Option Plan
Annex III-B: PHC 1995 Restricted Stock Plan
Annex IV-A: Amendment to Promus 1990 Stock Option Plan
Annex IV-B: Amendment to Promus 1990 Restricted Stock Plan
Annex V: Amendment to the Promus Certificate of Incorporation Regarding
Name Change
Annex VI: Amendment to Promus Certificate of Incorporation Regarding
Redemption of Common Stock
Annex VII: PHC Key Executive Officer Annual Incentive Plan
Annex VIII: PHC Non-Management Directors Stock Incentive Plan
Annex IX: Promus Key Executive Officer Annual Incentive Plan
Annex X: Promus Non-Management Directors Stock Incentive Plan
</TABLE>

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* References are made to these Annexes throughout the Proxy Statement. All
material terms of the Annexes are summarized in the Proxy Statement.

PROPOSALS
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<CAPTION>
DISTRIBUTION
PROPOSALS SECTION PAGE(S)
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Proposal One The Distribution 18-81
Proposal Two The Distribution and Annex V 18-81, Annex V
Proposal Three Amendments to Promus 1990 Stock Option Plan 82-86, Annex IV-A
and Annex IV-A
Proposal Four Amendments to Promus 1990 Restricted Stock 87-90, Annex IV-B
Plan and Annex IV-B
Proposal Five The Distribution--Management of PHC--PHC 62-66, Annex III-A
Compensation Plans and Annex III-A
Proposal Six The Distribution--Management of PHC--PHC 66-68, Annex III-B
Compensation Plans and Annex III-B
Proposal Seven The Distribution--Management of PHC--PHC 68-69, Annex VII
Compensation Plans and Annex VII
Proposal Eight The Distribution--Management of PHC--PHC 69-70, Annex VIII
Compensation Plans and Annex VIII
Proposal Nine The Distribution--Management of PHC--PHC 56-57
Board

ADDITIONAL
PROPOSALS
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Proposal Ten Election of Promus Directors 91-109
Proposal Eleven Amendment to the Promus Certificate of 110, Annex VI
Incorporation Regarding Redemption of Common
Stock and Annex VI
Proposal Twelve Adoption of Promus Key Executive Annual 110-112, Annex IX
Incentive Plan
Proposal Thirteen Adoption of Promus Non-Management Directors 112-114, Annex X
Stock Incentive Plan
Proposal Fourteen Appointment of Auditors 114
</TABLE>

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<PAGE>
SUMMARY

The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth elsewhere in
this Proxy Statement and its Annexes, all of which should be reviewed carefully.
For the location in this Proxy Statement of the definitions of capitalized terms
used herein, see "Index of Defined Terms."

ANNUAL MEETING

Date, Time and Place of Annual Meeting. The Annual Meeting of stockholders
(the "Annual Meeting") of The Promus Companies Incorporated, a Delaware
corporation ("Promus" and, together with its consolidated subsidiaries, the
"Company"), will be held at 11:00 a.m. at Winegardner Auditorium--Dixon Gallery
and Gardens, 4339 Park Avenue, Memphis, Tennessee on May 26, 1995 (the "Annual
Meeting Date"). This Proxy Statement and the accompanying proxy are first being
mailed to stockholders on or about April 25, 1995.

Matters for Consideration at the Annual Meeting. At the Annual Meeting, the
stockholders of Promus will be asked to consider and vote upon the following
nine related proposals (the "Distribution Proposals"): (i) ratification of a
distribution (the "Distribution") in the form of a special dividend to all
holders of Promus's outstanding shares of common stock, on a one-for-two basis,
of all outstanding shares of common stock, and the associated stockholders'
rights, of Promus Hotel Corporation ("PHC"), an indirect wholly-owned subsidiary
of Promus, and the related arrangements between Promus and PHC, and the policies
to be adopted by such companies, in connection with the Distribution ("Proposal
One") (see "The Distribution"); (ii) approval of an amendment to the Certificate
of Incorporation of Promus, which will change the name of Promus to Harrah's
Entertainment, Inc. ("Proposal Two") (see "The Distribution" and Annex V); (iii)
approval of certain amendments to the Promus 1990 Stock Option Plan (a) to
increase by 4,500,000 the number of shares available under the Promus 1990 Stock
Option Plan and (b) to expand the rights of the Human Resources Committee of
Promus's Board of Directors (the "Promus HR Committee") to make certain
adjustments in connection with the Promus 1990 Stock Option Plan upon the
occurrence of certain events ("Proposal Three") (see "Amendments to Promus 1990
Stock Option Plan" and Annex IV-A); (iv) approval of certain amendments to the
Promus 1990 Restricted Stock Plan (a) to increase by 500,000 the number of
shares available under the Promus 1990 Restricted Stock Plan, and (b) to expand
the rights of the Promus HR Committee to make certain adjustments in connection
with the Promus 1990 Restricted Stock Plan upon the occurrence of certain events
("Proposal Four") (see "Amendments to Promus 1990 Restricted Stock Plan" and
Annex IV-B); (v) approval and ratification of the adoption by PHC of the PHC
1995 Stock Option Plan to provide continued employment and performance
incentives for the management of PHC ("Proposal Five") (see "The
Distribution--Management of PHC--PHC Compensation Plans" and Annex III-A); (vi)
approval and ratification of the adoption by PHC of the PHC 1995 Restricted
Stock Plan to provide continued employment and performance incentives for the
management of PHC; ("Proposal Six") (see "The Distribution--Management of
PHC--PHC Compensation Plans" and Annex III-B); (vii) approval and ratification
of the adoption by PHC of the PHC Key Executive Officer Annual Incentive Plan to
provide continued employment and performance incentives for the management of
PHC ("Proposal Seven") (see "The Distribution--Management of PHC--PHC
Compensation Plans" and Annex VII); (viii) approval and ratification of the
adoption by PHC of the PHC Nonmanagement Directors Stock Incentive Plan pursuant
to which nonmanagement directors will receive up to 100% of their annual
director fees in common stock of PHC in lieu of cash ("Proposal Eight") (see
"The Distribution--Management of PHC--PHC Compensation Plans" and Annex VIII);
and (ix) ratification of the election of eleven directors of PHC specified
herein, who will be divided into three classes, the initial terms of which will
expire in 1996, 1997 and 1998 ("Proposal Nine") (see "The
Distribution--Management of PHC--PHC Board").

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THE EFFECTIVENESS OF EACH OF THE DISTRIBUTION PROPOSALS IS CONDITIONED UPON
THE APPROVAL OF ALL OF THE DISTRIBUTION PROPOSALS. ACCORDINGLY, FAILURE OF THE
STOCKHOLDERS TO APPROVE ANY ONE OR MORE OF THE DISTRIBUTION PROPOSALS WILL
RESULT IN THE INEFFECTIVENESS OF ALL OF THE DISTRIBUTION PROPOSALS. THE BOARD OF
DIRECTORS OF PROMUS (THE "PROMUS BOARD") UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR ALL OF THE DISTRIBUTION PROPOSALS.

For a description of the reasons for the Distribution, see "The
Distribution--Background and Reasons for the Distribution."

In addition, stockholders will also be asked to vote upon the following
proposals (the "Additional Proposals" and, together with the Distribution
Proposals, the "Proposals"): (i) the election of Philip G. Satre, Boake A. Sells
and Shirley Young to the Promus Board as Class II directors for three-year terms
expiring at the 1998 Annual Meeting ("Proposal Ten") (see "Election of Promus
Directors"); (ii) approval of an amendment to Promus's Certificate of
Incorporation permitting the redemption of Promus's common stock in certain
circumstances to facilitate Promus's participation in certain gaming joint
ventures ("Proposal Eleven") (see "Amendment to the Promus Certificate of
Incorporation Regarding Redemption of Common Stock"); (iii) approval of a Promus
Key Executive Officer Annual Incentive Plan to provide continued employment and
performance incentives for the management of Promus ("Proposal Twelve") (see
"Adoption of Promus Key Executive Officer Annual Incentive Plan"); (iv) approval
of a Promus Nonmanagement Directors Stock Incentive Plan pursuant to which
nonmanagement directors will receive up to 100% of their annual directors fees
in Promus common stock in lieu of cash ("Proposal Thirteen") (see "Adoption of
Promus Nonmanagement Directors Stock Incentive Plan"); and (v) ratification of
the appointment of Arthur Andersen LLP, as independent auditors of Promus
("Proposal Fourteen") (see "Appointment of Auditors").

THE EFFECTIVENESS OF ANY OF THE ADDITIONAL PROPOSALS IS NOT CONDITIONED ON
THE APPROVAL OF ANY OTHER ADDITIONAL PROPOSALS OR OF THE DISTRIBUTION PROPOSALS.
THE PROMUS BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS
NINE, TEN, ELEVEN, TWELVE, THIRTEEN AND FOURTEEN.

Annual Meeting Record Date. April 21, 1995 ("Annual Meeting Record Date").

Voting. Each stockholder of record as of the Annual Meeting Record Date is
entitled at the Annual Meeting to one vote for each share held. The affirmative
vote of the holders of at least a majority of the shares of common stock, par
value $0.10, of Promus ("Promus Common Stock") present in person or represented
by proxy at the Annual Meeting is required to approve each of the Proposals
except that the affirmative vote of the holders of at least a majority of the
outstanding shares of Promus Common Stock is required to approve Proposal Two
(regarding a charter amendment to change Promus's name) and Proposal Eleven
(regarding a charter amendment to permit the redemption of Promus Common Stock
in certain circumstances). As of January 31, 1995, there were 102,463,487 shares
of Promus Common Stock outstanding and entitled to vote at the Annual Meeting
and 16,993 record holders of Promus Common Stock.

THE DISTRIBUTION

Effect. The Distribution will separate Promus's hotel business (the "Hotel
Business") from its casino entertainment business (the "Casino Business"). After
the Distribution, PHC (as used herein, to include PHC's consolidated
subsidiaries unless the context requires otherwise) will operate and develop the
Hotel Business. Promus (after the Distribution, Promus, including its
subsidiaries unless the context requires otherwise, hereinafter being referred
to as "Harrah's Entertainment") and Embassy Suites, Inc. ("Embassy") will,
through subsidiaries, operate and develop the Casino Business. Embassy will
remain a wholly-owned subsidiary of Harrah's Entertainment and will,
concurrently with the Distribution, change its name to Harrah's Operating
Company, Inc.

Shares to be Distributed. On the date of the Distribution (the "Distribution
Date"), Embassy, a wholly-owned subsidiary of Promus and the sole stockholder of
PHC, will distribute (the "Embassy Distribution") to Promus all of the
outstanding shares of common stock, par value $0.10, of PHC ("PHC Common Stock")
and the associated rights (the "PHC Rights"). Substantially concurrently

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with the Embassy Distribution, Promus will make the Distribution to stockholders
of record of Promus as of the Distribution Record Date (as defined below). Each
stockholder will receive one share of PHC Common Stock for every two shares of
Promus Common Stock held by such stockholder. Fractional shares will not be
distributed. Fractional shares will be aggregated and, after the Distribution,
sold in the public market by Continental Stock Transfer & Trust Company, as the
distribution agent (the "Distribution Agent"), and the aggregate net cash
proceeds will be distributed ratably to those stockholders of record otherwise
entitled to fractional interests. See "The Distribution--Manner of Effecting the
Distribution."

Distribution Record Date. The record date for the Distribution ("the
Distribution Record Date") will be established by the Promus Board following the
Annual Meeting because approval of the Distribution Proposals by the
stockholders of Promus is a condition to the Distribution. The Distribution
Record Date will be a date that is as soon as practicable following the
declaration of the Distribution. It is currently anticipated that the Promus
Board will set a distribution record date of approximately June 12, 1995. See
"The Distribution--Manner of Effecting the Distribution."

Distribution Date. The Distribution Date will be established by the Promus
Board following the Annual Meeting. On the Distribution Date, Promus will
deliver shares of PHC Common Stock to the Distribution Agent. The Distribution
Agent will mail stock certificates and cash in lieu of fractional share
interests as soon as practicable thereafter. See "The Distribution--Manner of
Effecting the Distribution."

Conditions to the Distribution. The Distribution is conditioned upon, among
other things, stockholder approval of all of the Distribution Proposals at the
Annual Meeting. Consequently, the Distribution will not occur unless all of the
Distribution Proposals are approved. Even if all conditions are satisfied, the
Promus Board has reserved the right to abandon, defer or modify the Distribution
or the other elements of the Distribution Proposals at any time prior to the
Distribution Date. The Promus Board will not, however, waive any of the
conditions to the Distribution or make any changes in the terms of the
Distribution or the other elements of the Distribution Proposals after the
Distribution Proposals are approved by Promus's stockholders unless the Promus
Board determines that such changes would not be materially adverse to Promus's
stockholders. In determining whether any such changes would be materially
adverse to Promus's stockholders, the Promus Board will consider, as
appropriate, advice from its outside financial and legal advisors as well as the
recommendation of management as to the potential impact of such changes on
Promus and Promus's stockholders. See "The Distribution--Conditions;
Termination."

Reasons for the Distribution. The Promus Board believes that the
Distribution will accomplish a number of important business objectives.
Separation of the Casino Business and the Hotel Business into independent
companies will allow each company to concentrate exclusively on its own business
objectives without concern for the other company's strategic business
objectives. Management believes that the ability of the Hotel Business to expand
and increase its profitability may be significantly enhanced in the future if it
is no longer controlled by Promus. In particular, the Promus Board believes that
separation of PHC from Promus will avoid conflicts in the use of limited capital
resources by the Casino Business and the Hotel Business.

The Promus Board also believes that the separation will afford each of
Harrah's Entertainment and PHC greater flexibility to pursue business
opportunities, including acquisitions, joint ventures or business combinations.
The establishment of PHC Common Stock as a separate, publicly traded equity
security should facilitate PHC's ability to effect acquisitions using PHC Common
Stock as consideration. The Distribution is expected to enhance the ability of
the separate corporations to attract, motivate and retain key personnel through
the provision of more effective incentive compensation programs that are based
on the performance of the respective businesses in which such individuals are
employed without being influenced by the results of the businesses in which they
have no involvement.

The Promus Board also believes that the separation will allow financial
markets to better recognize and evaluate the different merits of the Casino
Business and the Hotel Business, enhancing the

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likelihood that each will achieve appropriate market recognition for its own
performance. In the opinion of the Promus Board, the separation will provide
stockholders additional flexibility in the management of their investment in
Promus by allowing them to make separate investments in Harrah's Entertainment
(which, after the Distribution, will be in the casino entertainment business)
and PHC (which, after the Distribution, will be in the hotel business), as
opposed to a single investment today in Promus, composed of both the Casino
Business and the Hotel Business. The Promus Board believes that the ability of
Harrah's Entertainment and PHC to raise additional equity and debt financing may
be enhanced by better comprehension on the part of potential investors and
lenders of the nature and strength of the business and assets of each individual
company, and, in the long-term, the Distribution is expected to result in
reduced cost of capital as the cost of capital for the hotel industry has
historically generally been lower than that of the gaming industry. Promus's
cost of capital has historically been slightly in excess of that of the gaming
industry generally. There can be no assurance that any of the anticipated
benefits of the Distribution described above will be realized.

In the event that stockholders fail to approve the Distribution Proposals,
Promus currently intends to continue to operate the Casino Business and the
Hotel Business and may consider alternative restructuring options.

Certain Special Considerations. Stockholders should consider the factors
discussed in "The Distribution--Certain Special Considerations," as well as the
other information set forth herein, before voting on the Distribution Proposals
or the Additional Proposals.

Asset Transfers. Prior to the Distribution Date, Promus intends to transfer
to PHC the stock of certain subsidiaries principally engaged in the Hotel
Business, and consummate certain other transfers intended to allocate assets and
liabilities relating to the Hotel Business to PHC and assets and liabilities
relating to the Casino Business to Harrah's Entertainment (such transfers being
referred to collectively as the "Asset Transfers"). Stockholder approval is not
being sought with respect to the Asset Transfers, and, although it has no
present intention to do so, Promus may proceed with some or all of the Asset
Transfers if stockholder approval is not obtained for the Distribution
Proposals. See "The Distribution--Asset Transfers."

Relationship Between PHC and Harrah's Entertainment After the
Distribution. For purposes of governing certain ongoing relationships between
Harrah's Entertainment and PHC after the Distribution and to provide mechanisms
for an orderly transition, Promus and PHC will enter into certain agreements.
Such agreements include: a Distribution Agreement; an Employee Benefits
Allocation Agreement; a Tax Sharing Agreement; a Trademark Assignment Agreement;
a Noncompetition Agreement; a Risk Management Allocation Agreement; information
technology sharing agreements; transitional services agreements; and polices and
procedures for addressing conflicts. See "The Distribution--Relationship between
PHC and Harrah's Entertainment after the Distribution."

In addition, Michael D. Rose will serve as Chairman of the Board of
Directors of Harrah's Entertainment and as Chairman of the Board of Directors of
PHC, and Ben C. Peternell will serve as an executive officer of Harrah's
Entertainment and as a director of PHC. PHC and Harrah's Entertainment will
adopt policies and procedures to be followed by the board of directors of each
company to limit the involvement of Messrs. Rose and Peternell in conflict
situations, including requiring them to abstain from voting as directors of
either company on certain matters that present a conflict of interest between
the two companies. See "The Distribution--Relationship Between PHC and Harrah's
Entertainment After the Distribution--Policies and Procedures for Addressing
Conflicts" and "The Distribution--Certain Special Considerations--Potential
Conflicts."

Financing. Promus and Embassy have obtained a commitment from NationsBank,
N.A. (Carolinas) and NationsBanc Capital Markets, Inc. ("NationsBank") under
which NationsBank or a group of banks and other financial institutions including
NationsBank will provide PHC with revolving credit facilities in aggregate
principal amount of $350 million (the "PHC Bank Credit Facilities"). The PHC
Bank Credit Facilities will consist of a $300 million revolving credit facility
with a maturity of five years (the "Five Year Revolver") and a $50 million
annually extendible revolving credit facility with an initial

4
<PAGE>
maturity of 364 days (the "Extendible Revolver"). The Extendible Revolver is
convertible into a two-year term loan with equal amortizing payments over such
two-year period. Initially, approximately $210 million will be drawn by Embassy
under the PHC Bank Credit Facilities and used by Embassy to retire existing
debt. Upon the consummation of the Distribution, the PHC Bank Credit Facilities
will be transferred by Embassy to a wholly-owned subsidiary of PHC, PHC and its
material subsidiaries will be guarantors of such facility and Embassy will be
released from liability under the PHC Bank Credit Facilities. PHC will use the
remaining availability under the PHC Bank Credit Facilities for working capital,
hotel development and other general corporate purposes and to pay certain costs
and expenses of the Distribution. See "The Distribution--Financing--PHC" and
"--Management's Discussion and Analysis of Historical Financial Condition and
Results of Operations of PHC-- Liquidity and Capital Resources." In addition,
Harrah's Entertainment will cause Embassy (which will remain a wholly-owned
subsidiary of Harrah's Entertainment) to make certain amendments to its bank
credit facility (the "Embassy Bank Credit Facility") to permit the Distribution.
Embassy is also seeking to amend the Embassy Bank Credit Facility to include
modifications to certain financial covenants necessitated by the Distribution
and more favorable pricing, maturity and other terms. The total commitment
amount under the Embassy Bank Credit Facility (presently $650 million) could be
reduced in connection with these amendments. See "The
Distribution--Financing--Harrah's Entertainment."

Consent Solicitation. Embassy is concurrently herewith soliciting consents
(the "Consent Solicitation") from the holders of its 10 7/8% Senior Subordinated
Notes due 2002 (the "10 7/8% Notes") and its 8 3/4% Senior Subordinated Notes
due 2000 (the "8 3/4% Notes") to certain indenture amendments to permit the
consummation of the Distribution. The Distribution, as structured, is
conditioned upon the consent to such indenture amendments by holders of a
majority of the outstanding aggregate principal amount of the 10 7/8% Notes and
by holders of a majority of the outstanding aggregate principal amount of the 8
3/4% Notes. See "The Distribution--Conditions; Termination." The Consent
Solicitation will be made only by means of a consent solicitation statement.
Certain anticipated terms and conditions of the Consent Solicitations are
summarized herein. See "The Distribution--Consent Solicitation."

Tax Consequences. For federal income tax purposes, it is expected that the
Embassy Distribution and the Distribution will each qualify as a tax-free
distribution under Section 355 of the Internal Revenue Code of 1986, as amended
(the "Code"). For a more detailed discussion of the tax consequences of the
Distribution to the holders of Promus Common Stock, see "The
Distribution--Federal Income Tax Aspects of the Distribution." For a description
of the consequences to Harrah's Entertainment, PHC and their stockholders if
either the Embassy Distribution or the Distribution were not to qualify as
tax-free, see "The Distribution--Certain Special Considerations--Certain Tax
Considerations."

Accounting Treatment. The historical financial statements of Promus have
been restated to report the Hotel Business as discontinued operations. Included
separately herein are the combined financial statements of PHC as if it were a
separate entity for all periods presented. Promus's historical basis in the
assets and liabilities of PHC has been carried over. See "Promus Hotel
Corporation Combined Financial Statements," "The Distribution--Pro Forma
Financial Data of PHC" and "The Distribution--Pro Forma Financial Data of
Harrah's Entertainment."

PHC

Business. PHC is presently a wholly-owned subsidiary of Embassy, which is a
wholly-owned subsidiary of Promus. Following the Asset Transfers and the
Distribution, PHC will conduct the Hotel Business as now conducted by Embassy
and certain other subsidiaries of Promus. The Hotel Business consists of the
Embassy Suites, Hampton Inn and Homewood Suites hotel brands. Each brand is
targeted to a specific market segment. Embassy Suites hotels, of which there
were 107 on December 31, 1994, appeal to the traveler who has a need or desire
for greater space and more focused services than

5
<PAGE>
are available in traditional upscale hotels. Embassy Suites hotels comprise the
largest upscale all-suite hotel system in the United States by number of suites
and system revenues. Hampton Inn hotels are moderately priced hotels designed to
attract the business and leisure traveler desiring quality accommodations at
affordable prices. Since 1984, when the brand was introduced, the system has
grown to 437 hotels as of December 31, 1994. Homewood Suites hotels, of which
there were 26 on December 31, 1994, represents the Company's entry into the
extended stay market and target the traveler who stays five or more consecutive
nights, as well as the traditional business and leisure traveler. In December
1993, PHC announced a new brand, Hampton Inn & Suites, which is under
development. The Hampton Inn & Suites brand will incorporate the best features
of the Hampton Inn and Homewood Suites brands, offering both traditional hotel
room accommodations and apartment style suites within one property. As of
December 31, 1994, the Hotel Business included 468 properties that are licensed
by PHC, 70 properties (including properties in which the Company has a joint
venture interest) that are managed by PHC, and 32 properties that are owned and
operated by PHC. See "The Distribution-- PHC Business and Properties."

Principal Office. The principal office of PHC is, and after the Distribution
Date will remain, 6800 Poplar Avenue, Suite 200, Memphis, Tennessee 38138. Its
telephone number will be (901) 758-3100.

Board of Directors. Prior to the Distribution Date, Embassy, as sole
stockholder of PHC, plans to elect the following eleven individuals to
constitute the entire Board of Directors of PHC (the "PHC Board"), effective as
of the Distribution Date: U. Bertram Ellis, Jr., Debra J. Fields, Christopher W.
Hart, C. Warren Neel, Ben C. Peternell, Michael D. Rose, Michael I. Roth,
Raymond E. Schultz, Jay Stein, David C. Sullivan and Ronald Terry. Messrs. Rose
and Terry currently serve as directors of Promus and Mr. Rose will continue to
serve as a director of Harrah's Entertainment after the Distribution. Mr. Terry
is expected to retire from the Promus Board on the Annual Meeting Date. Mr.
Peternell is an executive officer of Promus and will continue as an executive
officer of Harrah's Entertainment after the Distribution. See "The
Distribution--Management of PHC--PHC Board."

Post-Distribution Dividend Policy. The declaration and payment of dividends
by PHC is at the discretion of the PHC Board. It is expected that certain debt
agreements of PHC or its subsidiaries will substantially limit its ability to
pay cash dividends. The PHC Board does not presently intend to declare any cash
dividends on the PHC Common Stock after the Distribution. The PHC Board intends
to reevaluate its dividend policy in the future in light of its results of
operations, financial conditions, cash requirements, future prospects and other
factors it deems relevant. There can be no assurance that any dividends will be
paid in the future. See "The Distribution--Certain Special
Considerations--Dividend Policies."

Trading Market. There is currently no public market for PHC Common Stock.
PHC intends to list the PHC Common Stock and associated PHC Rights on the New
York Stock Exchange, the Midwest Stock Exchange, the Pacific Stock Exchange and
the Philadelphia Stock Exchange. See "The Distribution--Certain Special
Considerations--No Current Public Market for PHC Common Stock" and "The
Distribution--Listing and Trading of PHC Common Stock."

Certain Provisions of Certificate of Incorporation and Bylaws. PHC's
Certificate of Incorporation (the "PHC Certificate") and Bylaws (the "PHC
Bylaws") and Harrah's Entertainment's Certificate of Incorporation (the
"Harrah's Entertainment Certificate") and Bylaws (the "Harrah's Entertainment
Bylaws"), are substantially similar to Promus's Certificate of Incorporation
(the "Promus Certificate") and Bylaws (the "Promus Bylaws"). As is the case with
the Promus Certificate and the Promus Bylaws, certain provisions of the PHC
Certificate and the PHC Bylaws, as each will be in effect following the
Distribution, may have the effects of making difficult or expensive an
acquisition of control of PHC in a transaction not approved by the PHC Board, of
increasing the likelihood that incumbent management will retain their positions
and of depriving stockholders of opportunities to receive premiums over market
value for their shares. See "The Distribution--Certain Provisions of the PHC
Certificate and PHC Bylaws."

6
<PAGE>
Additionally, certain provisions of the PHC Certificate eliminate certain
liabilities of PHC directors in connection with the performance of their duties.
See "The Distribution--Liability and Indemnification of Officers and Directors
of PHC."

HARRAH'S ENTERTAINMENT

Business. Harrah's Entertainment will retain Promus's casino entertainment
operations and properties. Harrah's Entertainment has, through existing and
predecessor entities, been in the casino entertainment business for more than 57
years and is unique among casino entertainment companies in its broad geographic
diversification. Harrah's Entertainment operates casinos in the five traditional
U.S. gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin, Nevada and
Atlantic City, New Jersey. It also operates riverboat casinos in Joliet,
Illinois; dockside casinos in Vicksburg and Tunica, Mississippi, Shreveport,
Louisiana and North Kansas City, Missouri; limited stakes casinos in Central
City and Blackhawk, Colorado; and a casino on an Indian reservation near
Phoenix, Arizona. As of December 31, 1994, Harrah's Entertainment operated a
total of approximately 521,400 square feet of casino space, 14,808 slot
machines, 789 table games, 5,367 hotel rooms or suites, approximately 76,000
square feet of convention space, 51 restaurants, four showrooms and three
cabarets. Harrah's Entertainment's marketing strategy is designed to appeal
primarily to the broad middle-market gaming customer segment and its strategic
direction is focused on establishing a well-defined brand identity that
communicates a consistent message of quality and service. See "The
Distribution--Harrah's Entertainment Business and Properties."

Principal Office. The principal office of Harrah's Entertainment will be at
the current corporate headquarters of Promus, 1023 Cherry Road, Memphis,
Tennessee 38117. Its telephone number will continue to be (901) 762-8600.

Board of Directors. Effective as of the Distribution Date, the Board of
Directors of Harrah's Entertainment is expected to consist of the following
current ten directors of Promus: James L. Barksdale, Susan Clark-Jackson, James
B. Farley, Joe M. Henson, Michael D. Rose, Walter J. Salmon, Philip G. Satre,
Boake A. Sells, Eddie N. Williams, and Shirley Young. Ronald Terry, a current
director of Promus, is expected to retire from the Promus Board on the Annual
Meeting Date. The Promus Board is entitled to elect an individual to fill the
resulting vacancy. See "The Distribution-- Management of Harrah's
Entertainment." Effective as of the Distribution Date, Mr. Terry will become a
member of the PHC Board.

Post-Distribution Dividend Policy. Harrah's Entertainment does not presently
intend to declare any cash dividends on the Harrah's Entertainment Common Stock
after the Distribution. Certain debt agreements of Harrah's Entertainment and
its subsidiaries substantially limit the ability to pay such cash dividends. The
declaration and payment of dividends by Harrah's Entertainment is at the
discretion of the Board of Directors of Harrah's Entertainment (the "Harrah's
Entertainment Board"). The Harrah's Entertainment Board intends to reevaluate
Harrah's Entertainment's dividend policy in the future in light of Harrah's
Entertainment's results of operations, financial condition, cash requirements,
future prospects and other factors deemed relevant by the Harrah's Entertainment
Board. There can be no assurance that any dividends will be paid in the future.
See "The Distribution--Certain Special Considerations--Dividend Policies."

Trading Market. After the Distribution, it is expected that Harrah's
Entertainment Common Stock (formerly the Promus Common Stock) will continue to
be listed on the New York Stock Exchange, the Midwest Stock Exchange, the
Pacific Stock Exchange and the Philadelphia Stock Exchange. As a result of the
Distribution, the trading price range of Harrah's Entertainment Common Stock is
expected to be significantly lower than the trading price range of Promus Common
Stock prior to the Distribution. See "The Distribution--Certain Special
Considerations--Changes in Trading Prices of Harrah's Entertainment Common
Stock."

7
<PAGE>
THE PROMUS COMPANIES INCORPORATED
SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA

The following summary combined financial information for Promus has been
derived from the historical financial information of Promus, which has been
restated to retroactively reflect the Hotel Business as discontinued operations.
The information that follows should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto of Promus included in
Promus's Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended on Form 10-K/A (the "1994 Promus 10-K"), and incorporated by
reference herein. For a discussion of the basis of presentation of the Promus
consolidated financial statements, see Note 1 to the Promus consolidated
financial statements. For a discussion of Promus's financial results for the
first quarters of 1995 and 1994, see "Recent Developments."

<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------
1994(A) 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Operating results(b)
Continuing operations
Revenues.................................. $1,339.4 $1,020.6 $ 894.4 $ 863.4 $ 875.3
Operating income.......................... 269.2 210.0 161.0 142.2 139.3
Income from continuing operations......... 50.0 74.9 49.6 34.5 30.7
Earnings (loss) from discontinued hotel
operations................................ 36.3 16.9 1.8 (4.5) (7.4)
Net income.................................. 78.4 86.3 52.5 30.0 23.4
Earnings (loss) per share
Continuing operations..................... 0.49 0.73 0.49 0.39 0.39
Discontinued hotel operations............. 0.35 0.16 0.02 (0.06) (0.09)
Net income................................ 0.76 0.84 0.52 0.33 0.30
Cash dividend per share..................... - - - - 10.00
Financial position
Total assets(b)............................. 1,738.0 1,528.0 1,297.3 1,226.0 1,141.2
Total assets of continuing operations(b).... 1,595.0 1,347.5 1,085.1 1,034.3 1,028.6
Long-term debt(b)........................... 727.5 665.2 660.7 614.5 712.3
Stockholders' equity........................ 623.4 536.0 427.9 365.5 203.7
Book value per share........................ 6.09 5.24 4.20 3.61 2.55
</TABLE>

- - ------------

<TABLE>
<C> <S>
(a) Promus's 1994 financial results include a charge of $53.4 million to accrue the
estimated cost of the settlement of litigation between Promus and Bass PLC, including
related legal fees and other associated expenses.
(b) Promus's historical financial information for all periods presented is reflected net of
a pro-rata portion of its historical corporate debt balance, unamortized deferred
finance charges and interest expense allocated to PHC. These allocations were based on
the percentage of Promus's existing corporate debt expected to be retired using
proceeds drawn under the PHC Bank Credit Facilities. The amounts of these balances
allocated to PHC were based on the estimate that approximately 20.5 percent, computed
as of December 31, 1994, of Promus's corporate debt will be assumed by PHC at the time
of the Distribution and result in a reasonable approximation, in management's judgment,
of the portion of Promus's historical corporate debt balance that was serviced by the
cash flows of PHC's operations in the periods presented. The amounts of Promus's
corporate debt allocated to PHC as of year-end 1994, 1993, 1992, 1991 and 1990 were
$187.9 million, $171.8 million, $170.9 million, $168.9 million and $194.2 million,
respectively. The amounts of Promus's unamortized deferred finance charges allocated to
PHC as of year-end 1994, 1993, 1992, 1991 and 1990 were $3.2 million, $3.9 million,
$3.4 million, $3.6 million and $5.0 million, respectively. Promus's corporate interest
expense has been allocated to PHC on the same basis and percentage applied to the
corporate debt allocation. The amounts of Promus's corporate interest expense allocated
to PHC for fiscal 1994, 1993, 1992, 1991 and 1990 were $17.2 million, $17.0 million,
$19.5 million, $21.1 million and $18.6 million, respectively. The amounts of Promus's
corporate interest allocated to PHC for all periods presented is in addition to the
interest expense included in PHC's financial statements on indebtedness specifically
identified with a PHC entity and PHC's proportionate share of interest expense of its
nonconsolidated affiliates. Total interest expense included in PHC's financial
statements from all sources, including the amounts allocated from Promus, for fiscal
1994, 1993, 1992, 1991 and 1990 were $31.1 million, $33.5 million, $40.7 million, $41.8
million and $30.3 million, respectively.
</TABLE>

8
<PAGE>
PROMUS HOTEL CORPORATION
SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA

The following summary combined financial information for PHC has been
derived from the historical financial information of PHC. The information that
follows should be read in conjunction with the unaudited Pro Forma Financial
Data of PHC and the notes thereto and the audited Combined Financial Statements
and the notes thereto and Management's Discussion and Analysis of Historical
Financial Condition and Results of Operation of PHC included elsewhere in this
Proxy Statement. For a discussion of the basis of presentation of the PHC
Combined Financial Statements, see Note 1 of Notes to the PHC Combined Financial
Statements. For a discussion of PHC's financial results for the first quarters
of 1995 and 1994, see "Recent Developments."
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating results(a)(b)
Continuing operations
Revenues...................................... $242.7 $231.2 $218.7 $167.7 $128.9
Operating income.............................. 94.3 67.5 43.8 33.9 20.1
Income (loss) before extraordinary items...... 36.3 16.9 1.8 (4.5) (7.4)
Net income (loss)............................... 36.3 16.9 6.4 (4.5) (7.4)
Financial position
Total assets(a)................................. 420.6 446.2 511.5 502.7 404.2
Long-term debt(a)............................... 189.9 174.6 216.7 220.7 191.2
Parent company investment....................... 143.0 180.5 212.2 191.7 112.6
</TABLE>

- - ------------

(a) In anticipation of retiring a portion of Promus's outstanding corporate debt
using proceeds drawn under the PHC Bank Credit Facilities prior to the
Distribution, a pro-rata portion of Promus's historical corporate debt
balance, unamortized deferred finance charges and interest expense has been
allocated to PHC. These allocations were based on the percentage of Promus's
existing debt expected to be retired using proceeds to be drawn under the
PHC Bank Credit Facilities. The amounts of these balances allocated to PHC
were based on the estimate that approximately 20.5 percent, computed as of
December 31, 1994, of Promus's corporate debt will be assumed by PHC at the
time of the Distribution and result in a reasonable approximation, in
management's judgment, of the portion of Promus's historical corporate debt
balance that was serviced by the cash flows of PHC's operations in the
periods presented. The amounts of Promus's corporate debt allocated to PHC
as of year-end 1994, 1993, 1992, 1991 and 1990 were $187.9 million, $171.8
million, $170.9 million, $168.9 million and $194.2 million, respectively.
The amounts of Promus's deferred finance charges allocated to PHC as of
year-end 1994, 1993, 1992, 1991 and 1990 were $3.2 million, $3.9 million,
$3.4 million, $3.6 million and $5.0 million, respectively. Promus's
corporate interest expense has been allocated to PHC on the same basis and
percentage applied to the corporate debt allocation. The amounts of Promus's
corporate interest expense allocated to PHC for fiscal 1994, 1993, 1992,
1991 and 1990 were $17.2 million, $17.0 million, $19.5 million, $21.1
million and $18.6 million, respectively. The amounts of Promus's corporate
interest allocated to PHC for all periods presented are in addition to PHC's
interest expense on indebtedness specifically identified with a PHC entity
and PHC's proportionate share of interest expense of its nonconsolidated
affiliates. Total interest expense included in PHC's financial statements
from all sources, including the amounts allocated from Promus, for fiscal
1994, 1993, 1992, 1991 and 1990 were $31.1 million, $33.5 million, $40.7
million, $41.8 million and $30.3 million, respectively.

(b) PHC's historical operating results do not reflect any estimated incremental
costs expected to be incurred by PHC to support its operations as a
stand-alone entity after the Distribution. As reflected in the accompanying
pro forma financial statements, had the Distribution occurred on January 1,
1994, it is estimated that such incremental costs would have been
approximately $6.6 million, before income taxes, in 1994. Had the
Distribution occurred at the beginning of the earliest period presented, a
similar amount, adjusted for the impact of inflation, would have been
incurred in each of the periods reported in this table.

9
<PAGE>
PROMUS HOTEL CORPORATION
SUMMARY OF SELECTED PRO FORMA FINANCIAL DATA

The following summary unaudited pro forma financial data illustrate the
estimated effects of the proposed Distribution (including the incurrence of the
PHC Bank Credit Facilities). The pro forma balance sheet data is based on the
December 31, 1994, balance sheet of PHC and assumes the Distribution was
consummated on that date. The pro forma income statement data is based on the
fiscal 1994 PHC income statement and assumes the Distribution was consummated at
the beginning of that year. The selected unaudited pro forma financial data
should be read in conjunction with the Selected Historical Financial Data,
including notes thereto, and other financial information of PHC included
elsewhere in this Proxy Statement.

The Selected Pro Forma Financial Data of PHC does not purport to represent
what the financial position or results of operations of PHC would actually have
been if the Distribution had in fact been consummated on such dates or to
project the financial position or results of operations as of any future date or
for any period.

<TABLE>
<CAPTION>
FISCAL
YEAR 1994
---------
<S> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Operating results
Continuing operations
Revenues...................................................................... $ 245.5
Operating income.............................................................. 89.2
Income before income taxes.................................................... 58.2
Income from continuing operations............................................... 33.3
Earnings per share.............................................................. 0.65
Average number of common and common equivalent shares (in thousands).............. 51,405
Financial position
Total assets.................................................................... $ 442.7
Long-term debt.................................................................. 215.2
Stockholders' equity............................................................ 139.8
Book value per share............................................................ 2.73
</TABLE>

10
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
SUMMARY OF SELECTED PRO FORMA FINANCIAL DATA

The following summary unaudited pro forma financial data illustrate the
estimated effects of the proposed Distribution. The pro forma balance sheet data
is based on the December 31, 1994, balance sheet of Harrah's Entertainment and
assumes the Distribution was consummated on that date. The pro forma income
statement data is based on the fiscal 1994 Harrah's Entertainment income
statement and assumes the Distribution was consummated at the beginning of that
year. The selected unaudited pro forma financial data should be read in
conjunction with the other financial information of Harrah's Entertainment
included elsewhere in this Proxy Statement.

The Selected Pro Forma Financial Data of Harrah's Entertainment does not
purport to represent what the financial position or results of operations of
Harrah's Entertainment would actually have been if the Distribution had in fact
been consummated on such dates or to project the financial position or results
of operations as of any future date or for any period.

<TABLE>
<CAPTION>
FISCAL
YEAR
(IN MILLIONS, EXCEPT SHARE DATA) 1994
--------
<S> <C>
Operating results
Continuing operations
Revenues...................................................................... $1,339.4
Operating income.............................................................. 267.9
Income before income taxes and minority interest(a)........................... 138.1
Income from continuing operations(a)............................................ 49.2
Earnings per share--continuing operations(a).................................... 0.48
Average number of common and common equivalent shares (in thousands)............ 102,810
Financial position
Total assets.................................................................... $1,598.1
Long-term debt.................................................................. 745.5
Stockholders' equity............................................................ 469.1
Book value per share............................................................ 4.58
</TABLE>

- - ------------

(a) Harrah's Entertainment's 1994 pro forma income statement includes a charge
of $53.4 million to accrue the estimated cost of the settlement of
litigation between Promus and Bass PLC, including related legal fees and
other associated expenses.

11
<PAGE>
INTRODUCTION

This Proxy Statement is being furnished to stockholders of Promus in
connection with the solicitation of proxies by the Promus Board from holders of
record of Promus Common Stock as of the close of business on the Annual Meeting
Record Date for use at the Annual Meeting to be held on May 26, 1995 at 11:00
a.m. at the Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue,
Memphis, Tennessee, and at any adjournment or postponement thereof. This Proxy
Statement is first being mailed to Promus's stockholders on or about April 25,
1995. References in this Proxy Statement to "Harrah's Entertainment" and
"Harrah's Entertainment Common Stock" mean Promus and Promus Common Stock
following the Distribution. The principal executive offices of Promus are
located at 1023 Cherry Road, Memphis, Tennessee 38117. Following the
Distribution described below, the principal executive offices of PHC will be
located at 6800 Poplar Avenue, Suite 200, Memphis, Tennessee 38138, and the
principal executive offices of Harrah's Entertainment will be at 1023 Cherry
Road, Memphis, Tennessee 38117.

MATTERS FOR CONSIDERATION AT THE ANNUAL MEETING

At the Annual Meeting, holders of shares of Promus Common Stock will be
asked to consider and to vote upon the following Distribution Proposals:

(i) Proposal One: Ratification of the Distribution in the form of a
special dividend to all the holders of outstanding Promus Common Stock, on a
one-for-two basis, of all outstanding shares of PHC Common Stock and the PHC
Rights, and the related arrangements between Promus and PHC, and the
policies to be adopted by such companies, in connection with the
Distribution (see "The Distribution");

(ii) Proposal Two: Approval of the amendment of the Promus Certificate
of Incorporation, which will change the name of Promus to Harrah's
Entertainment, Inc. (see "The Distribution" and Annex V);

(iii) Proposal Three: Approval of certain amendments to the Promus 1990
Stock Option Plan (a) to increase by 4,500,000 the number of shares
available under the Promus 1990 Stock Option Plan and (b) to expand the
rights of the Promus HR Committee to make certain adjustments in connection
with the Promus 1990 Stock Option Plan upon the occurrence of certain events
(see "Amendments to Promus 1990 Stock Option Plan" and Annex IV-A);

(v) Proposal Five: Approval and ratification of the adoption by PHC of
the PHC 1995 Stock Option Plan to provide continued employment and
performance incentives for the management of PHC (see "The
Distribution--Management of PHC--PHC Compensation Plans" and Annex III-A);

(vi) Proposal Six: Approval and ratification of the adoption by PHC of
the PHC 1995 Restricted Stock Plan to provide continued employment and
performance incentives for the management of PHC (see "The
Distribution--Management of PHC--PHC Compensation Plans" and Annex III-B);

12
<PAGE>
(vii) Proposal Seven: Approval and ratification of the adoption by PHC
of the PHC Key Executive Officer Annual Incentive Plan to provide continued
employment and performance incentives for the management of PHC (see "The
Distribution--Management of PHC--PHC Compensation Plans" and Annex VII);

(viii) Proposal Eight: Approval and ratification of the adoption by PHC
of the PHC Nonmanagement Directors Stock Incentive Plan pursuant to which
nonmanagement directors will receive up to 100% of their annual director
fees in PHC Common Stock in lieu of cash (see "The Distribution--Management
of PHC--PHC Compensation Plans" and Annex VIII); and

(ix) Proposal Nine: Ratification of the election of the eleven directors
of PHC specified herein, who will be divided into three classes, the initial
terms of which will expire in 1996, 1997 and 1998 (see "The
Distribution--Management of PHC--PHC Board").

THE EFFECTIVENESS OF EACH OF THE DISTRIBUTION PROPOSALS IS CONDITIONED UPON
THE APPROVAL OF ALL OF THE DISTRIBUTION PROPOSALS. ACCORDINGLY, FAILURE OF THE
STOCKHOLDERS TO APPROVE ANY ONE OR MORE OF THE DISTRIBUTION PROPOSALS WILL
RESULT IN THE INEFFECTIVENESS OF ALL OF THE DISTRIBUTION PROPOSALS.

THE PROMUS BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF
THE DISTRIBUTION PROPOSALS.

Stockholders who vote for the Distribution Proposals will be deemed to have
approved the Distribution Proposals that they vote for, and if sufficient votes
are received, the Distribution Proposals that are approved will be deemed to
have been approved by the stockholders of Promus. Stockholder approval of the
Distribution Proposals may not prevent a stockholder from subsequently seeking
to challenge the Distribution Proposals or the actions of the Promus Board in
approving the Distribution Proposals, and, although Promus cannot determine in
advance its position with respect to any such challenge, it is possible that
Promus could assert such stockholder's or stockholders' approval of the
Distribution Proposals as a defense, in which case, if such defense were held
meritorious, such stockholder or stockholders could effectively be estopped from
asserting such claims.

Although Promus does not believe that stockholder approval of the
Distribution is required under applicable law, the Promus Board has made
stockholder ratification of the Distribution (along with stockholder
ratification or approval, as the case may be, of each of the other Distribution
Proposals, as set forth above) a condition to the Distribution because of the
importance of the Distribution to Promus and its stockholders. This condition
may not be waived by the Promus Board with respect to any of the Distribution
Proposals. See "The Distribution--Conditions; Termination." The Promus Board has
retained discretion, even if stockholder approval of the Distribution Proposals
is obtained, to abandon, defer or modify the Distribution or any other element
contained in the Distribution Proposals, provided that following stockholder
approval the Promus Board will not make any changes in the terms of the
Distribution or the other elements of the Distribution Proposals unless the
Promus Board determines that such changes would not be materially adverse to
Promus's stockholders.

The Distribution is the most important element in the restructuring plan
approved by the Promus Board. Other elements of the restructuring plan involve
certain asset transfers and other corporate reorganizations described below in
"The Distribution--Asset Transfers" that have been or will be consummated prior
to the Distribution Date. Stockholder approval is not being sought for such
Asset Transfers or any elements of the restructuring plan other than those
contained in the Distribution Proposals. Although it has no present intention to
do so, if stockholder approval of the Distribution Proposals is not obtained,
the Promus Board may, in its discretion, elect to proceed with some or all of
the Asset Transfers or certain other elements of the restructuring plan.

For a description of the reasons for the Distribution, see "The
Distribution--Background and Reasons for the Distribution."

13
<PAGE>
In addition, the holders of shares of Promus Common Stock will also be asked
to consider and to vote upon the following Additional Proposals:

(x) Proposal Ten: The election of Philip G. Satre, Boake A. Sells and
Shirley Young to the Promus Board as Class II directors for three-year terms
expiring at the 1998 Annual Meeting (see "Election of Promus Directors");

(xi) Proposal Eleven: Approval of an amendment to Promus's Certificate
of Incorporation permitting the redemption of Promus Common Stock in certain
circumstances to facilitate Promus's participation in certain gaming joint
ventures (see "Amendment to the Promus Certificate of Incorporation
Regarding Redemption of Common Stock");

(xii) Proposal Twelve: Approval of a Promus Key Executive Officer Annual
Incentive Plan to provide continued employment and performance incentives
for the management of Promus (see "Adoption of Promus Key Executive Officer
Annual Incentive Plan");

(xiv) Proposal Fourteen: Ratification of the appointment of Arthur
Andersen LLP as independent auditors of Promus (see "Appointment of
Auditors").

THE EFFECTIVENESS OF ANY OF THE ADDITIONAL PROPOSALS IS NOT CONDITIONED UPON
THE APPROVAL OF ANY OTHER ADDITIONAL PROPOSALS OR OF THE DISTRIBUTION PROPOSALS.

THE PROMUS BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADDITIONAL PROPOSALS.

VOTING RIGHTS AND PROXY INFORMATION

Only holders of record of shares of Promus Common Stock as of the close of
business on the Annual Meeting Record Date will be entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof. Such
holders of shares of Promus Common Stock are entitled to one vote per share on
any matter which may properly come before the Annual Meeting. The presence,
either in person or by properly executed proxy, of a majority of the shares of
Promus Common Stock outstanding on the Annual Meeting Record Date will
constitute a quorum and such quorum is necessary to permit action to be taken by
the stockholders at such meeting. Except for Proposal Two (regarding the charter
amendment to change Promus's name) and Proposal Eleven (regarding the charter
amendment to permit the redemption of Promus Common Stock in certain
situations), the affirmative vote of the holders of at least a majority of the
outstanding shares of Promus Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote is required to approve each of
the Proposals. Proposals Two and Eleven require the affirmative vote of a
majority of the outstanding shares of Promus Common Stock regardless of whether
the holders of such shares are present in person or represented by proxy at the
Annual Meeting. You have three choices on each of the matters to be voted upon
at the Annual Meeting. Concerning the election of directors (Proposal Ten), by
checking the appropriate box on your proxy card, you may: (a) vote for all of
the director nominees as a group; (b) withhold authority to vote for all
director nominees as a group; or (c) vote for all director nominees as a group
except those nominees you identify on the appropriate line. Concerning the other
matters to be voted upon, by checking the appropriate box you may: (a) vote
"For" the Proposal; (b) vote "Against" the Proposal; or (c) "Abstain" from
voting on the Proposal. As discussed below, if you "Abstain" from voting, it
will have the effect of a vote "Against" the Proposal if a quorum is present.

14
<PAGE>
As of January 31, 1995, there were 102,463,487 shares of Promus Common Stock
outstanding and entitled to vote at the Annual Meeting and 16,993 record holders
of Promus Common Stock. Under the Promus Bylaws and Delaware law, shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the Annual Meeting,
but with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Because shares with
respect to which stockholders abstain are deemed to be present and entitled to
vote for purposes of calculating the number of affirmative votes required to
constitute a majority of the outstanding shares present in person or represented
by proxy at the Annual Meeting and entitled to vote, abstentions as to any of
the Proposals will have the same effect as votes against such Proposals. Broker
non-votes, however, will be treated as unvoted for purposes of determining
approval of such proposals and will not be counted as votes for or against such
proposals.

All shares of Promus Common Stock that are represented at the Annual Meeting
by properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated for any of the
Distribution Proposals or any of the Additional Proposals, such proxies will be
voted FOR such Proposal(s).

In the event that a quorum is not present at the time the Annual Meeting is
convened, or if for any other reason Promus believes that additional time should
be allowed for the solicitation of proxies, Promus may adjourn the Annual
Meeting with or without a vote of the stockholders. If Promus proposes to
adjourn the Annual Meeting by a vote of the stockholders, the persons named in
the enclosed proxy will vote all shares of Promus Common Stock for which they
have voting authority in favor of such adjournment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Corporate Secretary of Promus, at or before the Annual Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same shares of Promus Common Stock
and delivering it to the Corporate Secretary of Promus at or before the Annual
Meeting, or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice revoking a proxy should be sent to
the Corporate Secretary of Promus at 1023 Cherry Road, Memphis, Tennessee 38117.

The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid by
Promus. In addition to the use of mails, certain directors, officers or
employees of Promus and its subsidiaries, who receive no compensation for their
services other than their regular salaries, may solicit and tabulate proxies.
Promus has retained D.F. King & Co. to assist in the solicitation of proxies
with respect to shares of Promus Common Stock held of record by brokers,
nominees and institutions. The estimated cost of the services of D.F. King & Co.
is $10,000, plus expenses.

For participants in Promus's Employee Stock Ownership Plan, an appointed
Plan Trustee will vote any shares held for a participant's account in accordance
with the confidential voting instructions returned by the participant. If the
instructions are not returned by the participant, shares held by Promus's
Employee Stock Ownership Plan for such participant will not be voted.

Promus's transfer agent, The Bank of New York, will tabulate the votes. A
representative of the transfer agent will be appointed as inspector at the
Annual Meeting to count all votes and ballots and perform the other duties
required of an inspector.

NO APPRAISAL RIGHTS

Stockholders of Promus will not be entitled to appraisal rights under
Delaware law in connection with the Distribution Proposals or the Additional
Proposals.

15
<PAGE>
RECENT DEVELOPMENTS

Promus recently reported its financial results for the first quarter of
1995. The following summary combined financial information for Promus and
supplemental information regarding earnings of discontinued operations has been
derived from the historical financial information of Promus, which has been
restated retroactively to reflect the Hotel Business as discontinued operations.
The results for the periods indicated are unaudited, but reflect all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair presentation of operating results. Results of operations
for interim periods are not necessarily indicative of a full year of operations.
The information that follows should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto of Promus included in the
1994 Promus 10-K and incorporated by reference herein. For a discussion of the
basis of presentation of the Promus consolidated financial statements, see Note
1 to the Promus consolidated financial statements.

THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED SUMMARY OF OPERATIONS(A)
(UNAUDITED)

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------
MARCH 31, MARCH 31,
1995 1994
--------- ---------
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues............................................................... $ 356,481 $ 290,232
--------- ---------
--------- ---------
Operating profit before corporate expense.............................. $ 77,803 $ 66,930
Corporate expense...................................................... (5,382) (4,892)
--------- ---------
Operating income....................................................... 72,421 62,038
Interest, net of interest capitalized.................................. (22,064) (18,037)
Provision for settlement of litigation and related costs............... - (646)
Other income, including interest income................................ 2,033 404
--------- ---------
Income before income taxes and minority interests...................... 52,390 43,759
Provision for income taxes............................................. (20,357) (16,951)
Minority interests..................................................... (3,337) (4,723)
--------- ---------
Income from continuing operations...................................... 28,696 22,085
Discontinued operations
Earnings from hotel operations, net of tax provision of $6,983
and $5,936......................................................... 9,604 6,131
Spin-off transaction expenses, net of tax benefit of $3,552.......... (15,198) -
--------- ---------
Income before cumulative effect of change in accounting policy......... 23,102 28,216
Cumulative effect of change in accounting policy, net of tax benefit
of $4,317............................................................. - (7,932)
--------- ---------
Net income............................................................. $ 23,102 $ 20,284
--------- ---------
--------- ---------
Earnings per share
Continuing operations................................................ $ 0.28 $ 0.22
Discontinued operations
Earnings from hotel operations, net of taxes....................... 0.09 0.06
Spin-off transaction expenses, net of taxes........................ (0.15) -
Cumulative effect of change in accounting policy, net................ - (0.08)
--------- ---------
Net income....................................................... $ 0.22 $ 0.20
--------- ---------
--------- ---------
Average common shares outstanding...................................... 103,014 102,907
--------- ---------
--------- ---------
</TABLE>

See footnotes on the following page.

16
<PAGE>
THE PROMUS COMPANIES INCORPORATED
SUPPLEMENTAL INFORMATION
EARNINGS OF DISCONTINUED HOTEL OPERATIONS(B)(C)(D)
(UNAUDITED)

<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------
MARCH 31, MARCH 31,
1995 1994
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Revenues................................................................ $63,218 $55,555
--------- ---------
--------- ---------
Operating income........................................................ $24,943 $19,740
Interest, net of interest capitalized................................... (8,407) (7,700)
Other income, including interest income................................. 51 27
--------- ---------
Income before income taxes.............................................. 16,587 12,067
Provision for income taxes.............................................. (6,983) (5,936)
--------- ---------
Net earnings of discontinued hotel operations........................... $ 9,604 $ 6,131
--------- ---------
--------- ---------
</TABLE>

(a) Promus's historical financial information for all periods presented is
reflected net of a pro-rata portion of its historical corporate debt
balance, unamortized deferred finance charges and interest expense allocated
to PHC. The allocations were based on the percentage of Promus's existing
corporate debt expected to be retired using proceeds drawn under the PHC
Bank Credit Facilities. The amounts of these balances allocated to PHC were
based on the estimated percentage of Promus's corporate debt that will be
assumed by PHC at the time of the Distribution and result in a reasonable
approximation, in management's judgment, of the portion of Promus's
historical corporate debt balance that was serviced by the cash flows of
PHC's operations in the periods presented. The amounts of Promus's corporate
debt allocated to PHC as of first quarter-end 1995 and December 31, 1994
were $210.0 million and $187.9 million, respectively. The amounts of
Promus's unamortized deferred finance charges allocated to PHC as of first
quarter-end 1995 and December 31, 1994 were $3.0 million and $3.2 million,
respectively. Promus's corporate interest expense has been allocated to PHC
on the same basis and percentage applied to the corporate debt allocation.
The amounts of Promus's corporate interest expense allocated to PHC for the
first quarter 1995 and 1994 were $4.9 million and $4.5 million,
respectively. The amounts of Promus's corporate interest allocated to PHC
for all periods presented is in addition to the interest expense included in
PHC's financial statements on indebtedness specifically identified with a
PHC entity and PHC's proportionate share of interest expense of its
nonconsolidated affiliates. Total interest expense included in PHC's
financial statements from all sources, including the amounts allocated from
Promus, for first quarter 1995 and 1994 were $8.4 million and $7.7 million,
respectively.

(b) This supplemental information for Promus's discontinued hotel operations
does not purport to represent what the operating results of PHC would have
been had the Distribution occurred at the beginning of the period presented.

(c) PHC's historical financial information for all periods presented includes a
pro-rata portion of Promus's historical corporate debt balance, unamortized
deferred finance charges and interest expense allocated to PHC as described
in note (a).

(d) This supplemental information for Promus's discontinued hotel operations
does not reflect any estimated incremental costs expected to be incurred by
PHC to support its operations as a stand-alone entity after the
Distribution. As reflected in the accompanying pro forma financial
statements, had the Distribution occurred on January 1, 1994, it is
estimated that such incremental costs would have been approximately $6.6
million, before income taxes, in 1994.

17
<PAGE>
THE DISTRIBUTION

BACKGROUND AND REASONS FOR THE DISTRIBUTION

The Promus Board believes that the Distribution will accomplish a number of
important business objectives. Separation of the Casino Business and the Hotel
Business into independent companies will allow each company to concentrate
exclusively on its own business objectives without concern for the other
company's strategic business objectives. Management believes that the ability of
the Hotel Business to expand and increase its profitability may be significantly
enhanced in the future if it is no longer controlled by Promus. In particular,
the Promus Board believes that separation of PHC from Promus will avoid
conflicts in the use of limited capital resources by the Casino Business and the
Hotel Business.

The Promus Board also believes that the separation will afford each of
Harrah's Entertainment and PHC greater flexibility to pursue business
opportunities, including acquisitions, joint ventures or business combinations.
The establishment of PHC Common Stock as a separate, publicly traded equity
security should facilitate PHC's ability to effect acquisitions using PHC Common
Stock as consideration because the PHC Common Stock represents shares in a
company that is primarily in the hotel business, as opposed to the Promus Common
Stock which represents shares in a company that is primarily in the casino
entertainment business. The Distribution is expected to enhance the ability of
the separate corporations to attract, motivate and retain key personnel through
the provision of more effective incentive compensation programs that are based
on the performance of the respective businesses in which such individuals are
employed without being influenced by the results of the businesses in which they
have no involvement.

The Promus Board also believes that the separation will allow financial
markets to better recognize and evaluate the different merits of the Casino
Business and the Hotel Business, enhancing the likelihood that each will achieve
appropriate market recognition for its own performance. In the opinion of the
Promus Board, the separation will provide stockholders additional flexibility in
the management of their investment in Promus by allowing them to make separate
investments in Harrah's Entertainment (which, after the Distribution, will
principally be in the casino entertainment business) and PHC (which will be in
the hotel business), as opposed to a single investment today in Promus, composed
of both the Casino Business and the Hotel Business. The Promus Board believes
that the ability of Promus and PHC to raise additional equity and debt financing
may be enhanced by better comprehension on the part of potential investors and
lenders of the nature and strength of the business and assets of each individual
company, and, in the long-term, the Distribution is expected to result in
reduced cost of capital as the cost of capital for the hotel industry has
historically generally been lower than that of the gaming industry. Promus's
cost of capital has historically been slightly in excess of that of the gaming
industry generally. There can be no assurance that any of the anticipated
benefits of the Distribution described above will be realized.

These factors led members of management to commence consideration, in
October 1994, of the possibility of dividing Promus's operations into two
separate and independent companies. In October 1994, management informed the
Promus Board that it had begun to study such a transaction. In December 1994,
management discussed with the Promus Board the results of its study to date. The
proposal to effect the Distribution, as ultimately developed by management of
Promus with advice from its advisors, was presented to and approved by the
Promus Board on January 27, 1995.

OPINION OF FINANCIAL ADVISOR

James D. Wolfensohn Incorporated ("Wolfensohn") has acted as a financial
advisor to Promus since 1986 pursuant to an annual retainer agreement and has
provided financial advice to Promus with

18
<PAGE>

respect to the Distribution. In connection therewith, Wolfensohn advised the
Promus Board and management regarding the capital structure of PHC and Harrah's
Entertainment following the Distribution. Wolfensohn was requested to render a
fairness opinion to the Promus Board with respect to the Distribution, and at
the meeting of the Promus Board on January 27, 1995, Wolfensohn advised the
Promus Board that, as of that date, in Wolfensohn's opinion, the Distribution
would be fair, from a financial point of view, to the holders of Promus Common
Stock. Wolfensohn furnished to the Promus Board its written opinion, dated April
24, 1995, to that effect. Wolfensohn's opinion is addressed to the Promus Board
in connection with its consideration of the Distribution and addresses only the
fairness, from a financial point of view, of the Distribution to the holders of
Promus Common Stock. Wolfensohn's opinion is not a recommendation to any holder
of Promus Common Stock to approve the Distribution, nor a recommendation to any
current or prospective stockholder of Promus, PHC or Harrah's Entertainment as
to any investment decision such person may take, nor an opinion or estimate as
to the trading prices of the PHC Common Stock or Harrah's Entertainment Common
Stock following the Distribution. The full text of the Wolfensohn opinion, which
sets forth certain assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex I hereto and is incorporated herein by
reference and should be read in its entirety in connection with this Proxy
Statement. The summary of Wolfensohn's opinion set forth herein is qualified by
reference to the full text of such opinion. It is a condition to the
consummation of the Distribution that Wolfensohn deliver an updated opinion to
the Promus Board, to be dated as of the date of the Promus Board's declaration
of the special dividend (the "Declaration Date"), in substantially the same form
as the opinion set forth in Annex I. See "--Conditions; Termination."

In preparing its opinion, Wolfensohn was not responsible for independent
verification of any information, whether publicly available or furnished to it,
concerning Promus, PHC or Harrah's Entertainment, including, without limitation,
any financial information, forecast or projections, considered by it in
connection with the rendering of its opinion. Accordingly, Wolfensohn assumed
and relied upon the accuracy and completeness of all such information and did
not conduct a physical inspection of any of the properties or assets, and did
not prepare or obtain any independent evaluation or appraisal of any of the
assets or liabilities of Promus, PHC or Harrah's Entertainment. With respect to
the financial forecasts and projections made available by Promus to Wolfensohn
and used in its analysis, Wolfensohn assumed that the financial forecasts and
projections were reasonably prepared on bases reflecting the best available
estimates and judgments of the management of Promus as to the matters covered
thereby, and in rendering its opinion Wolfensohn expressed no view as to the
reasonableness of such forecasts and projections or the assumptions on which
they are based. No instructions were provided by Promus to Wolfensohn, and no
limitations were imposed by Promus on Wolfensohn, in connection with the
preparation of its opinion. Wolfensohn was not requested or authorized to
solicit, and did not solicit, any proposals from any third parties for the
acquisition of any of the assets or businesses of PHC or Harrah's Entertainment
nor did Wolfensohn make any determination as to whether any such proposals could
be obtained if solicited. Wolfensohn's opinion is necessarily based upon
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion.

In connection with its opinion, Wolfensohn assumed that the Distribution
will be consummated on the terms and subject to the conditions described in this
Proxy Statement. In addition, Wolfensohn assumed the correctness of the
conclusions of Latham & Watkins in its opinion to Promus described herein that
the Distribution will be tax free to Promus and the holders of Promus Common
Stock. Wolfensohn also assumed that all necessary governmental and regulatory
approvals and consents of third parties will be obtained on terms and conditions
that will not have a material adverse effect on Promus, PHC or Harrah's
Entertainment.

Wolfensohn's opinion is also based on, among other things, such firm's
review of the terms of the agreements relating to the Distribution, historical
and pro forma financial information and certain business information relating to
Promus, PHC and Harrah's Entertainment, including information contained in this
Proxy Statement, the historical market prices and trading activity of Promus
Common

19
<PAGE>
Stock, as well as certain financial forecasts and other data provided by Promus
relating to the businesses and prospects of PHC and Harrah's Entertainment.
Wolfensohn also conducted discussions with management of Promus and its hotel
division with respect to the businesses and prospects of PHC and Harrah's
Entertainment including, among other things, the anticipated strategic,
financial and competitive effects of the Distribution on the Casino Business and
the Hotel Businesses and the anticipated effects of the Distribution on the
projected plans and programs for the development, financing, and operation of
existing and planned Harrah's Entertainment and PHC facilities. Wolfensohn also
reviewed public information with respect to the current and historical
operations, profitability, capitalization, cost of capital, credit statistics
and perceived future prospects of certain other companies involved in lines of
business believed by Wolfensohn to be generally comparable to Harrah's
Entertainment and PHC, considered the terms of other recent spin-off
transactions, and conducted such financial studies, analyses and investigations
as Wolfensohn deemed appropriate in rendering its opinion.

Public hotel companies deemed appropriate for analyzing the Hotel Business
were chosen on the basis of, among other factors, their operating performance,
proportion of franchised and/or managed properties in relation to their owned
properties, financial leverage and presence in the hotel industry. The public
hotel companies considered to be most comparable to PHC were Hospitality
Franchise Systems, Inc. and La Quinta Inns, Inc. Other public hotel companies
considered somewhat, although less, comparable included Doubletree Corporation,
Host Marriott Corporation, Marriott International, Inc., Prime Hospitality
Corp., Red Lion Inns Limited Partnership and Servico, Inc. Public gaming
companies deemed appropriate for analyzing the Casino Business were chosen on
the basis of, among other factors, their operating performance, diversity and
nature of markets, financial leverage and presence in the gaming industry. The
public gaming companies considered to be most comparable to Harrah's
Entertainment were Caesars World, Inc., Circus Circus Enterprises, Inc., and
Mirage Resorts, Incorporated. Other public gaming companies considered somewhat,
although less, comparable included Aztar Corporation, Bally Entertainment
Corporation, Hollywood Casino Corporation, Primadonna Resorts, Inc., Rio Hotel
and Casino, Inc., Sahara Gaming Corporation, Showboat, Inc., and Station
Casinos, Inc.

Wolfensohn is an internationally recognized investment banking firm that
specializes in providing financial advisory services in connection with mergers
and acquisitions and corporate restructurings.

Promus has paid Wolfensohn an annual retainer (plus out-of-pocket expenses)
for financial advisory services since 1986 (an aggregate of $562,172 for 1993
and 1994). In connection with the Distribution, Promus has paid Wolfensohn an
additional fee of $1.25 million and has agreed to pay Wolfensohn additional fees
of $2.75 million upon consummation of the Distribution. In addition, Promus has
agreed, among other things, to reimburse Wolfensohn for all reasonable fees and
disbursements of counsel and other reasonable out-of-pocket expenses incurred in
connection with the services provided by such firm. Promus has also agreed to
indemnify and hold harmless Wolfensohn and certain of its related parties to the
full extent lawful from and against liabilities, including certain liabilities
under the federal securities laws, incurred in connection with such firm's
engagement.

MANNER OF EFFECTING THE DISTRIBUTION

If Promus's stockholders approve the Distribution Proposals and all other
conditions thereto are satisfied (or waived by the Promus Board), and if the
Promus Board declares the Distribution, the Embassy Distribution and the
Distribution will occur on the Distribution Date. The Distribution Date and the
Distribution Record Date will be established by the Promus Board following the
Annual Meeting because approval of the Distribution Proposals by the
stockholders of Promus is a condition to the Distribution. The Distribution
Record Date will be a date that is as soon as practicable following the
declaration of the Distribution. It is currently anticipated that the Promus
Board will set a Distribution Record Date of approximately June 12, 1995. On the
Distribution Date, all outstanding shares of PHC Common Stock will be delivered
by Embassy to Promus, and then by Promus to the Distribution Agent. As soon as
practicable thereafter, certificates therefor will be mailed by the Distribution
Agent to

20
<PAGE>
holders of record of Promus Common Stock as of the Distribution Record Date on
the basis of one share of PHC Common Stock for every two shares of Promus Common
Stock held on that date. All such shares will be fully paid and nonassessable
and the holders thereof will not be entitled to preemptive rights. See
"--Description of PHC Capital Stock."

No holder of Promus Common Stock will be required to pay any cash or other
consideration for the shares of PHC Common Stock received in the Distribution or
to surrender or exchange shares of Promus Common Stock in order to receive PHC
Common Stock.

No certificates or scrip representing fractional shares of PHC Common Stock
will be issued to Promus stockholders as part of the Distribution. The
Distribution Agent will aggregate fractional shares into whole shares and sell
them in the open market at then prevailing prices on behalf of holders who
otherwise would be entitled to receive fractional share interests, and such
persons will receive instead a cash payment in the amount of their pro rata
share of the total sale proceeds. See "--Federal Income Tax Aspects of the
Distribution." Such sales are expected to be made as soon as practicable after
the mailing of the certificates evidencing shares of PHC Common Stock to Promus
stockholders. Promus will bear the cost of commissions incurred in connection
with such sales.

FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION

In the opinion of Latham & Watkins, counsel to Promus and Embassy, the
material federal income tax consequences expected to result to Promus's
stockholders as a result of the Embassy Distribution and the Distribution are as
described below. This opinion is based on the current provisions of the Code,
applicable Treasury Regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"IRS") will not take a contrary view. No ruling from the IRS has been or will be
sought with respect to any aspect of the transactions described herein.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to stockholders.

The following summary is for general information only. The tax treatment of
a stockholder may vary depending upon his particular situation, and certain
stockholders (including insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, and persons who are not citizens or residents of
the United States or who are foreign corporations, foreign partnerships or
foreign estates or trusts as to the United States) may be subject to special
rules not discussed below. EACH STOCKHOLDER IS URGED TO CONSULT HIS OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE TRANSACTIONS
DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.

Tax Opinion. The obligations of Promus, Harrah's Entertainment, Embassy, and
PHC to consummate the transactions described herein are conditioned upon the
delivery of a satisfactory tax opinion (the "Opinion") from Latham & Watkins,
counsel to Promus and Embassy. Counsel currently expects that the Opinion will
state that, although not entirely free from doubt, the Embassy Distribution and
the Distribution will qualify as tax-free distributions under Section 355 of the
Code. In rendering the Opinion, counsel will receive, rely on and assume the
accuracy of certain representations from Promus, Embassy and PHC and certain
other information, data, documentation and other materials deemed necessary,
including representations that to the best knowledge of the management of
Promus, Embassy and PHC: (i) there is no plan or intention by the stockholders
of Promus to sell, exchange, transfer by gift or otherwise dispose of 10% or
more of the total number of shares of PHC Common Stock received in the
Distribution; (ii) there is no plan or intention to liquidate PHC subsequent to
the Distribution, to sell or otherwise dispose of a substantial amount of the
assets of PHC or its subsidiaries (except in the ordinary course of business),
to redeem shares of PHC Common Stock, to cause PHC to merge with any other
corporation or to cease to conduct the Hotel Business and (iii) there is no plan
or intention to

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liquidate Harrah's Entertainment subsequent to the Distribution, to sell or
otherwise dispose of a substantial amount of the assets of Harrah's
Entertainment or its subsidiaries (except in the ordinary course of business),
to redeem shares of Harrah's Entertainment Common Stock, to cause Harrah's
Entertainment to merge with any other corporation or to cease to conduct the
Casino Business. These representations address, among other things, the
requirements for tax-free treatment of the Embassy Distribution and the
Distribution that (i) Promus' stockholders retain a continuity of interest in
both PHC and Harrah's Entertainment after the Distribution, and (ii) Promus'
historic businesses continue after the Distribution.

The Embassy Distribution and the Distribution. Assuming that the Embassy
Distribution and the Distribution are tax-free, (i) Promus's stockholders will
not recognize income, gain or loss upon the receipt of shares of PHC Common
Stock; (ii) each stockholder will allocate his aggregate tax basis in his Promus
Common Stock before the Distribution between his Harrah's Entertainment Common
Stock and PHC Common Stock in proportion to their respective fair market values
at the time of the Distribution; (iii) each stockholder's holding period for PHC
Common Stock will include his holding period for his Promus Common Stock,
provided that the Promus Common Stock is held as a capital asset at the time of
the Distribution; (iv) the earnings and profits of Promus will be allocated
between Harrah's Entertainment and PHC; and (v) no gain or loss will be
recognized by Promus upon the Distribution. For a description of the
consequences to Harrah's Entertainment, PHC and their stockholders if either the
Embassy Distribution or the Distribution were not to qualify as tax-free, see
"--Certain Special Considerations--Certain Tax Considerations."

It is expected that a PHC Right will attach to each share of PHC Common
Stock distributed in the Distribution. While the distribution of the PHC Rights
should not be taxable to stockholders or to PHC, stockholders may, depending
upon the circumstances, recognize taxable income in the event that the PHC
Rights become exercisable for PHC Common Stock (or other consideration) or for
common stock of an acquiring company. See "--Description of PHC Capital
Stock--PHC Rights and PHC Special Stock."

For a description of the Tax Sharing Agreement pursuant to which Promus and
PHC have provided for various tax matters, see "--Relationship Between PHC and
Harrah's Entertainment After the Distribution--Tax Sharing Agreement."

THE FOREGOING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
STOCKHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE DISTRIBUTION, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL AND FOREIGN TAX LAWS, AND OF PROPOSED CHANGES IN APPLICABLE TAX
LAWS.

LISTING AND TRADING OF PHC COMMON STOCK

There is not currently a public market for PHC Common Stock. Prices at which
PHC Common Stock may trade prior to the Distribution on a "when-issued" basis or
after the Distribution cannot be predicted. Until the PHC Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
stock occurs may fluctuate significantly. The prices at which PHC Common Stock
trades will be determined by the marketplace and may be influenced by many
factors, including, among others, the depth and liquidity of the market for PHC
Common Stock, investor perception of PHC and the industry in which PHC
participates, dividend policy and general economic and market conditions. Such
prices may also be affected by certain provisions of PHC Certificate and the PHC
Bylaws, as each will be in effect following the Distribution. See "--Certain
Special Considerations-- Dividend Policies" and "--Certain Provisions of the PHC
Certificate and PHC Bylaws."

PHC intends to list the PHC Common Stock and associated PHC Rights on the
New York Stock Exchange, the Midwest Stock Exchange, the Pacific Stock Exchange
and the Philadelphia Stock

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Exchange. PHC initially will have approximately 16,993 stockholders of record
based upon the number of stockholders of record of Promus as of January 31,
1995. For certain information regarding options to purchase PHC Common Stock
that will be outstanding after the Distribution, see "--Relationship Between
Harrah's Entertainment and PHC after the Distribution--Employee Benefits
Allocation Agreement."

Promus filed a request for no-action letter with the Securities and Exchange
Commission (the "Commission") on February 3, 1995, setting forth, among other
things, Promus's view that the Distribution of the PHC Common Stock does not
require registration under the Securities Act of 1933, as amended (the
"Securities Act"). On April 21, 1995, Promus received a favorable letter from
the Commission in response to this request. Accordingly, shares of PHC Common
Stock distributed to Promus's stockholders in the Distribution will be freely
transferable, except for securities received by persons who may be deemed to be
"affiliates" of Promus within the meaning of Rule 144 of the Securities Act.
Persons who are affiliates of Promus within the meaning of Rule 144 would be
subject to such rule and may not publicly offer or sell the PHC Common Stock
received in connection with the Distribution except pursuant to a registration
statement under the Securities Act or an exemption. However, the 90-day waiting
period of Rule 144(c)(1) would not apply to such sales by affiliates.

LISTING AND TRADING OF HARRAH'S ENTERTAINMENT COMMON STOCK

After the Distribution, it is expected that Harrah's Entertainment Common
Stock (formerly Promus Common Stock) will continue to be listed and traded on
the New York Stock Exchange, the Midwest Stock Exchange, the Pacific Stock
Exchange and the Philadelphia Stock Exchange. Following the Distribution,
Harrah's Entertainment's financial results will no longer be consolidated with
those of PHC's Hotel Business, and Harrah's Entertainment's revenues, income and
other results of operations will be substantially below those of Promus prior to
the Distribution. Accordingly, as a result of the Distribution, the trading
price range of Harrah's Entertainment Common Stock immediately after the
Distribution is expected to be significantly lower than the trading price range
of Promus Common Stock prior to the Distribution. The combined trading prices of
the Harrah's Entertainment Common Stock and the PHC Common Stock held by
stockholders after the Distribution may be less than, equal to or greater than
the trading price of Promus Common Stock prior to the Distribution. The prices
at which Harrah's Entertainment Common Stock trades after the Distribution will
be determined by the marketplace and may be influenced by many factors,
including, among others, the continuing depth and liquidity of the market for
Harrah's Entertainment's Common Stock, investor perception of Harrah's
Entertainment's Casino Business, Harrah's Entertainment's dividend policy and
general and economic and market conditions. See "--Certain Special
Considerations--Dividend Policies."

CONDITIONS; TERMINATION

The Promus Board has conditioned the Distribution upon, among other things,
(i) approval of each of the Distribution Proposals by Promus's stockholders;
(ii) the Promus Board having received confirmation that the Embassy Distribution
and the Distribution will qualify as a tax-free transaction under Section 355 of
the Code; (iii) the transfers of assets and liabilities contemplated by the
Distribution Agreement to be entered into between Promus and PHC prior to the
Distribution having been consummated in all material respects; (iv) the PHC
Common Stock and associated PHC Rights having been approved for listing on the
New York Stock Exchange subject to official notice of issuance; (v) the PHC
Board having been elected by Embassy, as sole stockholder of PHC, and the PHC
Certificate and the PHC Bylaws, as each will be in effect after the
Distribution, having been adopted and being in effect; (vi) PHC having entered
into agreements with lenders to provide financing of at least $350 million upon
the consummation of the Distribution; (vii) the Registration Statement on Form
10 with respect to the PHC Common Stock (the "Form 10 Registration Statement")
having become effective under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); (viii) certain third-party consents to the transactions
contemplated by the Distribution Proposals having been obtained

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(including, without limitation, consents having been obtained from holders of
the 10 7/8% Notes and the 8 3/4% Notes (collectively the "Notes") to certain
amendments to the covenants contained in such Notes), except for those the
failure of which to obtain would not have a material adverse effect on PHC or
Harrah's Entertainment; (ix) Embassy having obtained from its lenders under its
bank credit facility consents to the transactions contemplated by the
Distribution Proposals; and (x) Wolfensohn having delivered an updated opinion
to the Promus Board, dated as of the Declaration Date, in substantially the same
form as the opinion set forth in Annex I. See "--Opinion of Financial Advisor."
Any of these conditions, except for approval of the Distribution Proposals by
Promus's stockholders, may be waived in the discretion of the Promus Board. Even
if all the above conditions are satisfied, the Promus Board has reserved the
right to abandon, defer or modify the Distribution or the other elements of the
Distribution Proposals at any time prior to the Distribution Date; however, the
Promus Board will not waive any of the conditions to the Distribution or make
any changes in the terms of the Distribution or the other elements of the
Distribution Proposals after the Distribution Proposals are approved by the
stockholders unless the Promus Board determines that such changes would not be
materially adverse to Promus's stockholders. In determining whether any such
changes would be materially adverse to Promus's stockholders, the Promus Board
will consider, as appropriate, advice from its outside financial and legal
advisors as well as the recommendation of management as to the potential impact
of such changes on Promus and Promus's stockholders. See "--Relationship Between
Harrah's Entertainment and PHC after the Distribution--Distribution Agreement."

CERTAIN SPECIAL CONSIDERATIONS

Certain Financial Considerations. PHC was recently incorporated for the
purpose of effecting the Distribution. While the Hotel Business and the Casino
Business have substantial operating histories, PHC and Harrah's Entertainment do
not have operating histories as separate stand-alone companies. Prior to the
Distribution, each of the two businesses had access to the cash flow generated
by the other and Promus's credit, which was based on the combined assets of the
Casino Business and the Hotel Business. Subsequent to the Distribution, PHC will
not have the benefit of either the cash flow generated by, or the assets of, the
Casino Business and Harrah's Entertainment will not have the benefit of either
the cash flow generated by, or the assets of, the Hotel Business.

As is the case with Promus, after the Distribution, each of PHC and Harrah's
Entertainment will be a highly leveraged company. Assuming the Distribution had
been consummated as of December 31, 1994, on a pro forma basis PHC would have
had total long-term debt of $215.2 million and total stockholders' equity of
$139.8 million and Harrah's Entertainment would have had total long-term debt of
$742.7 million and total stockholders' equity of $468.4 million, compared with
Promus's actual long-term debt, before allocation of debt to PHC, of $917.4
million and total stockholders' equity of $623.4 million as of December 31,
1994. On a pro forma basis, assuming the Distribution had been consummated as of
January 1, 1994, PHC would have had income from continuing operations of $33.3
million and Harrah's Entertainment would have had income from continuing
operations of $102.7 million compared with Promus's actual income before a $53.4
million provision for settlement of litigation and related costs and the
cumulative effect of change in accounting policy of $139.8 million for 1994.

After the Distribution, each of PHC and Harrah's Entertainment will continue
to have significant interest expense and principal repayment obligations. While
each company expects that its operating cash flow will be sufficient to cover
its expenses, including interest costs, either PHC or Harrah's Entertainment may
be required to supplement operating cash flow with asset sales, refinancing
proceeds or capital spending reductions to meet principal repayment obligations
in later years. There can be no assurance that such asset sales or refinancing
could be successfully concluded. Neither PHC nor Harrah's Entertainment has any
plans for such asset sales. An alternate source of funds may be reductions in
currently anticipated capital expenditures. However, any resort to alternative
sources of funds may impair such company's competitive position and reduce its
cash flow.

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<PAGE>
The ability of PHC and Harrah's Entertainment to satisfy their respective
obligations, to reduce their respective debt and to increase equity will also be
dependent upon their respective future performance, which will be subject to
prevailing economic conditions and to financial, business and other factors,
including factors beyond the control of either company, affecting the business
operations of each company.

Certain Operating Considerations. Subsequent to the Distribution, each of
PHC and Harrah's Entertainment will be a smaller and less diversified company
than is currently the case with Promus. In addition, the division of Promus may
result in some temporary dislocation and inefficiencies to the business
operations, as well as the organization and personnel structure, of each
company. Nevertheless, the Promus Board believes that separation of the two
companies also will result in certain long-term operating efficiencies by
allowing the companies to focus on their respective businesses.

Certain Tax Considerations. If either the Embassy Distribution or the
Distribution were not to qualify under Section 355 of the Code, then, in
general, Embassy or Promus would recognize gain equal to the excess of the fair
market value of the PHC Common Stock over Embassy's tax basis in the PHC Common
Stock immediately prior to the transaction. This tax would be payable by
Harrah's Entertainment, although under certain limited circumstances, PHC has
agreed to indemnify Harrah's Entertainment for such tax liability. See
"--Relationship Between PHC and Harrah's Entertainment After the
Distribution--Tax Sharing Agreement." Each member of the Promus consolidated
group (including PHC and its subsidiaries) would remain jointly and severally
liable for such tax liability.

In addition, if the transaction were taxable, each Promus stockholder would
be treated as having received a taxable dividend equal to the fair market value
of the PHC Common Stock received, if, and to the extent that, Promus has (as
expected) sufficient current and accumulated earnings and profits. If, and to
the extent that, Promus did not have sufficient earnings and profits, each
Promus stockholder would (a) first reduce his tax basis in Promus Common Stock
(but not below zero) to the extent that the value of the PHC Common Stock
received exceeds his pro rata share of such earnings and profits and (b) then
recognize gain from the exchange of his Promus Common Stock to the extent the
value of the PHC Common Stock received exceeds both his pro rata share of
earnings and profits and his tax basis in his Promus Common Stock. If the
transaction were taxable, each stockholder's tax basis in his PHC Common Stock
after the Distribution would be equal to its fair market value at the time of
the Distribution.

No Current Public Market for PHC Common Stock. There is not currently a
public market for PHC Common Stock and there can be no assurance as to the
prices at which trading in PHC Common Stock will occur after the Distribution.
Until PHC Common Stock is fully distributed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate significantly. PHC
intends to list the PHC Common Stock and the associated PHC Rights on the New
York Stock Exchange, the Midwest Stock Exchange, the Pacific Stock Exchange and
the Philadelphia Stock Exchange. See "--Listing and Trading of PHC Common
Stock."

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<PAGE>
Change in Trading Prices of Harrah's Entertainment Common Stock. After the
Distribution, it is expected that Harrah's Entertainment Common Stock (formerly
Promus Common Stock) will continue to be listed and traded on the New York Stock
Exchange, the Midwest Stock Exchange, the Pacific Stock Exchange and the
Philadelphia Stock Exchange. As a result of the Distribution, the trading price
range of Harrah's Entertainment Common Stock is expected to be significantly
lower than the trading price range of Promus Common Stock prior to the
Distribution. The combined trading prices of PHC Common Stock and Harrah's
Entertainment Common Stock held by stockholders after the Distribution may be
less than, equal to or greater than the trading prices of Promus Common Stock
prior to the Distribution. See "--Listing and Trading of Harrah's Entertainment
Common Stock."

Dividend Policies. Neither Promus nor PHC presently intend to declare any
cash dividends on either the PHC Common Stock or the Harrah's Entertainment
Common Stock after the Distribution. It is expected that certain debt agreements
of PHC and Harrah's Entertainment or their subsidiaries will substantially limit
these companies' respective ability to pay dividends. The declaration and
payment of dividends by PHC is at the discretion of the PHC Board. The
declaration and payment of dividends by Harrah's Entertainment is at the
discretion of the Harrah's Entertainment Board. The PHC Board and the Harrah's
Entertainment Board intend to reevaluate their respective dividend policies in
the future in light of their respective companies' results of operations,
financial conditions, cash requirements, future prospects and other factors
deemed relevant by the respective boards of directors. There can be no assurance
that any dividends will be paid in the future.

Certain Antitakeover Features. If the Distribution Proposals are approved
and the Distribution is consummated, the PHC Certificate and the PHC Bylaws will
contain several provisions, all of which are now in effect with respect to
Promus and will continue to be in effect with respect to Harrah's Entertainment,
that may have the effects of making the acquisition of control of PHC difficult
or expensive, of increasing the likelihood that incumbent management will retain
their positions, and of depriving stockholders of opportunities to receive
premiums over market value for their shares. See "--Certain Provisions of the
PHC Certificate and PHC Bylaws."

Certain Consent Requirements. Promus has reviewed applicable governmental
regulations, its existing debt obligations and other contractual arrangements to
determine whether consummation of the Distribution, as structured, and related
transactions would result in a violation of these regulations or obligations. In
a substantial number of situations, an amendment, consent or waiver from third
parties, including governmental agencies and gaming authorities, will be
required to avoid noncompliance with such regulations or a default under such
obligations. It is a condition of the Distribution that these amendments,
consents or waivers have been obtained, except for those the failure of which to
obtain would not have a material adverse effect on PHC or Harrah's
Entertainment. The amendments, consents or waivers upon which Promus is
conditioning the Distribution include, without limitation, consents from holders
of the 10 7/8% Notes and the 8 3/4% Notes to certain amendments to the covenants
contained in such Notes and an amendment to the Embassy Bank Credit Facility to
accommodate the Distribution. See "--Financing--Harrah's Entertainment,"
"--Consent Solicitation" and "--Regulatory Approvals."

Potential Conflicts. Subsequent to the Distribution, the interests of PHC
and Harrah's Entertainment may potentially conflict due to the ongoing
relationships between the companies. Such sources of conflict include the fact
that after the Distribution, Harrah's Entertainment and PHC will enter into a
noncompetition agreement that will limit the competition between PHC and
Harrah's Entertainment. See "--Relationships Between PHC and Harrah's
Entertainment after the Distribution--Noncompetition Agreement." In addition,
Michael D. Rose will serve as chairman of the Harrah's Entertainment Board and
as Chairman of the PHC Board, and Ben C. Peternell will serve as an executive
officer of Harrah's Entertainment and as a director of PHC. Messrs. Rose and
Peternell, as well as certain other officers and directors of PHC and Harrah's
Entertainment, will also own shares (and/or options or other rights to acquire
shares) in both companies following the Distribution. See "--Relationships
Between

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PHC and Harrah's Entertainment after the Distribution," "--Management of PHC"
and "--Management of Harrah's Entertainment." Such relationships may be
adversarial under certain circumstances. Appropriate policies and procedures
will be followed by the boards of directors of each company to limit the
involvement of Messrs. Rose and Peternell (and, if appropriate, other officers
and directors of such companies) in conflict situations, including requiring
them to abstain from voting as directors of either PHC or Harrah's Entertainment
on certain matters which present a conflict between the two companies. See
"--Relationship between PHC and Harrah's Entertainment after the
Distribution--Policies and Procedures for Addressing Conflicts."

Fraudulent Transfer Considerations; Legal Dividend Requirements. The Promus
Board does not intend to consummate the Distribution unless it is satisfied
regarding the solvency of Promus, PHC and Harrah's Entertainment and the
permissibility of the Distribution under Section 170 of the Delaware General
Corporation Law ("DGCL"). There is no certainty, however, that a court would
find the evidence relied on by the Promus Board to be binding on creditors of
Promus, PHC or Harrah's Entertainment or that a court would reach the same
conclusions suggested by such evidence in determining whether Promus, PHC or
Harrah's Entertainment was solvent or insolvent at the time of, or after giving
effect to, the Distribution.

If a court in a lawsuit filed by an unpaid creditor or representative of
unpaid creditors, such as a trustee in bankruptcy, were to find that at the time
the Distribution and the Embassy Distribution were consummated, Promus or
Embassy, as the case may be, (i) was insolvent, (ii) was rendered insolvent by
reason of the Embassy Distribution or the Distribution, (iii) was engaged in a
business or transaction for which the remaining assets of Promus or Embassy, as
the case may be, constituted unreasonably small capital, or (iv) intended to
incur, or believed it would incur, debts beyond its ability to pay as such debts
matured, such court may be asked to void the Distribution (in whole or in part)
as a fraudulent conveyance and require that the stockholders return the special
dividend (in whole or in part) to Promus or Embassy, or require Harrah's
Entertainment to fund certain liabilities of PHC for the benefit of creditors,
or require PHC to fund certain liabilities of Harrah's Entertainment for the
benefit of creditors. The measure of insolvency for purposes of the foregoing
will vary depending upon the jurisdiction whose law is being applied. Generally,
however, Promus or Embassy, as the case may be, would be considered insolvent if
the fair value of their respective assets were less than the amount of their
respective liabilities or if they incurred debt beyond their ability to repay
such debt as it matures. In addition, under Section 170 of the DGCL (which is
applicable to Embassy in the Embassy Distribution and to Promus in the
Distribution) a corporation generally may make distributions to its stockholders
only out of its surplus (net assets minus capital) and not out of capital.

The Promus Board and management believe that, in accordance with the
evidence examined in connection with the Distribution, (a) Promus and Embassy,
each will be solvent at the time of the Distribution (in accordance with the
foregoing definitions), will be able to repay its debts as they mature following
the Distribution and will have sufficient capital to carry on its businesses,
and (b) the Embassy Distribution and the Distribution will be made entirely out
of surplus, as provided under Section 170 of the DGCL.

FUTURE MANAGEMENT OF THE SEPARATE COMPANIES

PHC. Following the Distribution it is intended that PHC will continue to
operate the Hotel Business substantially in the manner in which it is currently
operated. PHC will seek to expand market share and, with access to capital at
favorable rates, to take advantage of investment and growth opportunities in the
Hotel Business. PHC will conduct the Hotel Business with substantially the same
operating management with which it is presently conducted: Mr. Rose will be
Chairman of the Board; Raymond E. Schultz will be the President and Chief
Executive Officer; David C. Sullivan will be the Executive Vice President and
Chief Operating Officer; and Donald H. Dempsey will be Senior Vice

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President and Chief Financial Officer. The other executive officers of PHC will
be drawn from the current management of Promus. See "--Management of
PHC--Executive Officers."

Harrah's Entertainment. Following the Distribution it is intended that the
Casino Business will continue to be operated substantially in the manner in
which it is currently operated. Mr. Rose will remain as Chairman of the Board;
Philip G. Satre will remain as President and Chief Executive Officer; and
Charles A. Ledsinger, Jr. will remain as Senior Vice President and Chief
Financial Officer.

ASSET TRANSFERS

Prior to the Distribution Date, Promus will consummate the Asset Transfers
consisting of the transfer to PHC of the stock of certain subsidiaries
principally engaged in the Hotel Business, and the transfer by Embassy to PHC of
other assets and liabilities relating to the Hotel Business (such as management
contracts and partnership interests related to the Hotel Business), as well as
real property assets related to the Hotel Business. On a pro forma basis, the
total book value of the assets of the Hotel Business is equal to $442.7 million.
Such assets will be transferred to PHC in connection with the Distribution. In
connection with the Asset Transfers, a wholly-owned subsidiary of PHC will
assume from Embassy approximately $210 million of debt under the PHC Bank Credit
Facilities and PHC and its subsidiaries will assume other debts and liabilities
related to the Hotel Business. On a pro forma basis, the amount of other debt
and liabilities to be assumed by the Hotel Business is approximately $92.8
million. The Asset Transfers are intended to allocate assets and liabilities
relating to the Hotel Business to PHC and assets and liabilities relating to the
Casino Business to Harrah's Entertainment. Stockholder approval is not being
sought with respect to the Asset Transfers and, although it has no present
intention to do so, Promus may proceed with some or all of the Asset Transfers
if stockholder approval is not obtained for the Distribution Proposals.

In addition, prior to the Distribution Date, Promus will consummate the
transfer by Embassy to its gaming subsidiaries of the real property and
improvements related to its Northern Nevada and Las Vegas casinos. Stockholder
approval is not being sought with respect to these internal Casino Business
transfers.

RELATIONSHIP BETWEEN PHC AND HARRAH'S ENTERTAINMENT AFTER THE DISTRIBUTION

For the purpose of governing certain of the ongoing relationships between
PHC and Harrah's Entertainment after the Distribution and to provide mechanisms
for an orderly transition, Promus and PHC will enter into the various agreements
and will adopt policies as described in this section. Promus and PHC believe
that the agreements are fair to both parties and contain terms which generally
are comparable to those which would have been reached in arm's-length
negotiations with unaffiliated parties (although comparisons are difficult with
respect to certain agreements that relate to the specific circumstances of this
transaction). In some cases (such as the Distribution Agreement and the Tax
Sharing Agreement each as hereinafter defined) the agreements are comparable to
those used by other companies in similar transactions. In each case, the terms
of these agreements have been reviewed by individuals who will be included at a
senior management level within Harrah's Entertainment and by individuals who
will be included at a senior management level within PHC.

Distribution Agreement. Prior to the Distribution Date, Promus and PHC will
enter into a Distribution Agreement (the "Distribution Agreement"), which will
provide for, among other things, (i) certain of the Asset Transfers, (ii) the
Distribution, (iii) the division of certain liabilities between Harrah's
Entertainment and PHC, and (iv) certain other agreements governing the
relationship between Harrah's Entertainment and PHC following the Distribution.

Subject to certain exceptions, the Distribution Agreement will provide for,
among other things, assumptions of liabilities and cross-indemnities designed to
allocate, effective as of the Distribution

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<PAGE>
Date, financial responsibility for the liabilities arising out of or in
connection with the Hotel Business to PHC and its subsidiaries, and financial
responsibility for the liabilities arising out of or in connection with the
Casino Business to Harrah's Entertainment and its retained subsidiaries. The
agreements to be executed in connection with the Distribution Agreement will set
forth certain specific allocations of liabilities between Harrah's Entertainment
and PHC. See "--Employee Benefits Allocation Agreement" and "--Tax Sharing
Agreement" below. Harrah's Entertainment will retain responsibility for the
recent litigation between Promus and Bass PLC pursuant to the settlement
thereof.

To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides that,
until the second anniversary of the Distribution Date, PHC must obtain an
opinion of counsel reasonably satisfactory to Harrah's Entertainment before PHC
may make certain material dispositions of its assets, engage in certain
repurchases of PHC's capital stock or cease the active conduct of its business
independently, with its own employees and without material changes. PHC does not
expect these limitations to inhibit significantly its operations, growth
opportunities or its ability to respond to unanticipated developments. Harrah's
Entertainment must also obtain an opinion of counsel reasonably satisfactory to
PHC before Harrah's Entertainment may engage in similar transactions during such
period. See "--Certain Special Considerations-- Certain Tax Considerations."
Harrah's Entertainment does not expect these limitations to inhibit
significantly its operations, growth opportunities or its ability to respond to
unanticipated developments.

The Distribution Agreement will also provide that by the Distribution Date,
the PHC Certificate and PHC Bylaws shall be in the forms attached hereto as
Annex II-A and II-B, respectively, and that PHC and Promus will take all actions
which may be required to elect or otherwise appoint, as directors of PHC, the
eleven persons indicated herein. See "--Description of PHC Capital Stock,"
"--Certain Provisions of the PHC Certificate and PHC Bylaws" and "--Management
of PHC--PHC Board."

The Distribution Agreement will also provide that each of Harrah's
Entertainment and PHC will be granted access to certain records and information
in the possession of the other, and requires the retention by each of Harrah's
Entertainment and PHC of all such information in its possession for a period of
ten years following the Distribution, and thereafter will require that each
party give the other prior notice of its intention to dispose of such
information. In addition, the Distribution Agreement will provide for the
allocation of shared privileges with respect to certain information and will
require each of Harrah's Entertainment and PHC to obtain the consent of the
other prior to waiving any shared privilege.

Employee Benefits Allocation Agreement. Prior to the Distribution Date,
Promus and PHC will enter into an Employee Benefits and Other Employment Matters
Allocation Agreement (the "Employee Benefits Allocation Agreement") providing
for the allocation of certain responsibilities with respect to employee
compensation, benefits and labor matters. The allocation of responsibility and
adjustments to be made pursuant to the Employee Benefits Allocation Agreement
are substantially consistent with the existing rights of Promus's employees
under Promus's various compensation plans. The Employee Benefits Allocation
Agreement will provide that, effective as of the Distribution Date, Harrah's
Entertainment will, or will cause one or more of its subsidiaries to, assume or
retain, as the case may be, all liabilities of Promus and its subsidiaries, to
the extent unpaid as of the Distribution Date, under employee benefit plans,
policies, arrangements, contracts and agreements with respect to employees who
on or after the Distribution Date will be employees of Harrah's Entertainment or
its subsidiaries ("Harrah's Entertainment Employees") and certain liabilities
with respect to all current and former employees of Promus as described more
fully below. In addition, certain employees of Harrah's Entertainment will
provide administrative services to PHC with respect to employee compensation and
benefit matters. The Employee Benefits Allocation Agreement will also provide
that PHC generally will assume or retain, as the case may be, all liabilities
under employee benefits plans with respect to employees of PHC or any of its
retained subsidiaries after the Distribution ("PHC Employees").

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<PAGE>
Promus currently provides additional compensation to its employees under one
or more of the following benefit plans: The Promus Companies Incorporated
Savings and Retirement Plan (the "Promus S&RP"), The Promus Companies
Incorporated Executive Deferred Compensation Plan (the "Promus Executive
Deferred Compensation Plan"), The Promus Companies Incorporated Deferred
Compensation Plan (the "Promus Deferred Compensation Plan"), The Promus
Companies Incorporated 1990 Stock Option Plan (the "Promus Stock Option Plan"),
The Promus Companies Incorporated 1990 Restricted Stock Plan (the "Promus
Restricted Stock Plan") and The Promus Companies Incorporated Employee Stock
Purchase Plan (the "Promus ESPP"). As of January 31, 1995, 443,045 shares of
Promus Common Stock were reserved for issuance under the Promus Restricted Stock
Plan and 1,738,648 shares of Promus Common Stock were reserved for issuance of
new options under the Promus Stock Option Plan.

Pursuant to the Employee Benefits Allocation Agreement and subject to
certain conditions set forth in that Agreement, in connection with the
Distribution, each existing company employee benefit plan will be treated in the
following manner:

(1) Savings and Retirement Plan. Effective on the Distribution Date, PHC
will establish a Savings and Retirement Plan (the "PHC S&RP") which will be
substantially similar to the Promus S&RP. Subsequent to the Distribution, the
account balances of Harrah's Entertainment Employees as well as the account
balances of persons who terminated employment with Promus or its subsidiaries
prior to the Distribution Date will be retained in the Promus S&RP (which will
be renamed the Harrah's Entertainment Savings and Retirement Plan (the "Harrah's
Entertainment S&RP")). As soon as practical after the Distribution Date, the
account balances of PHC Employees, including shares of PHC Common Stock and
Shares of Harrah's Entertainment Common Stock attributable to such accounts,
will be transferred to the PHC S&RP. It is anticipated that for the remainder of
the 1995 Plan Year (the Distribution Date through December 31, 1995), the rate
of base matching contributions made to the PHC S&RP will continue at the same
rate that base matching contributions were previously made to the Promus S&RP.
For example, PHC will contribute $1 to the PHC S&RP for every $1 contributed by
each participant in the PHC S&RP up to the limit of 6% of compensation as
currently provided by the Promus S&RP. Beginning in 1996, the amount of PHC base
matching contributions under the PHC S&RP will be as set forth in the PHC S&RP,
which may be amended at the sole discretion of the PHC Board or its appropriate
committees. It is the intention of PHC that the PHC S&RP continue to be a viable
and competitive retirement savings vehicle for participating employees.

Because the employer stock funds of the Promus S&RP and the PHC S&RP, as
well as the portions of such plans which constitute employer stock ownership
plans, are intended to invest primarily in securities of the company sponsoring
each such plan, the trustees of the Promus S&RP have resolved to negotiate with
the trustees of the PHC S&RP to exchange shares of PHC Common Stock held in the
Harrah's Entertainment S&RP immediately following the Distribution for the
shares of Harrah's Entertainment Common Stock held in the PHC S&RP immediately
following the Distribution. It is expected that such exchange will be effected,
as soon as practicable following the Distribution. Based on current estimates of
the expected trading prices, it is currently anticipated that following this
exchange the Harrah's Entertainment S&RP will hold approximately 2 million
shares of PHC Common Stock. Consequently, it is expected that after the exchange
the Harrah's Entertainment S&RP will sell shares of PHC Common Stock on the open
market and that such sales will occur over a period of several months before all
the shares are sold. It is also expected that the proceeds of such sales of PHC
Common Stock will be used by the Harrah's Entertainment S&RP to purchase
Harrah's Entertainment Common Stock. Consequently, varying periods of time will
pass before each such plan holds 100% of its own company's stock. Until these
shares of PHC Common Stock are sold, they will remain in the Harrah's
Entertainment S&RP Company Stock Fund and will be valued monthly, based on the
market price of PHC Common Stock, within participants' accounts.

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<PAGE>
(2) Deferred Compensation Plans. Under the Promus Executive Deferred
Compensation Plan, approximately 120 executives and 11 nonmanagement directors,
including retirees, have deferred compensation accounts. Under the Promus
Deferred Compensation Plan, approximately 60 key employees and two nonmanagement
directors, including retirees, have deferred compensation accounts. PHC has
adopted a PHC Executive Deferred Compensation Plan (the "PHC Executive Deferred
Compensation Plan") and a PHC Deferred Compensation Plan (the "PHC Deferred
Compensation Plan") which will go into effect immediately after the Distribution
and will have terms and conditions substantially similar to those governing the
Promus plans. In connection with the Distribution, PHC will assume the
obligation for all undistributed account balances accrued as of the Distribution
Date with respect to PHC Employees and any nonmanagement directors of Promus who
become PHC directors. Harrah's Entertainment will remain obligated for all
undistributed account balances accrued as of the Distribution Date for Harrah's
Entertainment Employees and for any employees of Promus and its subsidiaries who
terminated employment prior to the Distribution Date. Mr. Rose's deferred
compensation account balance will be prorated between PHC and Harrah's
Entertainment in proportion to the percentage of his total salary to be paid by
each company after the Distribution. In connection with the assumption of
deferred compensation accounts by PHC, Promus will also transfer certain assets
to PHC that are intended to protect these accounts in the event of a change of
control.

(3) Restricted Stock Plan. The Promus Restricted Stock Plan provides
additional compensation incentives to key employees in the form of restricted
shares of Promus Common Stock. Each holder of restricted stock, whether a
Harrah's Entertainment Employee or a PHC Employee, will receive, as part of the
Distribution and as required by provisions of the plan, a dividend of one share
of PHC Common Stock for each two shares of Promus Common Stock held for
participants under the plan as of the Distribution Date. (A fractional share of
PHC stock will be rounded to the next highest share.) Such shares of PHC Common
Stock will be unrestricted.

PHC has adopted the PHC 1995 Restricted Stock Plan (the "PHC Restricted
Stock Plan") which will go into effect immediately after the Distribution.
Subject to the approval of PHC Employees who hold restricted shares of Promus
Common Stock under the Promus Restricted Stock Plan, effective upon the
Distribution, such restricted shares of Promus Common Stock will be cancelled
and in lieu thereof, such employees will receive an adjusted number of
restricted shares of PHC Common Stock which will vest under the same terms and
conditions as the restricted shares of Promus Common Stock. The cancelled
restricted shares of Promus Common Stock will be returned to the Promus
Restricted Stock Plan and will be available for reissuance. For a description of
the adjustments, see "--Management of PHC--PHC Compensation Plans."

The Promus Restricted Stock Plan will continue in effect after the
Distribution and will be renamed the Harrah's Entertainment Restricted Stock
Plan. The Harrah's Entertainment Restricted Stock Plan will be amended as
described under "Amendments to Promus 1990 Restricted Stock Plan."

(4) Stock Option Plan. The purpose of the Promus Stock Option Plan is to
provide additional long term incentives to management employees through awards
of either nonqualified options or incentive stock options. PHC has adopted a PHC
Stock Option Plan (the "PHC Stock Option Plan") containing substantially
identical terms and conditions as the Promus Stock Option Plan. Subject to the
approval of PHC Employees who hold options under the Promus Stock Option Plan,
effective upon the Distribution, such employees will receive, in substitution
therefor, an adjusted number of options to purchase PHC Common Stock. For a
description of these adjustments, see "--Management of PHC-- PHC Compensation
Plans." The stock options held by such employees under the Promus Stock Option
Plan will be cancelled as of the Distribution Date. The shares subject to such
cancelled options will be returned to the Promus Stock Option Plan and will be
available for reissuance.

Upon completion of the Distribution, it is expected that the market price of
Harrah's Entertainment Common Stock will be significantly less than the market
price of Promus Common Stock

31
<PAGE>
immediately prior to the Distribution. Accordingly, the Promus HR Committee has
determined that each outstanding stock option that will be held by participants
who will be employed by Harrah's Entertainment immediately after the
Distribution will be adjusted in connection with the Distribution to preserve
the value of the option. The adjustment would preserve the approximate aggregate
spread value of stock options that existed immediately prior to the
Distribution. To accomplish this, the number of outstanding Promus stock options
held by a Harrah's Entertainment employee and the exercise price of those
options will be adjusted as follows: The number of shares subject to the option
will be multiplied by the market price of Promus Common Stock immediately prior
to the Distribution (the "Pre-Distribution Promus Share Price") and the
resulting number will be divided by the average of the closing prices of
Harrah's Entertainment Common Stock on the New York Stock Exchange during the
ten trading days immediately following the Distribution Date (the
"Post-Distribution Harrah's Entertainment Share Price"); the exercise price of
the option will be multiplied by the Post-Distribution Harrah's Entertainment
Share Price and the resulting number will be divided by the Pre-Distribution
Promus Share Price. Fractions will be rounded to the next highest share and next
lowest cent, respectively. The Pre-Distribution Promus Share Price will be the
closing price of Promus Common Stock on the New York Stock Exchange on the
Distribution Date.

The Promus Stock Option Plan will be amended as described under "Amendments
to Promus 1990 Stock Option Plan."

(5) Employee Stock Purchase Plan. Promus is the sponsor of a plan under
which employees may purchase Promus Common Stock through an arrangement with
Merrill Lynch. Employees may make such purchases on a monthly basis through
payroll deduction. The Company's only connection with the plan was to arrange
the program with Merrill Lynch and the Company pays the brokerage commissions on
the purchases of stock by employees. It is anticipated that PHC will adopt a
similar plan for its employees to purchase PHC stock after the Distribution. The
Promus ESPP will continue in effect after the Distribution and it will be
renamed the Harrah's Entertainment Employee Stock Purchase Plan. Participants in
the Promus ESPP will receive the Distribution in the same manner as all other
stockholders. Participants in the Promus ESPP who become employed by PHC will no
longer participate in the Promus ESPP and may withdraw their investments from
that plan after the Distribution Date.

Embassy, as the sole stockholder of PHC prior to the Distribution, has
approved the adoption by PHC of the PHC S&RP, the PHC Executive Deferred
Compensation Plan, the PHC Deferred Compensation Plan, the PHC Restricted Stock
Plan, the PHC Stock Option Plan, the PHC Key Executive Officer Annual Incentive
Plan, and the PHC Nonmanagement Directors Stock Incentive Plan. For a
description of these plans, see "--Management of PHC--PHC Compensation Plans."

Harrah's Entertainment will assume, with respect to Harrah's Entertainment
Employees and all retired or terminated employees of Promus and its
subsidiaries, all liabilities and obligations as of the Distribution Date for
medical, dental and vision plan coverage and for vacation pay and other payment
obligations under Promus's welfare plans. PHC will similarly assume, with
respect to PHC Employees, all liabilities and obligations as of the Distribution
Date for medical, dental and vision coverage and for vacation pay and other
payment obligations under welfare plans that pertain to PHC Employees.

The Employee Benefits Allocation Agreement will provide that employment by
PHC of individuals who were employees of Promus or any of its subsidiaries
immediately prior to the Distribution Date will not be deemed a severance of
employment for purposes of any policy, plan, program or agreement that provides
for the payment of severance pay, salary continuation or similar benefits.

Tax Sharing Agreement. PHC and Harrah's Entertainment will enter into a tax
sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights
and obligations with respect to deficiencies and refunds of federal, state and
other income or franchise taxes relating to Promus's business for tax years
prior to the Distribution and with respect to certain tax attributes of Promus
after

32
<PAGE>
the Distribution. In general, with respect to periods ending on or before the
last day of the year in which the Distribution occurs, Harrah's Entertainment is
responsible for (i) filing consolidated federal tax returns for the Harrah's
Entertainment affiliated group, including in each case PHC and its subsidiaries
for the relevant periods of time that such companies were members of the
applicable group, and (ii) paying the taxes relating to such returns except to
the extent solely attributable to the Hotel Business (including any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities). PHC will reimburse Harrah's Entertainment for
the portion of such taxes solely relating to the Hotel Business. The
responsibility for state and local tax returns, audits and payments for periods
prior to the Distribution will be allocated between Harrah's Entertainment and
PHC according to their respective properties and businesses as of the
Distribution Date, unless otherwise specifically provided in the Tax Sharing
Agreement. PHC is responsible for audits, filing returns and paying taxes
related to the Hotel Business for subsequent periods. PHC and Harrah's
Entertainment have agreed to cooperate with each other and to share information
in preparing such tax returns and in dealing with other tax matters. If either
the Embassy Distribution or the Distribution were taxable, the tax would be
payable by Harrah's Entertainment, except that in certain limited circumstances
PHC has agreed to indemnify Harrah's Entertainment for such tax liability.
Harrah's Entertainment is also responsible for paying all taxes of the Promus
group and its successors for periods prior to February 7, 1990.

Trademark Assignment Agreement. Pursuant to the terms of a Trademark
Assignment Agreement between Harrah's Entertainment and PHC (the "Trademark
Assignment Agreement"), all of Promus's rights, title and interests in certain
trademarks, including the trademarks "Promus," "Embassy Suites," "Hampton Inn,"
and "Homewood Suites," will be conveyed to PHC. After the Distribution, Embassy
will change its name to Harrah's Operating Company, Inc.

Noncompetition Agreement. PHC and Harrah's Entertainment will enter into a
noncompetition agreement as part of the Distribution Agreement (the
"Noncompetition Agreement") that defines the parties' rights and obligations
with respect to certain businesses to be operated by PHC and Harrah's
Entertainment. Pursuant to the Noncompetition Agreement, PHC and its affiliates
will be prohibited, without the express written consent of Harrah's
Entertainment, from competing with the Casino Business of Harrah's
Entertainment, provided (i) that two years after the Noncompetition Agreement
has become effective and for the remaining term of such agreement, such
restrictions shall not prevent PHC from competing with the Casino Business in
geographic areas where Harrah's Entertainment is prohibited, by law or by
contract, from operating casino facilities (or any additional casino facilities)
and (ii) that such restrictions shall not prevent PHC from operating the Hotel
Business in competition with Harrah's Entertainment's casino hotel facilities or
from operating a limited scale casino (no more than 10,000 square feet or 300
gaming positions) in a predominantly hotel facility. Harrah's Entertainment will
have the right to provide management or consulting services to PHC in connection
with PHC's operation of a limited scale casino. Harrah's Entertainment and its
affiliates will be prohibited, without the express written consent of PHC, from
competing with the Hotel Business of PHC, provided that such restrictions shall
not prevent or impair the operation by Harrah's Entertainment of any casino
hotel facility as such casino hotel facility may be operated presently or in the
future. The term affiliates includes any entity in which PHC or Harrah's
Entertainment owns a 20% or greater interest, but excludes any entity owning a
controlling or other interest in either company. PHC and Harrah's Entertainment
will not be permitted to unreasonably withhold their consent to transactions
involving affiliates that are not controlled by the other company. The
Noncompetition Agreement has a five year term commencing on the Distribution
Date.

In addition, PHC and Harrah's Entertainment will each be prohibited, without
the express written consent of the other company, for a period of two years
after the Distribution Date, from hiring employees of the other company, except
for certain employees identified in the Distribution Agreement.

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<PAGE>
Policies and Procedures for Addressing Conflicts. After the Distribution,
PHC and Harrah's Entertainment will have significant contractual and other
ongoing relationships, as described herein. Such ongoing relationships may
present certain conflict situations for Mr. Rose, who will serve as Chairman of
the PHC Board and the Harrah's Entertainment Board, and Mr. Peternell, who will
serve as a director of PHC and as an executive officer of Harrah's
Entertainment. Messrs. Rose and Peternell, as well as other executive officers
and directors of PHC and Harrah's Entertainment, will also own (or have options
or other rights to acquire) a significant number of shares of common stock in
both companies. See "--Certain Special Considerations--Potential Conflicts,"
"--Management of PHC" and "--Management of Harrah's Entertainment." Harrah's
Entertainment and PHC will adopt appropriate policies and procedures to be
followed by the boards of directors of each company to limit the involvement of
Messrs. Rose and Peternell (and other executive officers and directors having a
significant ownership interest in both companies) in conflict situations,
including matters relating to contractual relationships or litigation between
the companies. Such procedures will include requiring Messrs. Rose and Peternell
(or such other executive officers or directors having a significant ownership
interest in both companies) to abstain from making management decisions in their
capacities as officers of PHC and Harrah's Entertainment, respectively, and to
abstain from voting as directors of either company, with respect to matters that
present a significant conflict of interest between the companies. Whether or not
a significant conflict of interest situation exists will be determined on a
case-by-case basis depending on such factors as the dollar value of the matter,
the degree of personal interest (or such other executive officers and directors
having a significant ownership interest in both companies) in the matter, the
respective interests of the stockholders of PHC or Harrah's Entertainment and
the likelihood that resolution of the matter will have significant strategic,
operational or financial implications for the business of the respective
companies. It will be a principal responsibility of the general counsel of each
company to monitor this issue in consultation with the audit committee of the
board of directors of the company in question. For a further discussion of the
possible conflicts of interest between PHC and Harrah's Entertainment, see
"--Certain Special Considerations--Potential Conflicts."

Information Technology Sharing Agreements. Harrah's Entertainment and PHC
will enter into several information technology sharing agreements for the
purpose of governing certain relationships between PHC and Harrah's
Entertainment after the Distribution. These agreements include the following:
(i) a data center lease under which PHC will provide Harrah's Entertainment with
space and certain computer services at PHC's Data Center, (ii) a marketing
services agreement under which PHC will provide Harrah's Entertainment with the
use of certain facilities for processing reservations, (iii) a reservations
system agreement under which PHC will provide Harrah's Entertainment with
certain access to the PHC's computer reservation system, (iv) a satellite
services agreement under which PHC will provide Harrah's Entertainment with
certain access to PHC's satellite communications system, and (v) a software
agreement which will define the rights of Harrah's Entertainment and PHC to the
use of certain software. These agreements will contain commercially reasonable
terms to be negotiated by the parties.

Risk Management Allocation Agreement. Pursuant to the terms of a Risk
Management Allocation Agreement to be entered into between PHC and Harrah's
Entertainment, claims covered under the Promus risk management program relating
to the Hotel Business and arising prior to the Distribution will continue to be
insured through Harrah's Entertainment's risk management program with an agreed
portion of existing reserves to be allocated to such claims. PHC will manage
such claims and indemnify Harrah's Entertainment against liability for such
claims to the extent the reserve is insufficient to cover the ultimate cost of
the claims. Claims relating to the Hotel Business arising on or after the
Distribution Date will be covered by PHC's risk management program.

Transitional Services Agreements. In addition to the agreements described
above, PHC and Harrah's Entertainment will enter into a number of other
agreements pursuant to which Harrah's Entertainment will provide certain
continuing services to PHC, or PHC will provide certain services to

34
<PAGE>
Harrah's Entertainment, for limited transitional periods. Such services will be
provided on market terms and conditions. Subject to the termination provisions
of the specific agreements, PHC or Harrah's Entertainment, as the case may be,
will be free to procure such services from outside vendors or may develop an
in-house capability in order to provide such services internally. Promus
believes that these agreements are based on commercially reasonable terms
including pricing and payment terms.

FINANCING

PHC. Promus and Embassy have obtained a commitment from NationsBank under
which NationsBank or a group of banks and other financial institutions including
NationsBank will provide PHC with the PHC Bank Credit Facilities in aggregate
principal amount of $350 million. The PHC Bank Credit Facilities will consist of
the Five Year Revolver, a $300 million revolving credit facility with a maturity
of five years, and the Extendible Revolver, a $50 million annually extendible
revolving credit facility with an initial maturity of 364 days. The Extendible
Revolver is convertible into a two-year term loan with equal amortizing payments
over such two-year period. Initially, approximately $210 million will be drawn
by Embassy under the PHC Bank Credit Facilities and used by Embassy to retire
existing debt. Upon the consummation of the Distribution, the PHC Bank Credit
Facilities will be transferred by Embassy to a wholly-owned subsidiary of PHC,
PHC and its material subsidiaries will be guarantors of such facility, and
Embassy will be released from liability under the PHC Bank Credit Facilities.
The remaining availability under the PHC Bank Credit Facilities are to be used
for working capital, hotel development and other general corporate purposes and
to pay certain costs and expenses of the Distribution.

Interest on the drawn portion of the PHC Bank Credit Facilities will be, at
the option of PHC, equal to either (i) the Base Rate (as hereinafter defined) or
(ii) the LIBOR rate plus an applicable margin presently expected to range at the
closing from 35 to 50 basis points for the Five-Year Revolver and from 40 to 55
basis points for the Extendible Revolver. "Base Rate" is the higher of the
Federal funds rate plus 50 basis points and NationsBank's prime lending rate.
From and after the closing of the PHC Bank Credit Facilities, PHC will be
required to pay a facility fee on the PHC Bank Credit Facilities commitments
(whether drawn or undrawn) presently expected to range at the closing from 20 to
25 basis points for the Five-Year Revolver and from 15 to 20 basis points for
the Extendible Revolver.

There will be provisions for mandatory repayments of the PHC Bank Credit
Facilities with proceeds of certain asset dispositions. The PHC Bank Credit
Facilities will be secured by the pledge of stock of, and guaranteed by, the
material subsidiaries of PHC. The PHC Bank Credit Facilities will also contain
certain representations and warranties relating to corporate existence,
corporate and governmental authorization, financial information, absence of
material adverse change, compliance with laws, compliance with ERISA, absence of
litigation, payment of taxes, full disclosure and absence of liens and
encumbrances, and financial maintenance covenants and other covenants
restricting other indebtedness, asset sales, mergers and acquisitions, dividends
and transactions with affiliates.

Closing of the PHC Bank Credit Facilities is subject to certain conditions,
including the execution of definitive credit documentation, receipt of all
necessary approvals, no material adverse change in PHC or its business, and the
consummation of certain transactions related to the Distribution. See
"--Management's Discussion and Analysis of Historical Financial Condition and
Results of Operations of PHC--Liquidity and Capital Resources."

Harrah's Entertainment. In connection with the Distribution, Harrah's
Entertainment will cause Embassy to make certain amendments to the Embassy Bank
Credit Facility to permit the Distribution. Embassy is also seeking to amend the
Embassy Bank Credit Facility to include modifications to certain financial
covenants necessitated by the Distribution and more favorable pricing, maturity
and other terms. The total commitment amount under the Embassy Bank Credit
Facility (presently $650 million) could be reduced in connection with these
amendments.

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<PAGE>
CONSENT SOLICITATION

Embassy, a wholly-owned subsidiary of Promus, is the obligor with respect to
the 10 7/8 Notes and the 8 3/4% Notes. Concurrently herewith, Embassy is
soliciting consents from the holders of the 10 7/8% Notes and holders of the 8
3/4% Notes to certain indenture amendments to permit the consummation of the
Distribution. The Distribution, as structured, is conditioned upon the consent
to such indenture amendments by holders of a majority of the outstanding
aggregate principal amount of the 10 7/8% Notes and by holders of a majority of
the outstanding aggregate principal amount of the 8 3/4% Notes. See
"--Conditions; Termination." The Consent Solicitation will be made only by means
of a consent solicitation statement.

All holders of the 10 7/8% Notes and 8 3/4% Notes as of a specified date
(the "Consent Record Date") will be requested to consent to the proposed
indenture amendments in the Consent Solicitation. The proposed indenture
amendments will allow Embassy to make the Embassy Distribution without regard to
the covenant in both the 10 7/8% Notes indenture and the 8 3/4% Notes indenture
that restricts dividends to stockholders by Embassy. Embassy's obligation to
consummate the Consent Solicitation will be conditioned upon (i) the
consummation of the Distribution, and (ii) consent by a majority in principal
amount of each of the 10 7/8% Notes and the 8 3/4% Notes not owned by Embassy or
any of its affiliates as of the Consent Record Date and (iii) subject to waiver
by Embassy, the absence of any law or regulation, injunction or action or other
proceeding (pending or threatened), which would make unlawful or invalid, or
enjoin the implementation of, the proposed indenture amendments, the entering
into of supplemental indentures or the making of consent payments, or question
the legality or validity thereof, or otherwise adversely affect the Embassy
Distribution or the Distribution. Embassy currently expects to make the Consent
Solicitation at least 30 days prior to the Distribution Date, and, if the
conditions to the Consent Solicitation are satisfied, to consummate the Consent
Solicitation no later than the Distribution Date.

REGULATORY APPROVALS

Promus does not believe that any material federal or state regulatory
approvals will be necessary in connection with the Distribution, except as set
forth below.

Gaming Approvals. Certain approvals must be obtained from the gaming
authorities in the State of New Jersey prior to the Distribution. Although
Promus is in the process of obtaining such approval, it is not expected to be
obtained until shortly after the Annual Meeting. Consequently, the Promus Board
is expected to declare the Distribution conditioned upon the approval of the New
Jersey gaming authorities. See "--Certain Special Considerations--Certain
Consent Requirements."

Transfers of Liquor Licenses. In connection with the transfer to PHC of
certain assets of the Hotel Business, PHC will be required to seek approval from
a number of states for the transfer of liquor licenses from Embassy to PHC (or
its subsidiaries). PHC believes that such approvals can be obtained in due
course.

Transfers of Franchises. The Federal Trade Commission and a number of states
regulate the offering of new franchises and other aspects of franchising. In
connection with the transfer to PHC of certain assets of the PHC Hotel Business,
PHC will be required to register and obtain approval of an offering circular
from a number of states in order to offer for sale franchises for the Hotel
Business in those states. PHC believes that such approvals can be obtained in
due course following the Distribution and that no material adverse consequence
to PHC would result from a delay in obtaining any such approvals.

ACCOUNTING TREATMENT

The historical financial statements of Promus have been restated to report
the Hotel Business as discontinued operations. Included separately herein are
the combined financial statements of PHC as if it were a separate entity for all
periods presented. Promus's historical basis in the assets and liabilities of
PHC has been carried over. See "--Selected Historical Financial Data of PHC,"
"--Pro Forma Financial Data of PHC" and "--Pro Forma Financial Data of Harrah's
Entertainment."

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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PROMUS

The following summary combined financial information for Promus has been
derived from the historical financial information of Promus, which has been
restated to retroactively reflect the Hotel Business as discontinued operations.
The information that follows should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto of Promus included in the
1994 Promus Form 10-K and incorporated by reference herein. For a discussion of
the basis of presentation of the Promus consolidated financial statements, see
Note 1 to the Promus consolidated financial statements. For a discussion of
Promus's financial results for the first quarters of 1995 and 1994, see "Recent
Developments."
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------
1994(A) 1993 1992 1991 1990
-------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Operating results(b)
Continuing operations
Revenues............................. $1,339.4 $1,020.6 $ 894.4 $ 863.4 $ 875.3
Operating income..................... 269.2 210.0 161.0 142.2 139.3
Income from continuing operations.... 50.0 74.9 49.6 34.5 30.7
Earnings (loss) from discontinued hotel
operations........................... 36.3 16.9 1.8 (4.5) (7.4)
Net income............................. 78.4 86.3 52.5 30.0 23.4
Earnings (loss) per share
Continuing operations................ 0.49 0.73 0.49 0.39 0.39
Discontinued hotel operations........ 0.35 0.16 0.02 (0.06) (0.09)
Net income........................... 0.76 0.84 0.52 0.33 0.30
Cash dividend per share................ - - - - 10.00
Financial position
Total assets(b)........................ 1,738.0 1,528.0 1,297.3 1,226.0 1,141.2
Total assets of continuing
operations(b)........................ 1,595.0 1,347.5 1,085.1 1,034.3 1,028.6
Long-term debt(b)...................... 727.5 665.2 660.7 614.5 712.3
Stockholders' equity................... 623.4 536.0 427.9 365.5 203.7
Book value per share................... 6.09 5.24 4.20 3.61 2.55
</TABLE>

- - ------------

(a) Promus's 1994 financial results include a charge of $53.4 million to accrue
the estimated cost of the settlement of litigation between Promus and Bass
PLC, including related legal fees and other associated expenses.

(b) Promus's historical financial information for all periods presented is
reflected net of a pro-rata portion of its historical corporate debt
balance, unamortized deferred finance charges and interest expense allocated
to PHC. These allocations were based on the percentage of Promus's existing
corporate debt expected to be retired using proceeds drawn under the PHC
Bank Credit Facilities. The amounts of these balances allocated to PHC were
based on the estimate that approximately 20.5 percent, computed as of
December 31, 1994, of Promus's corporate debt will be assumed by PHC at the
time of the Distribution and result in a reasonable approximation, in
management's judgment, of the portion of Promus's historical corporate debt
balance that was serviced by the cash flows of PHC's operations in the
periods presented. The amounts of Promus's corporate debt allocated to PHC
as of year-end 1994, 1993, 1992, 1991 and 1990 were $187.9 million, $171.8
million, $170.9 million, $168.9 million and $194.2 million, respectively.
The amounts of Promus's unamortized deferred finance charges allocated to
PHC as of year-end 1994, 1993, 1992, 1991 and 1990 were $3.2 million, $3.9
million, $3.4 million, $3.6 million and $5.0 million, respectively. Promus's
corporate interest expense has been allocated to PHC on the same basis and
percentage applied to the corporate debt allocation. The amounts of Promus's
corporate interest expense allocated to PHC for fiscal 1994, 1993, 1992,
1991 and 1990 were $17.2 million, $17.0 million,

(Footnotes continued on following page)

37
<PAGE>
(Footnotes continued from preceding page)
$19.5 million, $21.1 million and $18.6 million, respectively. The amounts of
Promus's corporate interest allocated to PHC for all periods presented is in
addition to the interest expense included in PHC's financial statements on
indebtedness specifically identified with a PHC entity and PHC's
proportionate share of interest expense of its nonconsolidated affiliates.
Total interest expense included in PHC's financial statements from all
sources, including the amounts allocated from Promus, for fiscal 1994, 1993,
1992, 1991 and 1990 were $31.1 million, $33.5 million, $40.7 million, $41.8
million and $30.3 million, respectively.

SELECTED HISTORICAL FINANCIAL DATA OF PHC

The following table summarizes selected historical combined financial data
of PHC for the five fiscal years ended December 31, 1994. Prior to the
Distribution, Promus will transfer its interest in the Embassy Suites, Hampton
Inn and Homewood Suites hotel divisions and certain other assets unrelated to
Harrah's Entertainment to PHC. The following table gives effect to such
transfers.

The combined financial statements of PHC include the assets and liabilities,
revenues and expenses of the Hotel Business. The PHC combined financial
statements include certain allocations of the overhead expenses incurred by
Promus that support all of PHC's businesses. In management's opinion, these
allocations were made on a reasonable basis. However, such allocations may not
be indicative of the level of expenses which will be incurred by PHC after the
Distribution. The expenses were generally allocated based upon specific
identification and estimates of the relative time devoted to supporting PHC.

The historical combined financial data is not necessarily indicative of
PHC's future results of operations or financial condition. The data set forth
below should be read in conjunction with the unaudited Pro Forma Financial Data
and the notes thereto of PHC and the audited Combined Financial Statements of
PHC and the notes thereto and the Management's Discussion and Analysis of
Historical Financial Condition and Results of Operations of PHC included
elsewhere in this Proxy Statement. For a discussion of the basis of presentation
of the PHC Combined Financial Statements, see Note 1 of the Notes to the PHC
Combined Financial Statements. For a discussion of PHC's financial results for
the first quarters of 1995 and 1994, see "Recent Developments."
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Operating results(a)(b)
Continuing operations
Revenues...................................... $242.7 $231.2 $218.7 $167.7 $128.9
Operating income.............................. 94.3 67.5 43.8 33.9 20.1
Income (loss) before extraordinary items...... 36.3 16.9 1.8 (4.5) (7.4)
Net income (loss)............................... 36.3 16.9 6.4 (4.5) (7.4)
Financial position
Total assets(a)................................. 420.6 446.2 511.5 502.7 404.2
Long-term debt(a)............................... 189.9 174.6 216.7 220.7 191.2
Parent company investment....................... 143.0 180.5 212.2 191.7 112.6
</TABLE>

- - ------------

(a) In anticipation of the retirement of a portion of Promus's outstanding
corporate debt using proceeds drawn under the PHC Bank Credit Facilities
prior to the Distribution, a pro-rata portion of Promus's historical
outstanding debt balance, unamortized deferred finance charges and interest
expense has been allocated to PHC. These allocations were based on the
percentage of Promus's existing debt expected to be retired using proceeds
to be drawn under the PHC Bank Credit Facilities. The amounts of these
balances allocated to PHC were based on the estimate that approximately 20.5
percent, computed as of December 31, 1994, of Promus's corporate debt will
be assumed by PHC at the time of the Distribution and result in a reasonable
approximation, in management's judgment, of the portion of Promus's
historical corporate debt balance that was serviced by the cash flows of
PHC's operations in the periods presented. The amounts of Promus's corporate
debt allocated to PHC as of year-end 1994, 1993, 1992, 1991 and 1990 were
$187.9 million, $171.8 million, $170.9 million, $168.9 million and $194.2
million, respectively. The amounts of Promus's unamortized deferred finance
charges allocated to PHC as of year-end 1994,

(Footnotes continued on following page)

38
<PAGE>
(Footnotes continued from preceding page)

1993, 1992, 1991 and 1990 were $3.2 million, $3.9 million, $3.4 million,
$3.6 million and $5.0 million, respectively. Promus's corporate interest
expense has been allocated to PHC on the same basis and percentage applied
to the corporate debt allocation. The amounts of Promus's corporate interest
expense allocated to PHC for fiscal 1994, 1993, 1992, 1991 and 1990 were
$17.2 million, $17.0 million, $19.5 million, $21.1 million and $18.6
million, respectively. The amounts of Promus's corporate interest allocated
to PHC for all periods presented is in addition to the interest expense
included in PHC's financial statements on indebtedness specifically
identified with a PHC entity and PHC's proportionate share of interest
expense of its nonconsolidated affiliates. Total interest expense included
in PHC's financial statements from all sources, including the amounts
allocated from Promus, for fiscal 1994, 1993, 1992, 1991 and 1990 were $31.1
million, $33.5 million, $40.7 million, $41.8 million and $30.3 million,
respectively.
(b) PHC's historical operating results do not reflect any estimated incremental
costs expected to be incurred by PHC to support its operations as a
stand-alone entity after the Distribution. As reflected in the accompanying
pro forma financial statements, had the Distribution occurred on January 1,
1994, it is estimated that such incremental costs, related primarily to
information technology, insurance programs and administrative support
functions, would have been approximately $6.6 million, before income taxes,
in 1994. Had the Distribution occurred at the beginning of the earliest
period presented, a similar amount, adjusted for the impact of inflation,
would have been incurred in each of the periods reported in this table.

PRO FORMA FINANCIAL DATA OF PHC

The following unaudited financial data illustrates the estimated effects of
the proposed Distribution. The pro forma balance sheet is based on the December
31, 1994 balance sheet of PHC and assumes the Distribution was consummated on
that date. The pro forma income statement is based on the fiscal 1994 income
statement of PHC and assumes the Distribution was consummated at the beginning
of the fiscal period. The unaudited pro forma financial data should be read in
conjunction with the audited combined financial statements of PHC and the notes
thereto, together with the Selected Historical Financial Data, including the
notes thereto, and other financial information of PHC included elsewhere in this
Proxy Statement.

The Pro Forma Financial Data of PHC does not purport to represent what the
financial position or results of operations of PHC would have been if the
Distribution had in fact been consummated on such date or at the beginning of
the period indicated or to project the financial position or results of
operations for any future date or period. The pro forma adjustments are based
upon available information and upon certain assumptions that PHC's management
believes are reasonable in the circumstances.

39
<PAGE>
PROMUS HOTEL CORPORATION
PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................. $ 2,222 $ - $ 2,222
Receivables, including notes receivable of $66, less
allowance for doubtful accounts of $1,270........... 18,148 - 18,148
Deferred income taxes................................. 2,844 - 2,844
Prepayments........................................... 528 - 528
Supplies.............................................. 1,095 - 1,095
Other................................................. 728 - 728
---------- ----------- ---------
Total current assets.............................. 25,565 - 25,565
---------- ----------- ---------
Land, buildings, furniture and equipment................ 410,751 21,768(c) 432,519
Less: Accumulated depreciation and amortization......... (88,611) - (88,611)
---------- ----------- ---------
322,140 21,768 343,908
Investments in and advances to nonconsolidated
affiliates............................................ 35,856 - 35,856
Deferred costs and other................................ 37,004 (3,163)(a) 37,341
3,000(b)
500(d)
---------- ----------- ---------
$ 420,565 $ 22,105 $ 442,670
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable...................................... $ 14,437 $ - $ 14,437
Accrued expenses...................................... 18,769 - 18,769
Current portion of long-term debt..................... 1,255 - 1,255
---------- ----------- ---------
Total current liabilities......................... 34,461 - 34,461
Long-term debt.......................................... 189,943 3,000(b) 215,211
21,768(c)
500(d)
Deferred credits and other.............................. 28,649 - 28,649
Deferred income taxes................................... 24,504 - 24,504
---------- ----------- ---------
277,557 25,268 302,825
---------- ----------- ---------
Stockholders' equity
Common stock.......................................... - 5,116(e) 5,120
4(f)
Capital surplus....................................... - 134,729(e) 135,259
530(f)
Retained earnings..................................... - - -
Deferred compensation................................. - (534)(f) (534)
Parent company investment............................. 143,008 (3,163)(a) -
(139,845)(e)
---------- ----------- ---------
143,008 (3,163) 139,845
---------- ----------- ---------
$ 420,565 $ 22,105 $ 442,670
---------- ----------- ---------
---------- ----------- ---------
</TABLE>

See accompanying notes to pro forma financial statements.

40
<PAGE>
PROMUS HOTEL CORPORATION
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues
Rooms............................................... $ 110,205 $ - $ 110,205
Food and beverage................................... 8,001 - 8,001
Franchise and management fees....................... 76,874 - 76,874
Other............................................... 47,644 2,769(f) 50,413
---------- ----------- ---------
Total revenues.................................. 242,724 2,769 245,493
---------- ----------- ---------
Operating expense
Direct
Rooms............................................. (56,952) - (56,952)
Food and beverage................................. (7,760) - (7,760)
Depreciation of buildings and equipment............. (22,336) (1,136)(g) (23,472)
Other............................................... (58,711) (2,851)(h) (61,662)
(100)(i)
---------- ----------- ---------
Total operating expenses........................ (145,759) (4,087) (149,846)
---------- ----------- ---------
96,965 (1,318) 95,647
General and administrative............................ (3,337) (3,710)(h) (7,047)
Property transactions................................. 626 - 626
---------- ----------- ---------
Operating income...................................... 94,254 (5,028) 89,226
Interest expense, net of interest capitalized......... (31,148) 17,154(j) (30,992)
(16,998)(k)
Other................................................. 11 - 11
---------- ----------- ---------
Income before income taxes............................ 63,117 (4,872) 58,245
Provision for income taxes............................ (26,798) 1,900(l) (24,898)
---------- ----------- ---------
Income from continuing operations..................... $ 36,319 $ (2,972) $ 33,347
---------- ----------- ---------
---------- ----------- ---------
Income from continuing operations per share........... $ 0.65
---------
---------
Average shares outstanding............................ 51,405(e) 51,405
----------- ---------
----------- ---------
</TABLE>

See accompanying notes to pro forma financial statements.

41
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS

Prior to the Distribution, Embassy will enter into the PHC Bank Credit
Facilities and sufficient funds will be drawn under those facilities by Embassy
for purposes of retiring that portion of Promus's corporate debt which has been
allocated to PHC in the historical financial statements ($187.9 million at
December 31, 1994). The approximately $210.0 million expected to be outstanding
under the PHC Bank Credit Facilities and assumed by PHC in connection with the
Distribution includes both the $187.9 million of Promus corporate debt allocated
to PHC at December 31, 1994, and the additional $22.1 million to be incurred by
Promus subsequent to December 31, 1994, but prior to the Distribution, to
acquire the Audubon Woods Business Campus (see Note (c)). The PHC Bank Credit
Facilities will be included among the liabilities transferred by Embassy and its
subsidiaries to PHC, and Promus and Embassy will be released from their
liability under the PHC Bank Credit Facilities in connection with the
Distribution. The pro forma balance sheet assumes that these events occurred on
December 31, 1994, and the long-term debt in PHC's historical balance sheet
includes its borrowings under the PHC Bank Credit Facilities at the time of the
Distribution. See "--Financing--PHC."

<TABLE>
<C> <S>
(a) Records the transfer back to Promus through parent company investment of the balance of
historical unamortized deferred finance charges allocated by Promus to PHC as of
December 31, 1994, based on the percentage of Promus's existing corporate debt expected
to be retired using proceeds drawn under the PHC Bank Credit Facilities.
(b) Records the estimated $3.0 million of deferred finance charges expected to be incurred
at the inception of the PHC Bank Credit Facilities and paid with funds drawn on the
Facilities.
(c) Records the contribution by Promus to PHC of the Audubon Woods Business Campus,
together with the related debt. This facility, which will serve as PHC's headquarters
offices, was purchased in January 1995 using funds assumed to have been drawn under the
PHC Bank Credit Facilities.
(d) Records the payment by PHC of estimated organization costs using funds drawn under the
PHC Bank Credit Facilities.
(e) Reflects the issuance of 51,158,000 shares of PHC Common Stock at the time of the
Distribution.
(f) Records the issuance of 43,000 shares of restricted stock to PHC employees at the time
of the Distribution. These shares replace Promus restricted shares held by these
employees immediately prior to and cancelled upon consummation of the Distribution.
(g) Reflects estimated income statement impact of the addition of the Audubon Woods
Business Campus. The facility currently leases space to third parties in arm's-length
transactions and such estimates are based on existing lease agreements.
(h) Records estimated incremental costs, primarily for information technology, insurance
programs and administrative support functions, expected to be incurred by PHC to
support its stand-alone operations.
(i) Reflects amortization of estimated organization costs (see Note (d)) on a straight-line
basis over five years.
(j) Reflects the reversal of historical interest expense allocated by Promus to PHC.
(k) Reflects a full year of interest expense arising from the PHC Bank Credit Facilities,
including:
i. interest on outstanding balance computed at LIBOR plus 0.75%. The LIBOR rate as
of the date of receipt of the PHC Bank Credit Facilities commitment (6.75%) has
been used as the basis for computing interest expense for this pro forma income
statement.
ii. commitment fee on unused balance at 0.20%.
iii. amortization of deferred finance charges incurred at inception of the PHC Bank
Credit Facilities (see Note (b)) following the interest method over the expected
five-year term of the debt.
(l) Reflects income tax effect of the pro forma adjustments to income at the 39.0% marginal
income tax rate applied to PHC's historical 1994 income.
</TABLE>

42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF HISTORICAL FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PHC

Formation and Basis of Presentation. On January 30, 1995, Promus announced
the Distribution. The Distribution will split the company into two independent
public corporations, one for conducting the Casino Business and one for
conducting the Hotel Business. As a result of the announced Distribution,
Promus's historical financial statements have been restated to report the Hotel
Business as discontinued operations. Included separately herein are the combined
financial statements of PHC as if it were a separate entity for all periods
presented.

The Distribution is subject to a number of conditions. See "--Conditions;
Termination."

RESULTS OF OPERATIONS OF PHC
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE/(DECREASE)
--------------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS) 1994 1993 1992 94 VS 93 93 VS 92
------- ------- ------- -------- --------

<CAPTION>
<S> <C> <C> <C> <C> <C>
Revenues.................................. $242.7 $231.2 $218.7 5.0% 5.7%
Operating income before general and
administrative expenses and property
transactions............................ 97.0 70.6 57.7 37.4% 22.4%
Operating income.......................... 94.3 67.5 43.8 39.7% 54.1%
Net income................................ 36.3 16.9 6.4 114.8% 164.1%
Operating margin.......................... 38.9% 29.2% 20.0% 9.7pts 9.2pts
System-wide RevPAR/S
Embassy Suites.......................... $ 72.86 $ 68.58 $ 65.26 6.2% 5.1%
Hampton Inn............................. 39.74 37.10 34.82 7.1% 6.5%
Homewood Suites......................... 59.67 54.91 50.10 8.7% 9.6%
Number of Hotels
Company-owned
Embassy Suites........................ 9 9 15
Hampton Inn........................... 15 15 15
Homewood Suites....................... 8 8 8
Franchised and Managed
Embassy Suites........................ 98 98 88
Hampton Inn........................... 422 357 312
Homewood Suites....................... 18 16 16
</TABLE>

The principal factors affecting PHC results are: the continued growth in the
number of hotels; the occupancies and room rates achieved by the three hotel
brands; the number and relative mix of owned, managed and franchised hotels; and
PHC's ability to manage costs. The number of rooms/suites at franchised
properties and revenue per available room/suite ("RevPAR/S") significantly
affect PHC results since franchise royalty fees are based upon rooms/suites
revenues of franchised hotels. Increases in franchise and management fee
revenues have a disproportionate impact on PHC's operating margin due to the
lower incremental costs associated with these revenues. In 1994 and 1993, each
of these factors contributed to improved financial results over the prior year.

As of December 31, 1994, PHC's combined hotel systems had grown to include
570 properties, a net increase of 67 franchisee developed properties over the
503 hotels in the combined systems at the end of 1993. Each of the three brands
improved its RevPAR/S measurement by over 6%. The continued growth of the hotel
systems through management and franchise properties, coupled with a continued
focus on managing costs, contributed to higher operating income and operating
margins. Franchise and management fees increased to 31.7% of total revenues in
1994, versus 26.1% in 1993, and operating margins increased to 38.9% in 1994
versus 29.2% in the prior year. PHC 1994 franchise and management fees include
approximately $5.4 million in certain nonrecurring fees related to the change of
ownership and contract terminations. Excluding these fees, operating margin
would have been 37.4% in 1994.

43
<PAGE>
Total revenue increases in 1993 over 1992 were also primarily due to
combined system growth and increased RevPAR/S for all three brands. Partially
offsetting the revenue increases attributable to these sources was the reduction
in the number of company-owned Embassy Suites properties.

Operating income before corporate expense and property transactions
increased in 1993 over the prior year due to the impact on operations of
increased franchise and management fees. Partially offsetting this increase in
1993 was a $3.6 million writedown of a receivable from an Embassy Suites
franchisee.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE/(DECREASE)
--------------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS) 1994 1993 1992 94 VS 93 93 VS 92
------ ------ ------ -------- --------

<CAPTION>
<S> <C> <C> <C> <C> <C>
General and administrative expense.... $ 3.3 $ 4.5 $ 8.2 (26.7)% (45.1)%
Property transactions................. (0.6) (1.3) 5.7 N/M N/M
Interest expense...................... 31.1 33.5 40.7 (7.2)% (17.7)%
Other (income) expense................ - 3.2 (0.1) N/M N/M
Effective tax rate.................... 42.5% 45.0% 43.2% (2.5)pts 1.8pts
Extraordinary gains, net.............. $ - $ - $ (4.5) - N/M
</TABLE>

General and administrative expense reflects the cost of staff functions
which support all three hotel brands. These costs have declined over the three
year period, reflecting the third quarter 1993 consolidation into a single
organizational structure of the management of the brands comprising PHC and the
closing of the Embassy Suites management office in Dallas in 1992. The
Distribution will result in the division of certain of Promus's existing
corporate support functions between the two resulting entities. Historically,
Promus allocated to its operating units all corporate overhead expenses
specifically identified with those operations. The amounts of such costs
allocated to the entities comprising PHC and included in PHC financial results
were $10.6 million in 1994, $11.7 million in 1993 and $12.2 million in 1992.
Since these allocations will be discontinued after the Distribution and
responsibility for these support functions will be assumed by PHC, general &
administrative expense in the historical financial statements may not be
indicative of such costs in the future. In addition, PHC's historical operating
results do not reflect any estimated incremental costs expected to be incurred
by PHC to support its operations as a stand-alone entity after the Distribution.
As reflected in the accompanying pro forma financial statements, had the
Distribution occurred on January 1, 1994, it is estimated that such incremental
costs, related primarily to information technology, insurance programs and
administrative support functions, would have been approximately $6.6 million,
before income taxes, in 1994. Had the Distribution occurred at the beginning of
the earliest period presented, a similar amount, adjusted for the impact of
inflation, would have been incurred in each of the periods presented in these
financial statements.

Property transactions for 1994 includes gains on the sales of a
company-owned Hampton Inn and a parcel of undeveloped land. Property
transactions for 1993 included the gain on the sale of an Embassy Suites
property. In 1992, property transactions include a $3.6 million writedown
resulting from the writedown of a joint venture hotel during the year. This
property transaction writedown was offset by a $2.7 million extraordinary gain
resulting from the forgiveness of the joint venture's non-recourse debt.

Interest expense for all periods includes the pro rata allocation of
corporate interest by Promus related to the debt expected to be retired in
connection with the Distribution using funds drawn on the PHC Bank Credit
Facilities. See "--Liquidity and Capital Resources." Interest expense also
includes PHC's share of interest expense of its nonconsolidated affiliates. The
decrease in interest expenses from 1993 to 1994 is due to changes in interest
rates and the mix of allocated debt. The decrease from 1992 to 1993 is due to
the transfer of its ownership interest in five Embassy Suites properties to a
third party which included the assumption of mortgage debt on these properties
by the third party.

Other expense for 1993 included a $3.2 million payment related to the
settlement of an issue concerning the guarantee of a land lease associated with
an Embassy Suites franchised property by PHC.

The effective tax rate for all periods is higher than the federal statutory
rate primarily due to state income taxes.

44
<PAGE>
The extraordinary gain reported in 1992 is composed of two items. First, PHC
reported a $2.7 million, net of tax, extraordinary gain representing its portion
of an extraordinary gain resulting from the forgiveness of debt of an Embassy
Suites' joint venture by the secured lender of the venture's non-recourse debt.
A second extraordinary gain of $1.8 million, net of tax, resulted from the
discounting of a mortgage in connection with its early extinguishment.

Capital Spending and Development. PHC had net additions of 67 franchised
properties during 1994, compared to 55 in 1993. Most of the growth occurred in
the Hampton Inn division, which added 65 properties and 45 properties in 1994
and 1993, respectively. As of December 31, 1994, 79 properties were under
construction and will operate under franchise agreements as Promus brands: 67
Hampton Inns (including three Hampton Inns & Suites), four Homewood Suites, and
eight Embassy Suites.

In May 1994 PHC announced plans to expand the Homewood Suites brand by
developing 20 to 25 additional company owned properties during the next three
years. A total of up to $150 million may be required during this period to fund
the development. Construction on the first of these properties began in October
1994. The property will be a company-owned prototype of a downsized Homewood
Suites property, suitable for smaller markets, and is expected to be completed
during the third quarter of 1995 at an estimated cost of approximately $6.4
million.

Construction on the first Hampton Inn & Suites hotel, a new concept
combining rooms and suites within a single hotel, began in September 1994. The
hotel is being developed by a franchisee and is expected to open during the
second quarter of 1995.

During 1993, PHC reduced the number of company-owned properties from 38 to
32 through the transfer of its ownership interests in five Embassy Suites hotels
to a third party in exchange for cash, notes receivable and the assumption of
the related mortgages, and the sale of an Embassy Suites hotel in an unrelated
transaction to a third party for cash and assumption of the related debt. All
six properties remain in the Embassy Suites system as franchises and five
continue to be managed by Embassy Suites for a fee. The notes receivable arising
from the disposition of the five hotels in 1993 were collected in 1994.

On-going refurbishment of PHC's existing company-owned hotel properties to
maintain the quality standards set for those properties will continue in 1995 at
an estimated cost of $12.8 million.

In early 1995, PHC acquired an office complex in Memphis, Tennessee, which
will serve as its corporate headquarters after the Distribution, at a cost of
approximately $22.0 million.

Cash needed to finance the projects currently under development, as well as
additional projects to be developed by PHC, will be made available from
operating cash flows, the PHC Bank Credit Facilities (see "--Liquidity and
Capital Resources"), joint venture partners, specific project financing, sales
of existing hotel assets and, if necessary, PHC debt and equity offerings. PHC
capital expenditures totaled $17.2 million during 1994. An additional $109.5
million is expected to be spent during 1995 to fund project development,
including those projects discussed above, in refurbishing existing facilities
and for other hotel related projects.

Liquidity and Capital Resources. Promus is currently negotiating the $350
million PHC Bank Credit Facilities to be secured by stock of certain material
subsidiaries of PHC. Concurrent with the Distribution, approximately $210
million will be drawn by Embassy under this facility and used by Embassy to
retire existing debt. In anticipation of these transactions, a pro rata portion
of Promus's historical outstanding debt balance, unamortized deferred finance
charges and interest expense has been allocated to PHC for all periods
presented. The amounts allocated are based on the percentage of Promus's
existing debt expected to be retired using proceeds from the PHC Bank Credit
Facilities. The PHC Bank Credit Facilities will be included among the
liabilities transferred by Promus and its subsidiaries to PHC, and Embassy will
be released from its liability under the PHC Bank Credit Facilities in
connection with the Distribution. PHC will use the remaining borrowing capacity
available to it under the PHC Bank Credit Facilities for working capital, hotel
development and other general corporate purposes.

45
<PAGE>
In connection with the Distribution, PHC intends to enter into severance
agreements with certain of its key executives. See "Management of
PHC--Employment and Severance Agreements."

Tax Matters. PHC and Harrah's Entertainment will enter into the Tax Sharing
Agreement that defines the parties' rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to Promus's business for tax years prior to the Distribution and with
respect to certain tax attributes of Promus after the Distribution. In general,
with respect to periods ending on or before the last day of the year in which
the Distribution occurs, Harrah's Entertainment is responsible for (i) filing
consolidated federal tax returns for the Harrah's Entertainment affiliated
group, including in each case PHC and its subsidiaries for the relevant periods
of time that such companies were members of the applicable group, and (ii)
paying the taxes relating to such returns except to the extent solely
attributable to the Hotel Business (including any subsequent adjustments
resulting from the redetermination of such tax liabilities by the applicable
taxing authorities). PHC will reimburse Harrah's Entertainment for the portion
of such taxes solely relating to the Hotel Business. The responsibility for
state and local tax returns, audits and payments for periods prior to the
Distribution will be allocated between Harrah's Entertainment and PHC according
to their respective properties and businesses as of the Distribution Date,
unless otherwise specifically provided in the Tax Sharing Agreement. PHC is
responsible for audits, filing returns and paying taxes related to the Hotel
Business for subsequent periods. PHC and Harrah's Entertainment have agreed to
cooperate with each other and to share information in preparing such tax returns
and in dealing with other tax matters. Harrah's Entertainment is also
responsible for paying all taxes of the Promus group and its successors for
periods prior to February 7, 1990.

Effects of Inflation. Generally, PHC has not experienced any significant
negative impact in its hotels and food and beverage operations because of
inflation. PHC has been able to increase rates and prices and thereby pass on
the effects of inflationary cost increases. Competitive conditions may limit the
industry's future ability to raise room rates at the rate of inflation. However,
PHC expects to be able to raise the rates for its three brands by more than the
rate of inflation. PHC will continue to emphasize cost containment and
productivity improvement programs.

Inflation tends to increase the underlying value of PHC's real estate and
management and franchise contracts.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL DATA OF PHC

The Management's Discussion and Analysis of Pro Forma Financial Statements
of PHC should be read in conjunction with the Management's Discussion and
Analysis of Historical Financial Condition and Results of Operations of PHC
contained elsewhere in this Proxy Statement.

PHC's pro forma revenues for fiscal 1994 are approximately $245.5 million
compared to historical revenues of $242.7 million. The $2.8 million revenue
increase is due to the inclusion in the pro forma income statement of rental
revenue from the office complex to be acquired by PHC in January 1995 to serve
as its headquarters offices. The rent revenue on leases of office space to third
parties will continue until the expiration of the existing leases. Pro forma
operating income declined $5.0 million from the historical amount, to $89.2
million, primarily due to the estimated incremental operating costs to be
incurred by PHC to support its operations on a stand-alone basis after the
Distribution. Pro forma interest expense of $31.0 million is essentially even
with the historical interest expense.

Pro forma net income of $33.3 million is lower than the historical net
income of $36.3 million due to the estimated incremental operating costs,
partially offset by the addition of the rent revenue.

PRO FORMA FINANCIAL DATA OF HARRAH'S ENTERTAINMENT

The following unaudited financial data illustrates the estimated effects on
Harrah's Entertainment of the proposed Distribution. The pro forma balance sheet
is based on the December 31, 1994, balance sheet of Harrah's Entertainment and
assumes the Distribution was consummated on that date. The pro forma income
statement is based on the fiscal 1994 income statement of Harrah's Entertainment
and assumes the Distribution was consummated at the beginning of the fiscal
period.

46
<PAGE>
The Pro Forma Financial Data of Harrah's Entertainment does not purport to
represent what the financial position or results of operations of Harrah's
Entertainment would have been if the Distribution had in fact been consummated
on such date or at the beginning of the period indicated or to project the
financial position or results of operations for any future date or period. The
pro forma adjustments are based upon available information and upon certain
assumptions that Harrah's Entertainment's management believes are reasonable in
the circumstances.

HARRAH'S ENTERTAINMENT, INC.
PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................... $ 84,968 $ (18,015)(a) $ 84,968
(18,100)(b)
36,115(c)
Receivables, including notes receivable of $528,
less allowance for doubtful accounts of $9,551.... 33,051 - 33,051
Deferred income taxes............................... 18,979 - 18,979
Prepayments......................................... 4,291 - 4,291
Supplies............................................ 11,463 - 11,463
Other............................................... 19,083 - 19,083
---------- ----------- ----------
Total current assets............................ 171,835 - 171,835
---------- ----------- ----------
Land, buildings, riverboats and equipment............. 1,602,620 - 1,602,620
Less: Accumulated depreciation and amortization....... (472,779) - (472,779)
---------- ----------- ----------
1,129,841 - 1,129,841
Net assets of discontinued hotel operations........... 143,008 (3,163)(d) -
(139,845)(e)
Investments in and advances to nonconsolidated
affiliates.......................................... 116,932 - 116,932
Deferred costs and other.............................. 176,349 3,163(d) 179,512
---------- ----------- ----------
$1,737,965 $(139,845) $1,598,120
---------- ----------- ----------
---------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 54,621 $ - $ 54,621
Accrued litigation settlement and related costs..... 72,101 - 72,101
Construction payables............................... 10,879 - 10,879
Accrued expenses.................................... 156,446 (3,552)(a) 152,894
Current portion of long-term debt................... 1,036 - 1,036
---------- ----------- ----------
Total current liabilities....................... 295,083 (3,552) 291,531
Long-term debt........................................ 727,493 (18,100)(b) 745,508
36,115(c)
Deferred credits and other............................ 66,735 - 66,735
Deferred income taxes................................. 7,138 - 7,138
---------- ----------- ----------
1,096,449 14,463 1,110,912
---------- ----------- ----------
Minority interests.................................... 18,079 - 18,079
---------- ----------- ----------
Stockholders' equity
Common stock........................................ 10,240 (3)(f) 10,237
Capital surplus..................................... 350,196 (531)(f) 349,665
Retained earnings................................... 265,574 (139,845)(e) 110,531
(15,198)(a)
Deferred compensation related to restricted stock... (2,573) 735(a) (1,304)
534(f)
---------- ----------- ----------
Total stockholders' equity...................... 623,437 (154,308) 469,129
---------- ----------- ----------
$1,737,965 $(139,845) $1,598,120
---------- ----------- ----------
---------- ----------- ----------
</TABLE>

See accompanying notes to pro forma financial statements.

47
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Casino.......................................... $ 1,118,107 $ - $ 1,118,107
Food and beverage............................... 162,413 - 162,413
Rooms........................................... 105,642 - 105,642
Management fees................................. 914 - 914
Other........................................... 80,151 - 80,151
Less: casino promotional allowances............. (127,821) - (127,821)
----------- ----------- -----------
Total revenues.............................. 1,339,406 - 1,339,406
----------- ----------- -----------
Operating expenses
Direct
Casino........................................ (497,686) - (497,686)
Food and beverage............................. (82,825) - (82,825)
Rooms......................................... (33,430) - (33,430)
Depreciation of buildings and equipment......... (70,632) - (70,632)
Development costs............................... (22,015) - (22,015)
Preopening costs................................ (15,313) - (15,313)
Other........................................... (319,411) (2,398)(g) (321,809)
----------- ----------- -----------
Total operating expenses.................... (1,041,312) (2,398) (1,043,710)
----------- ----------- -----------
298,094 (2,398) 295,696
Corporate expense................................. (28,907) 1,150(g) (27,757)
----------- ----------- -----------
Operating income.................................. 269,187 (1,248) 267,939
Interest expense, net of interest capitalized..... (78,322) 1,991(h) (78,294)
(1,963)(i)
Provision for settlement of litigation and related
costs........................................... (53,449) - (53,449)
Other income, including interest income........... 1,867 - 1,867
----------- ----------- -----------
Income before income taxes and minority
interest........................................ 139,283 (1,220) 138,063
Provision for income taxes........................ (75,391) 476(j) (74,915)
Minority interest................................. (13,908) - (13,908)
----------- ----------- -----------
Income from continuing operations................. $ 49,984 $ (744) $ 49,240
----------- ----------- -----------
----------- ----------- -----------
Earnings per share - continuing operations........ $ 0.49 $ (0.01) $ 0.48
----------- ----------- -----------
----------- ----------- -----------
Average shares outstanding........................ 102,810 - 102,810
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying Notes to pro forma financial statements.

48
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS

Prior to the Distribution, Embassy will enter into the PHC Bank Credit
Facilities and sufficient funds will be drawn under those facilities to retire
certain outstanding Promus corporate debt allocated to PHC. Based upon the
percentage of Promus's corporate debt expected to be retired using proceeds
drawn under those facilities, approximately $187.9 million of Promus's debt was
allocated to PHC and reflected in its historical balance sheet as of December
31, 1994. The PHC Bank Credit Facilities will be among the liabilities
transferred to PHC in connection with the Distribution. The pro forma balance
sheet assumes these events occurred on December 31, 1994. A pro-rata share of
Promus's 1994 interest expense of approximately $17.2 million was also allocated
to PHC and included in its historical financial statements. See
"--Financing--PHC."

In connection with the Distribution, Harrah's Entertainment will cause
Embassy (which will remain a wholly-owned subsidiary of Harrah's Entertainment)
to make certain amendments to the Embassy Bank Credit Facility. Such amendments
are expected to include, among other things, a reduction in the aggregate
principal amount available under the Embassy Bank Credit Facility and
modifications to certain financial covenants. The pro forma financial statements
of Harrah's Entertainment have not been adjusted to reflect the impact, if any,
of these amendments. See "--Financing--Harrah's Entertainment."

<TABLE>
<C> <S>
(a) Reflects estimated costs of the Distribution to be paid by Harrah's Entertainment and
the estimated expense to be recognized as a result of the issuance of PHC Common Stock
to the holders of Promus Restricted Stock Plan shares in connection with the
Distribution. These costs will be reported as a component of income from discontinued
hotel operations in the 1995 consolidated statement of income of Harrah's Entertainment
and are not included in the pro forma statement of income.
(b) Records early retirement of 11% Notes, due 1999, of Embassy.
(c) Reflects additional revolver borrowings incurred to fund payments made in (a) and (b).
(d) Records the transfer to Harrah's Entertainment of the December 31, 1994, deferred
finance charge balance which had been allocated to PHC.
(e) Reflects Distribution of PHC Common Stock to Promus's stockholders.
(f) Reflects cancellation of unvested restricted stock plan shares of PHC employees.
(g) Reflects estimated net incremental operating costs of Harrah's Entertainment of
approximately $1.2 million, before income taxes, expected to be incurred after the
Distribution primarily related to information technology and risk management functions.
(h) Reflects reduction in interest expense due to early retirement of 11% Notes.
(i) Reflects additional interest expense incurred as a result of additional revolver
borrowings in (c).
(j) Reflects income tax effect of the pro forma adjustments to income at a 39.0% marginal
income tax rate.
</TABLE>

49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL DATA OF HARRAH'S
ENTERTAINMENT

The Management's Discussion and Analysis of Pro Forma Financial Statements
of Harrah's Entertainment should be read in conjunction with the Management's
Discussion and Analysis of Historical Financial Condition and Results of
Operations of Promus included in the Promus 1994 Form 10-K.

Harrah's Entertainment's pro forma revenues for fiscal 1994 are unchanged
from its historical revenues of $1,339.4 million. Pro forma operating income of
$267.9 million is approximately $1.2 million less than the historical amount due
to the net incremental operating costs expected to result from certain operating
inefficiencies arising from the Distribution. Pro forma interest expense is
essentially unchanged since the interest expense savings arising from the
assumed retirement of Promus's 11% Notes is offset by increased interest expense
associated with the incremental revolver borrowings assumed to be incurred to
fund the debt retirement.

Pro forma income from continuing operations of $49.2 million is $0.7 million
lower than the historical income from continuing operations primarily due to the
incremental operating costs.

PHC BUSINESS AND PROPERTIES

PHC is a newly-formed wholly-owned subsidiary of Embassy, which is a
wholly-owned subsidiary of Promus. Upon consummation of the Asset Transfers, PHC
will succeed to the Hotel Business currently conducted by Promus and certain of
its subsidiaries. The following description summarizes the businesses to be
transferred to PHC in the Asset Transfers.

General. The Hotel Business consists of the Embassy Suites, Hampton Inn and
Homewood Suites hotel brands. Each brand is targeted to a specific market
segment. In December 1993, PHC announced a new brand, Hampton Inn & Suites,
which is under development. Embassy Suites hotels, of which there were 107 on
December 31, 1994, appeal to the traveler who has a need or desire for greater
space and more focused services than are available in traditional upscale
hotels. Embassy Suites hotels comprise the largest all-suite upscale hotel
system in the United States by number of suites and system revenues. Hampton Inn
hotels are moderately priced hotels designed to attract the business and leisure
traveler desiring quality accommodations at affordable prices. Since 1984, when
the brand was introduced, the system has grown to 437 hotels as of December 31,
1994. Homewood Suites hotels, of which there were 26 on December 31, 1994,
represent PHC's entry into the extended stay market and target the traveler who
stays five or more consecutive nights, as well as the traditional business and
leisure traveler. The Hampton Inn & Suites brand now under development will
incorporate the best features of the Hampton Inn and Homewood Suites brands,
offering both traditional hotel room accommodations and apartment-style suites
within one property.

As of December 31, 1994, PHC's hotel brands included 468 properties that are
licensed by the Company, 70 properties (including properties in which PHC has a
joint venture interest) that are managed by PHC and 32 properties that are owned
and operated by PHC. These properties total approximately 78,600 rooms and
suites.

All of PHC's hotel brands are managed by a common senior management team.
PHC pursues a strategy of growing its hotel brands by minimizing its ownership
of hotel real estate and concentrating on obtaining new franchise or management
contracts. As a part of this strategy, owned or leased hotels are sold thereby
realizing the value of the underlying assets for its stockholders and increasing
returns on investment. Following the sale, the hotels typically are operated
either by PHC under a management contract or by the purchaser under license from
PHC.

Each of PHC's hotel brands uses a centralized business system, which
includes access to reservation services, performance support or training,
operations and marketing management and revenue management. This network of
business systems is one of the most sophisticated systems in the hotel industry.
The Embassy Suites, Hampton Inn and Homewood Suites business systems'
reservation

50
<PAGE>
module receives reservation requests entered on terminals located at all of
their respective hotels and reservations centers, and major domestic airlines.
The systems immediately confirm reservations or indicate accommodations
available at alternate system hotels. Confirmations are transmitted
automatically to the hotel for which the reservation is made. PHC's computer
center in Memphis, Tennessee houses the computers and satellite communications
equipment necessary for its reservations system, which is currently operational,
and for its property management system, which has been developed and is being
placed into service.

Each of PHC's hotel brands offers an unconditional money-back guarantee of
service satisfaction. All of PHC's hotel brands offer suites/rooms exclusively
for non-smoking guests.

Embassy Suites Hotels. The following table sets forth information regarding
all Embassy Suites hotels, including company-owned hotels, hotels operated by
Embassy under management contracts or joint venture arrangements and hotels
operated by licensees:

<TABLE>
<CAPTION>
MANAGEMENT
CONTRACTS/
LICENSED OWNED JOINT VENTURES
---------------- ---------------- ----------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS SUITES HOTELS SUITES HOTELS SUITES
------ ------ ------ ------ ------ ------

<S> <C> <C> <C> <C> <C> <C>
Fiscal Year-End 1991................. 42 9,806 15 3,450 44 11,452

1992 Activity:
Additions.......................... 2 685 - - - (3)
Transfers, net(a).................. 1 221 - - (1) (221)
-- ------ -- ------ -- ------
Fiscal Year-End 1992................. 45 10,712 15 3,450 43 11,228

1993 Activity:
Additions.......................... 5 938 - - - (3)
Transfers, net(a).................. 3 900 (6) (1,423) 3 523
Sales/Terminations................. (1) (196) - - - -
-- ------ -- ------ -- ------
Fiscal Year-End 1993................. 52 12,354 9 2,027 46 11,748

1994 Activity:
Additions.......................... 1 177 - - 2 410
Transfers, net(a).................. - (15) - (2) - 15
Sales/Terminations................. (2) (760) - - (1) (239)
-- ------ -- ------ -- ------
Fiscal Year-End 1994................. 51 11,756 9(b) 2,025 47(c) 11,934
-- ------ -- ------ -- ------
-- ------ -- ------ -- ------
</TABLE>

- - ------------

<TABLE>
<C> <S>
(a) Transfer of properties among licensed, managed and owned categories.
(b) Includes one property in which PHC owns a partial interest exceeding 50%. (This
property is under a license agreement to a third party and is managed by PHC.)
(c) Includes 45 hotels that are also licensed to third parties.
</TABLE>

On December 31, 1994, eight Embassy Suites hotels were under construction,
all of which will be licensee-operated.

Embassy Suites hotels are located in 33 states and the District of Columbia
in the United States and two hotels are located in Canada. One hotel is under
construction in each of the following countries: Thailand, Colombia and Mexico.
Embassy Suites hotels range in size between 102 and 413 suites. Each guest suite
has a separate living room and dining/work area, with a television, refrigerator
and wet bar, as well as a traditional bedroom where most feature a
remote-controlled television. Most Embassy Suites hotels are built around a
landscaped lobby. All hotels offer free breakfast and complimentary evening
cocktails (where local law allows).

51
<PAGE>
The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Embassy Suites hotels:

<TABLE>
<CAPTION>
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- - ------------------------------------------------------- --------- -------------- ---------------
<S> <C> <C> <C>
1994................................................. 74.9% $97.28 $ 72.86
1993................................................. 73.0% $93.91 $ 68.58
1992................................................. 71.7% $90.97 $ 65.26
</TABLE>

Hampton Inn Hotels. The following table sets forth information regarding all
Hampton Inn hotels, including company-owned hotels, hotels operated by Hampton
Inns under management contracts or joint venture arrangements and hotels
operated by licensees:

<TABLE>
<CAPTION>
MANAGEMENT
CONTRACTS/
LICENSED OWNED JOINT VENTURES
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------ ------ ------ ------ ------ ------
Fiscal Year-End 1991....................... 259 32,303 15 2,049 21 2,618

1992 Activity:
Additions................................ 32 3,216 - (1) 2 292
Terminations............................. (2) (277) - - - -
------ ------ -- ------ -- ------
Fiscal Year-End 1992....................... 289 35,242 15 2,048 23 2,910

1993 Activity:
Additions................................ 46 4,147 - - 1 51
Terminations (2) (236) - - - -
------ ------ -- ------ -- ------
Fiscal Year-End 1993....................... 333 39,153 15 2,048 24 2,961

1994 Activity:
Additions................................ 67 6,149 - - - -
Terminations............................. (1) (118) - (1) (1) (121)
------ ------ -- ------ -- ------
Fiscal Year-End 1994....................... 399(a) 45,184 15 2,047 23(b) 2,840
------ ------ -- ------ -- ------
------ ------ -- ------ -- ------
</TABLE>

- - ------------

<TABLE>
<C> <S>
(a) Includes one property open only on a seasonal basis.
(b) These hotels are also licensed to third parties.
</TABLE>

On December 31, 1994, 67 Hampton Inn hotels, including three Hampton Inn &
Suites properties, were under construction, all of which will be
licensee-operated.

Hampton Inn hotels are currently located in 43 states in the United States
and one hotel is in each of the following countries: Canada, Mexico and Costa
Rica. There is one additional hotel under construction in Mexico and one in
Thailand. An average Hampton Inn hotel has from 80 to 150 rooms. The Hampton Inn
hotel's standardized concept provides a guest room featuring a remote control
television, free in-room movies, free local telephone calls and complimentary
continental breakfast. Unlike full-service hotels, Hampton Inn hotels do not
feature restaurants, lounges or large public spaces.

Hampton Inns also has a modified lodging property for use in communities
supporting hotels of fewer than 90 rooms. The building design for these small
communities has the same features as a standard Hampton Inn hotel, but with
fewer rooms and a smaller lobby. There are over 80 of these modified design
hotels open and 43 currently under construction.

52
<PAGE>
The following table sets forth information concerning system occupancy,
average daily rate per occupied room and revenue per available room for all
Hampton Inn hotels:

<TABLE>
<CAPTION>
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED ROOM AVAILABLE ROOM
- - ------------------------------------------------------ --------- ------------- --------------
<S> <C> <C> <C>
1994................................................ 74.3% $ 53.46 $39.74
1993................................................ 73.0% $ 50.81 $37.10
1992................................................ 71.2% $ 48.91 $34.82
</TABLE>

In December 1993, PHC announced the Hampton Inn & Suites brand which
combines standard guest rooms with a significant block of two-room suites in a
single property. Development of this new brand is targeted for commercial and
suburban markets, as well as destination and resort markets. Each property will
contain a centrally located expanded lobby and complimentary services area and
will include an exercise room, convenience shop, meeting/hospitality room and
coin-laundry. An expanded complimentary continental breakfast-buffet will be
offered. The first Hampton Inn & Suites hotel is expected to open during 1995.
On December 31, 1994, there were three Hampton Inn & Suites hotels under
construction, all of which will be licensee-operated.

Homewood Suites Hotels. The following table sets forth information regarding
all Homewood Suites hotels, including company-owned hotels and hotels operated
by licensees:

<TABLE>
<CAPTION>
LICENSED OWNED
---------------- ----------------
NUMBER NUMBER NUMBER NUMBER
OF OF OF OF
HOTELS SUITES HOTELS SUITES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Fiscal Year-End 1991....................................... 14 1,504 8 940
1992 Activity:
Additions................................................ 2 250 - (8)
-- ------ -- ------
Fiscal Year-End 1992....................................... 16 1,754 8 932
1993 Activity:
Additions................................................ - 40 - -
-- ------ -- ------
Fiscal Year-End 1993....................................... 16 1,794 8 932
1994 Activity:
Additions................................................ 2 155 - -
-- ------ -- ------
Fiscal Year-End 1994....................................... 18 1,949 8 932
-- ------ -- ------
-- ------ -- ------
</TABLE>

On December 31, 1994, four Homewood Suites hotels were under construction,
three of which will be licensee operated and one will be company-owned.

Homewood Suites hotels are currently located in 17 states and hotels are
under construction in one additional state. Homewood Suites hotels feature
residential-style accommodations, which include a living room area (some with
fireplaces), separate bedroom, bath and a fully-equipped kitchen. The buildings
that contain the hotel's suites, generally two- or three-stories, are centered
around a central community building, called the "Lodge", which affords guests a
high level of social interaction. Amenities include an expanded complimentary
continental breakfast and a complimentary evening social hour, a convenience
store, shopping service, business center, outdoor pool, exercise center and
limited meeting facilities.

The Homewood Suites brand includes a smaller, modified prototype of its
standard hotel for use in surburban areas of major cities, as well as secondary
cities with active industrial or commercial areas. The modified prototype
reflects the signature design and amenities of a traditional Homewood Suites
hotel, but with fewer suites, a smaller Lodge and other construction
modifications that will require less land. There are currently three modified
prototype hotels under construction, two of which will be licensee operated and
the third will be company-owned.

53
<PAGE>
In May 1994, PHC announced plans for a major expansion of the Homewood
Suites brand involving the financing and construction of 20 to 25 company-owned
Homewood Suites hotels during the next three years.

The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Homewood Suites hotels:

<TABLE>
<CAPTION>
AVERAGE DAILY
RATE PER
OCCUPANCY OCCUPIED REVENUE PER
FISCAL YEAR RATE SUITE AVAILABLE SUITE
- - -------------------------------------------------------- --------- ------------- ---------------
<S> <C> <C> <C>
1994.................................................. 78.1% $ 76.38 $ 59.67
1993.................................................. 75.8% $ 72.47 $ 54.91
1992.................................................. 71.9% $ 69.65 $ 50.10
</TABLE>

Licensing and Management Contract Operations. Revenues from licensing
operations for all Embassy Suites, Hampton Inn and Homewood Suites hotels
operated under license from PHC's hotel divisions consist of initial license
application fees and continuing royalties. The initial license agreement
application fee for an Embassy Suites license agreement is $500 per room, with a
minimum of $100,000, and $400 per room, with a minimum of $40,000, for each
Hampton Inn, Hampton Inn & Suites and Homewood Suites license agreement. The
license agreements provide for a four percent royalty based upon gross
rooms/suites revenues and also provide for a marketing and reservation
contribution.

In screening applicants for license agreements, PHC evaluates the character,
operations ability, experience and financial responsibility of each applicant;
PHC's prior business dealings, if any, with the applicant; market feasibility of
the proposed hotel location and other factors. The license agreement establishes
general requirements for service and quality of accommodations. PHC provides
certain training for licensee management and makes regular inspections of
licensed hotels.

License agreements for new hotels generally have a 20-year term. PHC may
terminate a license agreement if the licensee fails to timely cure a breach of
the license agreement. In certain instances, a license agreement may be
terminated by the licensee, but such termination generally requires a payment to
PHC.

Revenues from management contracts consist primarily of management fees
which are based on a percentage of adjusted gross revenues of the hotel. The
contract terms governing management fees can vary depending on the size and
location of the hotel and other factors relative to the property.

Under PHC's management contracts, PHC, as the manager, operates or
supervises all aspects of the hotel's operations. The hotel owner is generally
responsible for all costs, expenses and liabilities incurred in connection with
operating the hotel including the expenses and salaries of all hotel employees.
The hotel owner also enters into a license agreement with PHC and pays the
royalty and marketing and reservation contributions as provided in the license
agreement. In addition, the hotel owner is often required to set aside a certain
percentage of hotel revenues for capital replacement. PHC's management contracts
typically have a term of 10 to 20 years and most give PHC specified renewal
rights. The management contract may be terminated by either party due to an
uncured default by the other party.

Audubon Woods Business Campus. In January 1995, PHC acquired property in
Memphis, Tennessee known as the Audubon Woods Business Campus for a purchase
price of $21.7 million. This office complex consists of four office buildings
containing approximately 360,000 square feet of office space and is located on
approximately 31 acres of land.

54
<PAGE>
Competition. Intense competition among many chains exists for hotel guests
as well as in the sale of hotel franchises and in obtaining management
contracts. PHC's hotels are in vigorous competition with a wide range of
facilities offering various types of lodging options and related services to the
public. The competition includes several large and moderate size chains and
independent hotels offering all-suite, upper and lower upscale, midscale, and
upper and lower economy accommodations.

The hotel industry saw continued improvement in 1994. With improving
occupancies, and modest growth in average daily rate, revenue per available room
in the industry improved over 6% in 1994 based on data provided by the major
firm that tracks hotel statistics.

In 1994 all of PHC's hotel brands outperformed their respective competitive
segment in revenue per available room (RevPAR).

Fuel Shortages and Costs. Although gasoline supplies are now in relative
abundance, gasoline shortages and price increases may have adverse effects on
PHC's business.

Governmental Regulation. A number of states regulate the licensing of hotels
and restaurants and the granting of liquor licenses by requiring registration,
disclosure statements and compliance with specific standards of conduct. In
addition, various federal and state regulations mandate certain disclosures and
other practices with respect to the sales of license agreements and the
licensor/licensee relationship. PHC's operations have not been materially
affected by such legislation and regulations, but PHC cannot predict the effect
of future legislation.

Employee Relations. PHC, through its subsidiaries, will have approximately
7,800 employees. Employee relations with Hotel Business employees are good.

Legal Proceedings. PHC is involved in various inquiries, administrative
proceedings and litigation relating to contracts and other matters arising in
the normal course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the final outcome of these matters will
not have a materially adverse effect upon PHC's consolidated financial position
or its results of operations.

Trademarks. It is anticipated that the following trademarks used herein,
currently owned by the Company, will be transferred to PHC (either directly or
by transferring the stock of subsidiaries that own such trademarks) as part of
the Distribution: Promus(R); Embassy Suites(R); Hampton Inn(R); Hampton Inn &
SuitesSM; and Homewood Suites(R). The names "Embassy Suites," "Hampton Inn" and
"Homewood Suites" are registered as service marks in the United States and in
certain foreign countries. Embassy acquired the name "Embassy" (as used in
connection with hotels) in eleven countries in western Europe in 1991. Embassy
paid an initial fee to acquire the name, and PHC will in the future pay an
additional fee for each hotel opened in the eleven countries under the name. The
Company considers all of these marks, and the associated name recognition, to be
valuable to its business.

HARRAH'S ENTERTAINMENT BUSINESS AND PROPERTIES

Harrah's Entertainment will operate the Casino Business as previously
operated by Promus. Harrah's Entertainment has, through existing and predecessor
entities, been in the casino entertainment business for more than 57 years and
is unique among casino entertainment companies in its broad geographic
diversification. Harrah's Entertainment operates casino hotels in the five
traditional U.S. gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin,
Nevada and Atlantic City, New Jersey. It also operates riverboat casinos in
Joliet, Illinois; dockside casinos in Vicksburg and Tunica, Mississippi,
Shreveport, Louisiana and North Kansas City, Missouri; limited stakes casinos in
Central City and Black Hawk, Colorado; and a casino on an Indian reservation
near Phoenix, Arizona. In addition, Harrah's Entertainment is a general partner
in a partnership that is developing a casino in New Orleans, Louisiana, and owns
an interest in a joint venture developing a casino in Auckland, New Zealand.
Harrah's Entertainment also owns a 13.8% interest in Sodak Gaming, Inc., a
leading distributor of electronic gaming machines and gaming-related products
and systems, and a 75% interest

55
<PAGE>
in a general partnership that owns the approximately 52-acre Station Square site
across from the Golden Triangle in Pittsburgh on which the partnership plans to
develop a casino entertainment facility if casino gaming is legalized in that
jurisdiction. As of December 31, 1994, Harrah's Entertainment operated a total
of approximately 521,400 square feet of casino space, 14,808 slot machines, 789
table games, 5,367 hotel rooms or suites, approximately 76,000 square feet of
convention space, 51 restaurants, four showrooms and three cabarets. For more
information about Harrah's Entertainment's casino business, see the 1994 Promus
10-K which is incorporated herein by reference.

MANAGEMENT OF PHC

PHC Board. The business of PHC will be managed under the direction of the
PHC Board. The current directors of PHC are Ben C. Peternell, Michael D. Rose,
Raymond E. Schultz and David C. Sullivan. Prior to the Distribution Date,
Embassy, as sole stockholder of PHC, plans to elect at least seven additional
persons to the PHC Board so that the eleven persons identified below will
constitute the entire PHC Board effective as of the Distribution Date. In
accordance with the PHC Certificate, the PHC Board is divided into three classes
with staggered terms. The initial terms for Class I Directors, Class II
Directors and Class III Directors will be one year, two years and three years,
respectively. With the exception of the initial terms, each class of directors
is elected for a term of three years. Directors for each class will be elected
at the annual meeting of stockholders held in the year in which the term for
such class expires. The PHC Certificate provides for a Board of Directors of not
less than three nor more than seventeen directors and authorizes the PHC Board
to determine the number within that range from time to time by the affirmative
vote of a majority of the directors then in office.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATIONS OR EMPLOYMENT CLASS OF
NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY DIRECTOR
- - ----------------------------- -------------------------------------------------- ---------
<S> <C> <C>

U. Bertram Ellis, Jr. (41)... Director of PHC effective as of the Distribution II
Date. President, Chief Executive Officer and
Director of Ellis Communications, Inc., an
owner-operator of television and radio stations,
since 1993. President of Broadcast Development
Corporation, a media consulting firm, since before
1990. President and Chief Executive Officer of
American Innovations, Inc., a manufacturer of hair
bows (1992-93). American Innovations, Inc. filed
a petition under Chapter 11 of the U.S. Bankruptcy
Code in 1993. Chief Executive Officer and Chief
Operating Officer, Act III Broadcasting, an
owner-operator of television stations (before
1990-1992).

Debra J. Fields(38).......... Director of PHC effective as of the Distribution I
Date. Chairman of the Board of Mrs. Fields Inc.
since 1992. President and Chief Executive
Officer (before 1990-1993) of Mrs. Fields Inc.

Christopher W. Hart(44)...... Director of PHC effective as of the Distribution III
Date. President of Spire Group, Ltd. (formerly
named TQM Group), a management consulting and
executive education firm, since March, 1990.

C. Warren Neel(56)........... Director of PHC effective as of the Distribution I
Date. Dean of the College of Business
Administration at The University of Tennessee,
Knoxville, since before 1990. Dr. Neel is also a
director of Clayton Manufactured Homes, Inc.,
O'Charley's, Inc., American HealthCorp, Inc.,
and Proffitt's.
</TABLE>

56
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATIONS OR EMPLOYMENT CLASS OF
NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY DIRECTOR
- - ----------------------------- -------------------------------------------------- ---------
<S> <C> <C>
Ben C. Peternell(49)......... Director of PHC since April 1995. Senior Vice III
President, Human Resources and Communications of
Promus since November 1989. Senior Vice
President, Human Resources and Corporate
Relations, Holiday Corporation and Holiday Inns,
Inc. (1985-1990).

Michael D. Rose(53).......... Chairman of the Board of PHC since April 1995. II
Chairman of the Board of Promus since November
1989. Chief Executive Officer (1989-1994) and
President (1989-1991) of Promus. Mr. Rose also
is a director of Ashland Oil, Inc., First
Tennessee National Corporation and General
Mills, Inc.

Michael I. Roth(49).......... Director of PHC effective as of the Distribution II
Date. Chairman and Chief Executive Officer of
Mutual of New York since 1994, trustee since
1991. Chairman, President and Chief Executive
Officer (1993-1994), President and Chief
Operating Officer (1991-1993) and Executive Vice
President and Chief Financial Officer
(1989-1991) of Mutual of New York.

Raymond E. Schultz(61)....... Director, President and Chief Executive Officer of III
PHC since April 1995. President and Chief
Executive Officer of Promus Hotels Division of
Promus since March 1993. President and Chief
Executive Officer of Hampton Inn/Homewood Suites
Hotel Division of Promus (1991-1993). President
and Chief Executive Officer of Hampton Inn Hotel
Division of Promus (1983-1991).

Jay Stein(49)................ Director of PHC effective as of the Distribution III
Date. Chairman of the Board, Chief Executive
Officer and Director of Stein Mart, Inc. since
before 1990. Mr. Stein is also a director of
Barnett Bank of Jacksonville and American
Heritage Life Insurance Company.

David C. Sullivan(55)........ Director, Executive Vice President and Chief I
Operating Officer of PHC since April 1995.
Executive Vice President and Chief Operating
Officer of Promus Hotels Division of Promus
since 1993. Senior Vice President of Development
and Operations of Hampton Inn/Homewood Suites
Hotel Division of Promus (1991-1993). Vice
President of Development, Hampton Inn Hotel
Division of Promus (1990-1991). President and
Chief Executive Officer of McNeill-Sullivan
Hospitality Corporation (1985-1990).

Ronald Terry(64)............. Director of PHC effective as of the Distribution II
Date. Chairman of the Board of First Tennessee
National Corporation since 1973. Chief Executive
Officer (1973-1994) and President (1988-1991) of
First Tennessee National Corporation. Mr. Terry
also is a director of Promus (but he will retire
from the Promus Board on the Annual Meeting
Date), BellSouth Corporation and AutoZone, Inc.
</TABLE>

57
<PAGE>
Committees of the Board. The PHC Board will have three standing committees:
(i) Executive, (ii) Audit and (iii) Human Resources.

During the intervals between meetings of the PHC Board, the PHC Executive
Committee, subject to specified limitations, will be able to act on behalf of
the PHC Board. Action taken by the PHC Executive Committee will be reported to
the PHC Board at its first meeting following such action. Without specific
delegated authority, the PHC Executive Committee will not be able to declare
dividends except current quarterly dividends not in excess of those last
declared by the PHC Board and will not be able to increase or decrease the
number of directors or appoint new directors. Unless within an overall plan
previously approved by the PHC Board, action taken by the PHC Executive
Committee approving a transaction in excess of $50 million will be subject to
revision or rescission by the PHC Board at the PHC Board's first meeting
following such action.

The PHC Audit Committee (1) will recommend annually to the PHC Board the
independent public accountants for PHC and its direct or indirect subsidiaries;
(2) will meet with the independent public accountants concerning their audit,
their evaluation of PHC's financial statements, accounting developments that may
affect PHC and their nonaudit services; (3) will meet with management and the
internal auditors concerning similar matters; and (4) will make recommendations
to all of the aforesaid groups that it deems appropriate.

The PHC HR Committee will act as the nominating committee of the PHC Board.
It will consider and will make recommendations to the PHC Board concerning the
size and composition of the PHC Board, the number of nonmanagement directors,
the qualifications of members and potential nominees for membership, the
compensation of directors, membership of committees of the PHC Board and certain
administrative matters. The PHC HR Committee will consider nominees recommended
by stockholders. Detailed resumes of business experience and personal data of
potential nominees may be submitted to the corporate Secretary of PHC at the
address indicated in this Proxy Statement.

The PHC HR Committee will also approve the annual compensation of corporate
officers who are members of the PHC Board and will administer PHC's bonus,
restricted stock, stock option and other incentive compensation plans. The PHC
HR Committee will also make various decisions and policy determinations in
connection with the PHC S&RP and PHC Stock Option Plan.

Compensation of Directors. Directors who are not employees of PHC or its
direct or indirect subsidiaries will be paid a quarterly fee of $6,250 plus
$1,500 for each PHC Board meeting and $1,200 for each committee meeting they
attend. Committee chairmen will be paid an additional $800 for each committee
meeting attended. Under the provisions of PHC's unfunded compensation deferral
program, directors may defer the receipt of all or a portion of their directors'
fees. Under the plan, amounts, while deferred, will earn interest at a rate
based on a calculated average prime interest rate. Amounts deferred under the
plan may be paid in a lump sum or in installments, as selected by the director
when making the deferral election.

Each nonmanagement director will also be provided with travel accident
insurance of $500,000 while traveling on behalf of PHC and the opportunity to
participate in PHC's standard group health insurance plans. Each director
receiving these benefits will incur taxable income equal to the cost of the
group insurance.

Each nonmanagement director will be awarded 1,000 shares of restricted stock
under the PHC Restricted Stock Plan. The PHC Restricted Stock Plan is attached
hereto as Annex III-B.

Beginning in April, 1996, each nonmanagement director may also receive PHC
Common Stock pursuant to the PHC Nonmanagement Directors Stock Incentive Plan
(the "PHC Nonmanagement Directors Stock Incentive Plan") which is meant to
provide an additional equity incentive in lieu of 50% of the director's fees (or
100% if the director so elects) and thereby more closely align the interests of
directors with stockholders. The PHC Nonmanagement Directors Stock Incentive
Plan is attached hereto as Annex VII.

58
<PAGE>
Executive Officers. PHC currently has seven executive officers: Michael D.
Rose (Chairman of the Board), Raymond E. Schultz (President and Chief Executive
Officer), David C. Sullivan (Executive Vice President and Chief Operating
Officer), Donald H. Dempsey (Senior Vice President and Chief Financial Officer),
Ralph B. Lake (Senior Vice President, General Counsel and Secretary), Thomas L.
Keltner (Senior Vice President, Development) and Mark C. Wells (Senior Vice
President, Marketing). Set forth below is certain information with respect to
the persons who are expected to serve as executive officers of PHC immediately
following the Distribution. Those persons named below who are currently officers
of Promus will relinquish their positions with Promus effective on the
Distribution Date. However, Mr. Rose will continue to serve as Chairman of the
Board of Directors of Harrah's Entertainment.

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE PRIOR TO
NAME AND TITLE AGE BECOMING AN EXECUTIVE OFFICER OF PHC
- - ----------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Michael D. Rose, 53 Chairman of the Board of Promus since November 1989. Chief
Chairman of the Board Executive Officer (1989-1994) and President (1989-1991) of
Promus. Mr. Rose also is a director of Ashland Oil, Inc.,
First Tennessee National Corporation and General Mills, Inc.
Raymond E. Schultz, 61 President and Chief Executive Officer of Promus Hotels Division
President and Chief of Promus since 1993. President and Chief Executive Officer
Executive Officer of Hampton Inn/Homewood Suites Hotel Division of Promus
(1991-1993). President and Chief Executive Officer of Hampton
Inn Hotel Division of Promus (1983-1991).
David C. Sullivan, 55 Executive Vice President and Chief Operating Officer of Promus
Executive Vice Hotels Division of Promus since 1993. Senior Vice President
President and Chief of Development and Operations of Hampton Inn/Homewood Suites
Operating Officer Hotel Division of Promus (1991-1993). Vice President of
Development, Hampton Inn Hotel Division of Promus
(1990-1991). President and Chief Executive Officer of
McNeill-Sullivan Hospitality Corporation (1985-1990).
Donald H. Dempsey, 50 Senior Vice President of Finance & Administration of Promus
Senior Vice President Hotels Division of Promus since 1993. Vice President, Finance
and Chief Financial of Hampton Inn/Homewood Suites Hotel Division of Promus
Officer (1991- 1993). Vice President Finance Hampton Inn Hotel
Division of Promus (1990-1991). Vice President of
Development, Hampton Inn Hotel Division of Promus
(1985-1990).
Ralph B. Lake, Senior 50 Vice President and General Counsel of Gaming Development of
Vice President, Promus since 1992. Associate General Counsel--International
General Counsel and of Promus (1991-1992). Vice President and General Counsel of
Secretary Homewood Suites Hotel Division of Promus (1988-1991).
Thomas L. Keltner, 48 Senior Vice President, Development of Promus Hotels Division of
Senior Vice President Promus since 1993. President, Golf Training Systems, Inc.,
Development (1991-1993). Senior Vice President and Chief Operating Officer,
Franchise Hotels Division, Holiday Inn Worldwide (1990).
Mark C. Wells, Senior 45 Senior Vice President, Marketing of Promus Hotels Division of
Vice President Promus since 1993. Senior Vice President, Marketing of
Marketing Hampton Inn/Homewood Suites Hotel Division of Promus (July
1993-October 1993). Senior Vice President, Marketing of
Embassy Suites Hotel Division of Promus (1991-1993). Vice
President, Marketing of Hampton Inn Division of Promus
(1986-1991).
</TABLE>

Executive Officer Compensation. The PHC Summary Compensation Table
immediately below sets forth a summary of the compensation paid by Promus for
the last three fiscal years to the person expected to be the chief executive
officer of PHC and the four additional most highly compensated executive
officers of PHC (based on their historical compensation from Promus).

59
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- ------------------------
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) AWARD(S)(2) OPTIONS(3) COMPENSATION(4)
- - ------------------------------ ---- --------- --------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz
President and Chief Executive
Officer...................... 1994 $ 248,240 $ 248,240 10,667 $ 184,282
1993 220,747 202,780 0 138,518
1992 213,928 203,231 57,300 104,664
Michael D. Rose
Chairman of the Board........ 1994 541,385(5) 530,611 $ 108,972 30,000 428,885
1993 509,233 504,141 88,234 318,807
1992 505,108 282,860 89,968 240,000 236,408
David C. Sullivan
Executive Vice President and
Chief Operating Officer...... 1994 196,135 196,135 6,167 29,914
1993 163,996 155,786 7,500 19,712
1992 155,245 132,112 25,230 12,562
Thomas L. Keltner
Senior Vice President
Development.................. 1994 174,183 156,764 4,667 9,636
1993 55,962 58,157 $20,962 2,791
1992
Mark C. Wells
Senior Vice President
Marketing.................... 1994 158,280 142,452 4,167 9,000
1993 136,051 103,921 730 7,873
1992 121,885 33,756 35,930 8,400 7,183
</TABLE>

- - ------------
(1) Other Annual Compensation for Mr. Rose includes allocated amounts for
aircraft usage and for household security. Such amounts, respectively, were
as follows: for 1994: $31,570 and $37,468; for 1993: $22,349 and $28,707;
for 1992: $35,600 and $28,800. In 1993, Other Annual compensation for Mr.
Keltner related to reimbursed moving expenses. Amounts of Other Annual
Compensation for each individual named above for 1992 to 1994 (other than
Mr. Rose and Mr. Keltner) aggregated less than (a) 10% of the total annual
salary and bonus for each individual or (b) $50,000 whichever is lower.
Accordingly, no such amounts are included.

(2) The 1993 award of restricted stock to Mr. Keltner was 439 shares: 227 shares
with vesting over the period 1994 to 1997 and 212 shares with vesting over
the period 1995 to 1998. The 1992 award of restricted stock to Mr. Wells was
570 shares with vesting in equal installments over the period 1995 to 1998
and 350 shares with vesting over the period 1994 to 1997 and 2,250 shares
with vesting in equal installments 1993 to 1995. Dividends will be paid on
restricted stock in the same manner and to the same extent as dividends are
paid on other shares of Common Stock. The number of unvested shares of
restricted stock awards held by Mr. Schultz, Mr. Sullivan, Mr. Wells, and
Mr. Keltner as of December 31, 1994 was 30,000, 7,500, 4,989 and 382
respectively. On January 1, 1995, all of the unvested shares held by Messrs.
Schultz and Sullivan vested, as did 4,191 of the unvested shares held by Mr.
Wells and 111 of the unvested shares held by Mr. Keltner. Numbers of shares
of restricted stock are based on awards of Promus restricted stock and will
be adjusted upon conversion to PHC restricted stock as described in "--PHC
Compensation Plans." The market value of unvested restricted stock awards
held by Mr. Schultz, Mr. Sullivan, Mr. Wells and Mr. Keltner as of December
31, 1994, was $926,250, $231,563, $154,035 and $11,794. Mr. Rose held no
shares of unvested restricted stock at December 31, 1994.

(3) The options shown as granted in 1994 are net of the cancellation of options
that occurred in December 1994. See "Election of Promus Directors--Report of
the Human Resources Committee on Executive Compensation." The number of
shares underlying options are based on awards of Promus stock options and
will be adjusted upon conversion to PHC stock options as described in "--PHC
Compensation Plans."

(4) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation balances and (b) matching contributions to the Promus
S&RP. Such amounts, respectively, were as follows: for 1994: Mr. Schultz,
$176,359 and $7,923; Mr. Rose $420,517 and $8,368; Mr. Sullivan, $20,914 and
$9,000; Mr. Keltner $700 and $8,936; and Mr. Wells 0 and $9,000; for 1993:
Mr. Schultz, $130,399 and $8,119; Mr. Rose, $309,813 and $8,994; Mr.
Sullivan, $10,856 and $8,856; and Mr. Wells, 0 and $7,873; for 1992: Mr.
Schultz, $96,393 and $8,272; Mr. Rose, $228,214 and $8,194; Mr. Sullivan,
$4,169 and $8,393; and Mr. Wells, 0 and $7,123. Mr. Keltner was not employed
by Promus until 1993. Promus does not provide a fixed benefit pension plan
for its executives. The amounts set forth above are retirement benefits
which are a function of deferred income voluntarily contributed by the
executives.

(5) Mr. Rose has entered into an employment agreement with PHC pursuant to
which, for a period of five years from the Distribution Date, he will spend
up to 40% of his time as Chairman of the PHC Board and receive, among other
things, an annual salary of $250,000. Mr. Rose has also entered into an
employment agreement with Harrah's Entertainment pursuant to which, from the
Distribution Date until April 30, 1996, he will spend at least 60% of his
time as Chairman of the Harrah's Entertainment Board and receive, among
other things, an annual salary of $350,000. From April 30, 1996 through
December 31, 1998, Mr. Rose will spend approximately 30% to 50% of his time
as Chairman of the Harrah's Entertainment Board and will receive, among
other things, an annual salary of $250,000. See "--Employment and Severance
Agreements" and "Election of Promus Directors--Certain Employment
Arrangements."

60
<PAGE>
The table immediately below sets forth information regarding options to
purchase Promus Common Stock granted by Promus under the Promus Stock Option
Plan to the persons listed in the PHC Summary Compensation Table during the 1994
fiscal year, including information as to the potential realizable value of such
options at assumed annual rates of stock price appreciation for the ten year
option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1994 and for all
Promus stockholders.

OPTION GRANTS IN THE LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OVER OPTION TERM(1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION -------------------------------------
NAME GRANTED(3) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
- - ---------------------------------- --------- ------------- ------------ ---------- --- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz................ 10,667 2.6% $49.4375 1/11/04 $ - $ 331,637 $ 840,453
Michael D. Rose................... 30,000 7.3% 49.4375 1/11/04 - 932,729 2,363,719
David C. Sullivan................. 6,167 1.5% 49.4375 1/11/04 - 191,732 485,898
Thomas L. Keltner................. 4,667 1.1% 49.4375 1/11/04 - 145,097 367,713
Mark C. Wells..................... 4,167 1.0% 49.4375 1/11/04 - 129,552 328,318
All Promus Stockholders(2)........ n/a n/a n/a n/a - 3,116,853,405 7,898,718,486
All Optionees..................... 411,302 100.00% 48.4500(4) various - 12,531,678 31,757,731
All Optionees as a % of All
Stockholders Gain................ n/a n/a n/a n/a n/a 0.40% 0.40%
</TABLE>

- - ------------
(1) The dollar amounts under these columns are the result of calculations at
zero percent, and at five percent and ten percent rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of Promus's stock price. In
the above table, Promus did not use an alternative formula for a grant
valuation, as Promus is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors.

(2) These amounts represent the appreciated value which common shareholders
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Promus Common Stock outstanding at or near the option
grant dates.

(3) Does not include options that were cancelled in December, 1994. Employees
vest in the right to exercise these options over a four-year period. In
general, major option awards have been granted once a year. Options may also
be granted at other times at the discretion of the Promus HR Committee based
on promotions or similar reasons. The options shown as granted in fiscal
year 1994 are net of the cancellation of options that occurred in December,
1994. See "Election of Promus Directors--Report of the Human Resources
Committee on Executive Compensation" and "Amendments to Promus 1990 Stock
Option Plan" for more information concerning stock option awards.

(4) Represents average exercise price of options granted to all optionees.

The following table sets forth certain information concerning stock option
exercises during 1994 by the executive officers named in the PHC Summary
Compensation Table and the value on December 31, 1994 (the last day of the 1994
fiscal year) of all unexercised Promus Common Stock options held by such
individuals.

AGGREGATED OPTION EXERCISES IN 1994 AND
DECEMBER 31, 1994 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1994(1) AT DECEMBER 31, 1994(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz............... - - 8,700 59,267 $ 188,375 $ 907,311
Michael D. Rose.................. - - 33,750 236,250 738,281 3,811,715
David C. Sullivan................ - - 3,750 35,147 82,031 401,675
Thomas L. Keltner................ - - 360 7,098 - -
Mark C. Wells.................... - - 1,500 11,797 32,813 134,937
</TABLE>

- - ------------
(1) The numbers shown are net of the cancellation of options that occurred in
December, 1994. See "Election of Promus Directors--Report of the Human
Resources Committee on Executive Compensation" and "Amendments to Promus
1990 Stock Option Plan" for more information concerning stock option awards.

(2) Amount represents the difference between the aggregated option price of
unexercised options and a $30.875 market price on December 30, 1994, which
was the closing price of the Promus Common Stock on the last trading day of
1994.

61
<PAGE>
PHC Compensation Plans. Embassy, as sole stockholder of PHC, has approved
the adoption by PHC of certain compensation plans. Although no approval of the
creation of these plans is required to be obtained from Promus stockholders, the
Distribution is conditioned upon the Promus stockholders ratifying the adoption
of such plans (Proposals Five, Six, Seven and Eight).

The PHC 1995 Stock Option Plan and the PHC 1995 Restricted Stock Plan are
intended to be the executive and management incentive stock plans for PHC
employees. The key employees of PHC, including each of the persons listed in the
PHC Summary Compensation Table above and all executive officers of PHC, will be
eligible to participate in both of these plans. The PHC Key Executive Officer
Annual Incentive Plan is intended to provide incentive compensation to certain
executive officers at the corporate senior vice president level or above. The
PHC Human Resources Committee will approve the specific executive officers who
will participate in the plan each year. The principal terms and conditions of
the PHC 1995 Stock Option Plan (attached as Annex III-A), the PHC 1995
Restricted Stock Plan (attached as Annex III-B), the PHC Key Executive Officer
Annual Incentive Plan (attached as Annex VI) and the PHC Nonmanagement Directors
Stock Incentive Plan (attached as Annex VIII) are summarized below and a copy of
each plan is attached hereto as indicated.

The description of the plans set forth herein does not constitute an offer
to sell or a sale of the securities issuable pursuant to such plans. Such offers
to sell or sales may only be made by PHC pursuant to relevant plan documents
including prospectuses. The plans described below are subject to amendment or
termination in accordance with the provisions of the plans.

In connection with the Distribution, PHC has adopted the PHC S&RP, a savings
and retirement plan for employees of PHC and participating subsidiaries.
Participants may make basic contributions of up to 6% of their base compensation
and supplemental contributions of up to an additional 10% of their base
compensation. PHC will contribute an amount equal to 100% of the participant's
basic contribution up to 6% of eligible earnings.

The PHC S&RP, which will have substantially similar terms to the Promus
S&RP, will become effective on the Distribution Date. PHC may amend or terminate
the plan at any time in accordance with its terms and subject to applicable
laws. PHC intends to request the IRS to issue a determination letter stating
that the PHC S&RP is qualified under Section 401 of the Code.

Amounts contributed to the PHC S&RP will be invested, at the participant's
option, in various investment funds including a PHC Common Stock fund. The funds
will be invested and paid, with any gains and losses, to participants generally
upon termination of employment. Termination of employment prior to retirement at
age sixty-five or seven years of credited service, will result in reduced
payment of the accumulated PHC contribution with gains or losses thereon.

Like the Promus S&RP, the PHC S&RP will include an Employee Stock Ownership
Plan ("PHC ESOP"). The PHC ESOP will apply to all employees who are continuously
employed for a calendar year and complete 1,000 hours of service in that
calendar year. Years of service under the Promus S&RP immediately before the
Distribution Date will be taken into account in the PHC S&RP. During the time
such shares are held by the PHC ESOP, the participants are entitled to direct
the Trustee of the PHC ESOP to vote shares held in their accounts under the PHC
ESOP. The PHC HR Committee has discretionary authority to approve contributions
to the PHC ESOP from time to time subject to the rules of the plan.

Simultaneously with the Distribution, the assets and liabilities held by the
Promus S&RP will be apportioned such that the assets together with the
liabilities that are attributable to employees of Promus and its subsidiaries
who will become employees of PHC or its subsidiaries subsequent to the
Distribution will be allocated and transferred to the PHC S&RP. Such allocation
will be effected in accordance with all applicable laws and the terms of the
Plans.

With respect to the shares of Promus Common Stock held in accounts of the
PHC S&RP, it is expected that shares of Promus stock will be converted into
shares of PHC Common Stock. It is

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expected that this will be accomplished by an exchange of shares with the Promus
S&RP, whereby the Promus S&RP will transfer PHC shares to the PHC S&RP in
exchange for Promus shares of equal value. The purpose of this exchange is to
enable each plan to have shares of the plan's employer sponsor constitute the
investment shares for that plan's company stock fund and ESOP.

It is estimated that approximately 4,050 employees will be eligible to
participate in the PHC S&RP. It is intended that the terms of the PHC S&RP will
be substantially similar to those of the Promus S&RP except that (i) amounts
presently invested in the Promus Common Stock fund in the Promus S&RP will be
reinvested in a PHC Common Stock fund, and (ii) the accounts of participants in
the Promus ESOP will be reinvested in PHC Common Stock. It is intended that
immediately following these transactions, the fair market value of the accounts
in the plan will remain approximately the same except to the extent of market
fluctuations while funds are being reinvested. For a description of the
treatment of the shares held in the Promus S&RP in the Distribution, see
"--Relationship Between PHC and Harrah's Entertainment after the
Distribution--Employee Benefits Allocation Agreement."

Immediately following the Distribution, PHC intends to establish an annual
bonus plan pursuant to which officers and key employees of PHC and its
subsidiaries will receive cash bonuses based on their level of management and
the attainment of individual and company objectives for the previous fiscal
year. It is expected that the terms of this plan will be similar to Promus's
current annual bonus plan.

Immediately following the Distribution, PHC intends to have in effect group
term insurance, life insurance, and health, dental and vision for its executives
that will be similar to those sponsored by Promus and its subsidiaries for its
hotel employees before the Distribution.

In conjunction with the Distribution, PHC will adopt the PHC Stock Option
Plan. The material features of the PHC Stock Option Plan are set forth below. A
copy of the form of the PHC Stock Option Plan is set forth as Annex III-A hereto
and incorporated herein by reference.

Approximately 180 key employees are eligible to receive awards under the
plan. A maximum of 3,600,000 shares of PHC Common Stock (which may be adjusted
in the event of certain changes) may be issued under the PHC Stock Option Plan.
Any shares subject to an option which expires for any reason, is forfeited or is
terminated unexercised as to such shares may again be subject to an option under
the PHC Stock Option Plan. The maximum number of shares with respect to which
stock options or stock appreciation rights may be granted to any individual is
limited to 250,000 shares in any one year period. This number of options and the
total number of shares subject to the Plan can be adjusted by the PHC HR
Committee in the event of certain corporate transactions or events.

No stock option or stock appreciation right may be granted after ten years
following the adoption of the plan. In general, except in case of death,
disability, or retirement, no stock option may be exercisable after the
expiration of ten years and one day (ten years in the case of an incentive stock
option) from the date of grant of the option.

An optionee with ten years of service has a two year period, and an optionee
with 20 years of service has a three year period, after retirement, death or
determination of disability to exercise any option to the extent it was
exercisable on the date of such event, provided that (1) for incentive stock
options, this two or three year period will not extend beyond the normal term of
the option and (2) for non-incentive options, the term of the option will be
extended up to a maximum term of thirteen years and one day to accommodate the
two or three year extension in cases where retirement, death or determination of
disability occurs within the three year period prior to the end of the normal
term of the option. Years of service for these purposes includes service with
Promus and its subsidiaries immediately prior to the Distribution.

The PHC Stock Option Plan will be administered by the PHC HR Committee. The
PHC HR Committee will have a wide degree of flexibility in determining options
to be granted and determining the terms and conditions thereof. The expenses of
administering the PHC Stock Option Plan are borne by PHC.

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A stock option gives the holder the right to purchase PHC Common Stock at a
fixed price over a specified period of time. Grants may consist of either
non-qualified stock options or incentive stock options. The option price of
stock options is set by the PHC HR Committee and options cannot be issued at a
price less than 100% (110% in the case of an incentive stock option granted to a
person owning, within the meaning of Section 424(d) of the Code, more than 10%
of the stock of the Company) of the fair market value of the PHC Common Stock on
the date the option is granted. The consideration for the grant of an option is
the employee's service to PHC. The PHC HR Committee has the right under the
terms of the PHC Stock Option Plan to decrease the option price on any
outstanding options and to accelerate the vesting of any option, except to the
extent that such action would cause the PHC Stock Option Plan to violate Section
422(b)(1) of the Code, Section 16 of the Exchange Act or Rule 16b-3 under such
section or would cause an option or stock appreciation right intended to qualify
as performance-based compensation under Section 162(m) of the Code to fail to so
qualify.

The option price may be paid in cash, by check, or in shares of PHC Common
Stock having a total fair market value on the date of exercise equal to the
option price. PHC may also permit the option price payable by reason of the
exercise of an option to be satisfied by withholding shares (that would
otherwise be obtained upon such exercise) having a fair market value equal to
the aggregate option price of the exercised option. PHC may also permit
optionees to use cashless exercise methods that are permitted by law.

Stock appreciation rights must pertain to, and be granted only in
conjunction with, a related underlying option granted under the PHC Stock Option
Plan and can be exercisable and exercised only to the extent that the related
option is exercisable. Upon the exercise of a stock appreciation right and the
surrender of the exercisable portion of the related option, the optionee will be
awarded cash, shares of PHC Common Stock or a combination of shares and cash at
the discretion of the PHC HR Committee. The award will have a total value equal
to the product obtained by multiplying (i) the excess of the fair market value
per share on the date on which the stock appreciation right is exercised over
the option price per share by (ii) the number of shares subject to the
exercisable portion of the related option so surrendered.

In the case of an optionee's death, the options may only be exercisable by
the optionee's legal representative or beneficiary if PHC is properly assured
and legally advised of the rights of such persons.

The PHC HR Committee may terminate or modify or amend the PHC Stock Option
Plan in such respect as it may deem advisable; provided, that the PHC HR
Committee may not, without further approval by PHC's stockholders make any
amendment which would require approval of stockholders under Rule 16b-3 under
Section 16(b) of the Exchange Act or Section 162(m) of the Code. No amendment,
modification or termination of the PHC Stock Option Plan may adversely affect a
participant's rights under any previously granted option without the
participant's consent.

The PHC HR Committee may adjust the number of shares subject to each
outstanding option, the option prices of outstanding options, and the maximum
number of shares subject to the PHC Stock Option Plan and may take certain other
actions in the event of certain corporate transactions or events. The PHC HR
Committee may also make additional adjustments and take other actions in the
event of certain corporate transactions or events, certain unusual or
nonrecurring transactions or events or changes in applicable laws, regulations,
or accounting principles. See "Amendments to Promus 1990 Stock Option
Plan--Proposed Amendments."

The PHC HR Committee also has authority to approve administrative rules and
regulations to govern administration of the PHC Stock Option Plan.

Certain of the federal income tax consequences applicable to the PHC Stock
Option Plan are set forth below. This discussion is intended to be general in
scope and does not specify all of the special tax rules that can apply to
various circumstances related to stock options.

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(1) Non-Incentive Stock Options. Federal taxable income is generally not
recognized by an optionee when a non-incentive stock option is granted. On the
date a non-incentive stock option is exercised, the amount by which the fair
market value of the stock exceeds the exercise price of the option is taxed as
ordinary income to the optionee. Subject to Section 162(m) of the Code, the
amount of income taxed to the optionee will be allowed as a deduction for
federal income tax purposes to PHC in the same year. PHC believes that the terms
and conditions of the stock options granted under the PHC Stock Option Plan
currently meet the requirements for performance-based compensation under Section
162(m)(4)(c) of the Code and that therefore the compensation attributable to the
exercise of a stock option is not subject to the deduction limit under Section
162(m) of the Code. When an optionee disposes of shares acquired by the exercise
of the option, any amount received in excess of the fair market value of the
shares on the date of exercise will be treated as long- or short-term capital
gain to the optionee, depending upon the holding period of the shares. If the
amount received is less than the market value of the shares on the date of
exercise, the loss will be treated as long- or short-term capital loss,
depending upon the holding period of the shares.

(2) Incentive Stock Options. Federal taxable income is generally not
recognized by an optionee when an incentive stock option is granted. When an
optionee exercises an incentive stock option within the term of such option, no
ordinary income will be recognized by the optionee at that time. However, the
excess of the fair market value of the stock over the exercise price is
considered an "item of adjustment" for alternative minimum tax purposes in the
year of exercise.

If a Disqualifying Disposition occurs in the year of exercise, the "item of
adjustment" for alternative minimum tax purposes can not exceed the gain on
disposition. For purposes of determining the alternative minimum tax gain or
loss in years following the year of exercise, the basis of the acquired shares
will be the exercise price increased by the amount of the "item of adjustment"
previously included in the alternative minimum taxable income.

(3) Stock Appreciation Rights. No taxable income is realized upon the
receipt of a stock appreciation right, but upon exercise of the stock
appreciation right, the fair market value of the shares (or cash in lieu of
shares) received must be treated as compensation taxable as ordinary income to
the recipient in the year of such exercise. Subject to Section 162(m) of the
Code, PHC will be entitled to a deduction for compensation paid in the same
amount which the recipient realized as ordinary income.

On the Distribution Date, all unvested options and all vested but
unexercised options held by employees of Promus and its subsidiaries who
following the Distribution will be employed by PHC will be cancelled. In their
place, PHC will issue new options to purchase PHC Common Stock under the PHC
Stock Option Plan subject to the individual consent of each employee. The number
of shares subject to these new PHC options and the exercise price of such
original options will be calculated so as to preserve the Promus options'
approximate value as of the date of the Distribution. To accomplish this, the
number of PHC options and their exercise price will be determined as follows:
The number of shares subject to the Promus option will be multiplied by the
Pre-Distribution Promus Share Price and the resulting number will be divided by
the average of the closing prices of shares of PHC Common Stock on the New York
Stock Exchange during the ten trading days immediately following the date of the

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Distribution (the "Post-Distribution PHC Share Price"); the exercise price of
the Promus option will be multiplied by the Post-Distribution PHC Share Price
and the resulting number will be divided by the Pre-Distribution Promus Share
Price. Fractions will be rounded to the next highest share and next lowest cent,
respectively. The Pre-Distribution Promus Share Price will be the closing price
of Promus Common Stock on the New York Stock Exchange on the date of the
Distribution.

The PHC HR Committee will administer PHC option grants in accordance with
the terms and conditions of the PHC Stock Option Plan. These substitute PHC
options will be subject to the same terms and will be exercisable at the times
and upon the conditions reflected in the Promus option being substituted.

In connection with the Distribution, PHC will adopt the PHC Restricted Stock
Plan. Under the PHC Restricted Stock Plan, PHC Common Stock will be awarded on a
periodic basis to key employees of PHC and its subsidiaries who are selected by
the chief executive officer of PHC and approved by the PHC HR Committee as
making significant contributions to PHC, subject to awards of substituted
restricted stock as set forth below. In addition, nonmanagement directors are
entitled to specified awards under the plan. A copy of the form of the PHC
Restricted Stock Plan is set forth as Annex III-B hereto and incorporated herein
by reference.

Approximately 180 officers and employees are eligible to receive awards
under the PHC Restricted Stock Plan. The shares of PHC Common Stock which are
awarded are restricted as to transfer and subject to forfeiture during a
specified period or periods. The consideration for the grant of restricted stock
is the employee's service to PHC. Each award is subject to such conditions,
terms and restrictions as are determined by the PHC HR Committee. The PHC HR
Committee also has the power to permit acceleration of the expiration of the
applicable restriction period with respect to any part or all of the shares
awarded to a participant; provided, however, that with respect to any award of
restricted shares intended to qualify as performance-based compensation under
Section 162(m) of the Code or any successor provisions thereto, no such
acceleration shall be authorized to the extent that such acceleration would
cause such restricted shares to fail to so qualify. Generally, in the event of a
participant's termination of employment (except for death or disability) prior
to the end of a restriction period, any shares upon which restrictions have not
yet lapsed will be automatically forfeited and returned to PHC without any
payment to the participant or his successors, heirs, assigns, or personal
representatives. Restricted shares that are forfeited are returned to the PHC
Restricted Stock Plan and can be regranted by the PHC HR Committee to any key
employee.

In general, shares awarded, and any right to vote such shares and to receive
dividends thereon, may not be sold, assigned or in any way transferred during
the restriction period applicable to such shares. During the restriction period,
the recipient has all other rights of a stockholder, including, but not limited
to, the right to receive dividends and vote such shares. Certificates for
restricted shares are deposited with PHC or its designee during the restriction
period. In the discretion of the PHC HR Committee, the PHC Restricted Stock Plan
will remain in effect until all shares awarded under the plan are free of
restrictions, but no award may be made more than ten years after adoption of the
plan. In the event of changes or corporate transactions that affect the PHC
Common Stock or its value, the PHC HR Committee may adjust the number of shares
to be issued under the plan, make equitable adjustments in restricted shares
previously awarded and take other action specified in the plan.

In the PHC HR Committee's discretion, an award of restricted shares may be
designed to qualify as performance-based compensation under Section 162(m) of
the Code. It is intended that such restricted shares will vest based upon PHC's
satisfaction of certain performance goals which are based on some or all of the
following business criteria: pre-tax income, operating income, cash flow,
earnings per share, return on equity, return on average invested capital, or a
division's operating income or opened units.

The PHC HR Committee may discontinue or amend the PHC Restricted Stock Plan
at any time, except that without stockholder approval the PHC HR Committee may
not make any amendment that

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would require stockholder approval under Section 162(m) of the Code, Section 16
of the Exchange Act or Rule 16b-3 under Section 16(b) of the Exchange Act. The
termination or any modification or amendment of the plan may not, without the
consent of a participant, adversely affect a participant's rights under an award
previously granted.

A maximum of 400,000 shares are authorized for issuance under the plan. This
number is subject to adjustment by the PHC HR Committee in its discretion in the
event of certain corporate transactions or events. The PHC HR Committee may also
make additional adjustments and take other actions in the event of certain
corporate transactions or events, certain unusual or nonrecurring transactions
or events or changes in applicable laws, regulations, or accounting principles.

The PHC HR Committee has authority to adopt policies and procedures
regarding various administrative matters under the Restricted Stock Plan.

Participants in the PHC Restricted Stock Plan must include in ordinary
income the fair market value of the stock at the time it vests. PHC anticipates
that it will not permit participants to make an election under Section 83(b) of
the Code with respect to restricted stock awards and no such elections are in
effect. Upon the sale of restricted stock after it vests, a participant will
recognize either short-term or long-term capital gain (or loss) to the extent of
any appreciation (or depreciation) in the value of the stock after the vesting
date. Subject to Section 162(m) of the Code, PHC is entitled to a tax deduction
in an amount equal to the participant's ordinary income recognized on the
vesting date. The tax deduction is taken by the company in the same year that
the participant recognizes ordinary income by reason of the vesting of the
stock.

The foregoing is a brief summary of the tax consequences relating to
restricted stock and is not intended to be complete. It does not describe state
or local tax consequences.

With respect to employees who hold shares of restricted stock under Promus's
Restricted Stock Plan who will be employed by PHC after the Distribution, such
restricted shares of Promus Common Stock will be forfeited and in lieu thereof
and to preserve the value of such shares they will receive an adjusted number of
restricted shares of PHC Common Stock under the PHC Restricted Stock Plan,
subject to their individual consent. The adjusted number of shares of restricted
PHC Common Stock that each such employee will receive will be calculated as
follows: the number of shares of restricted Promus Common Stock held by an
employee will be multiplied by a sum equal to the Pre-Distribution Promus Share
Price minus 1/2 of the Post-Distribution PHC Share Price and the resulting
number will be divided by the Post-Distribution PHC Share Price. These shares
will be subject to the same terms and restrictions as presently apply to
restricted shares of Promus Common Stock. Holders of these restricted shares of
PHC Common Stock will be entitled to receive the Distribution with respect to
shares of Promus Common Stock in the same manner as other stockholders.

PHC has established the PHC Executive Deferred Compensation Plan for certain
senior executives, and the PHC Deferred Compensation Plan for PHC
management-level employees. It is anticipated that each Promus Hotel employee
who was a party to a deferred compensation agreement with Promus under the
Promus Executive Deferred Compensation Plan or the Promus Deferred Compensation
Plan will enter into an agreement whereby such employee will agree that, as of
the Distribution Date, PHC will assume all obligations under such employee's
Promus Executive Deferred Compensation Plan agreement or Promus Deferred
Compensation Plan agreement, as the case may be, and Promus and its subsidiaries
will be released from all obligations to such employee regarding the Promus
Executive Deferred Compensation Plan and Promus Deferred Compensation Plan (the
"Deferred Compensation Assumption Agreements"). These assumed Promus Executive
Deferred Compensation Plan agreements and Promus Deferred Compensation Plan
agreements will be governed and administered pursuant to the PHC Executive
Deferred Compensation Plan and the PHC Deferred Compensation Plan.

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Pursuant to the Deferred Compensation Assumption Agreements, the deferred
compensation accounts of three executive officers of PHC in addition to
approximately 15 other key employees of PHC will be assumed by PHC.
Approximately 30 employees of PHC will be eligible to participate in the PHC
Executive Deferred Compensation Plan and approximately 125 employees of PHC will
be eligible to participate in the PHC Deferred Compensation Plan. Pursuant to
the PHC Executive Deferred Compensation Plan, eligible participants may defer
receipt of up to 25% of their salary and up to 50% of their annual bonus subject
to such limits and conditions as may be specified in the plan. Pursuant to the
PHC Deferred Compensation Plan, eligible participants may defer up to 12% of
their salary and up to 100% of their bonus. Directors of PHC may defer up to
100% of their fees under the PHC Deferred Compensation Plan. After the PHC
Nonmanagement Directors Stock Incentive Plan commences on May 1, 1996, the
directors will be eligible to defer 50% of their fees under the PHC Deferred
Compensation Plan.

Amounts which are deferred under the PHC Deferred Compensation Plan earn
interest at a rate based on a calculated average prime interest rate.
Participants under the PHC Deferred Compensation Plan may elect that payments be
paid out in a lump sum or in annual installments over a period of up to ten
years starting not later than the termination of employment.

Prior to the Distribution Date, PHC will establish an escrow fund and will
deposit insurance policies and certain other assets into the escrow fund. These
policies will include some of the policies that were previously held in a
similar escrow fund established by Promus for its deferred compensation plans.
The PHC escrow fund will be established to assure the payment of benefits, as
they accrue, to certain executive officers and the directors of PHC which will
be payable under the PHC Executive Deferred Compensation Plan or PHC Deferred
Compensation Plan. Upon occurrence of a potential change in control of PHC, PHC
will also place into this escrow fund certain severance payments payable under
the Severance Agreements (see "Certain Relationships" below) which would become
payable to ten executives only upon their termination of employment following a
change in control. PHC intends to increase the escrow fund, if necessary, to
assure the payment of future deferrals and also has the right to increase the
escrow fund to pay premiums on the insurance policies and interest on policy
loans. The escrow fund is subject to the claims of the creditors of PHC in the
case of the insolvency or bankruptcy of PHC.

The PHC Key Executive Officer Annual Incentive Plan (the "PHC Key Executive
Incentive Plan") is an annual bonus plan designed to provide certain senior
executives with incentive compensation based upon the achievement of
pre-established performance goals. Executive officers at the corporate vice
president level or above may be eligible for the PHC Key Executive Incentive
Plan. Prior to, or at the time of, establishment of the performance objectives
for a calendar year, the PHC HR Committee will approve the specific executive
officers who will participate in the PHC Key Executive Incentive Plan that year.

The PHC Key Executive Incentive Plan is designed to comply with Section
162(m) of the Code which limits the tax deductibility by a company of
compensation paid to officers named in the compensation tables of the company's
proxy statement to $1,000,000. Compensation paid pursuant to a plan approved by
stockholders that meets the requirements of Section 162(m) is exempted from this
limitation and is fully deductible. Embassy, as the sole stockholder of PHC
prior to the Distribution, has approved the PHC Key Executive Incentive Plan in
order to maintain the full deductibility of compensation paid to executive
officers of PHC. The PHC Key Executive Incentive Plan is being submitted for
approval and ratification by the Promus stockholders as one of the Distribution
Proposals (Proposal Seven).

Under the PHC Key Executive Incentive Plan, prior to March 30 of each year
the PHC HR Committee will approve performance goals, including specific
performance objectives for that year. The objectives may include any one or more
of the following corporate business criteria for the year (or a combination of
any of these criteria): pre-tax income, operating income, cash flow, earnings
per share,

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return on equity, return on average invested capital, construction starts, guest
satisfaction ratings, a division's operating income or a division's opened
units. These criteria will be determined in accordance with generally accepted
accounting principles ("GAAP") unless certain exceptions are approved by the PHC
HR Committee as further explained below.

At or after the end of a plan year, the PHC HR Committee will certify
achievement of the objectives in writing based on the company's performance
during the year. When establishing objectives and approving the achievement of
objectives, the PHC HR Committee will (unless an exception is pre-approved as
discussed below) ignore extraordinary items, minority interests, property
transactions, changes in accounting standards and losses or gains arising from
discontinued operations. The PHC HR Committee may, in any year, include property
transactions and/or discontinued operations (either specifically or generally or
both) and may further include or exclude any specified interest expense items,
corporate expense items and/or development expense items when determining the
pre-established objectives.

The actual results of the property transactions and/or discontinued
operations that are included in the objectives will then be included, in
accordance with GAAP, in the calculation of the achievement of the objectives.
Similarly, any included or excluded items of interest expense, corporate
expense, and/or development expense will be included or excluded, as the case
may be, in the calculation of achievement of the objectives. If the objectives
approved by the PHC HR Committee include operations or businesses (including
those being accounted for as discontinued operations) that are subsequently
spun-off or disposed of during the plan year, the objectives and the results
will be appropriately adjusted to exclude such operations or businesses.

The actual award for a participant will be determined by multiplying the
participant's eligible earnings by the percentage adjacent to a points column on
tables or matrices that has been approved by the PHC HR Committee prior to March
30 of the plan year. No award will exceed 200% of an individual's eligible
earnings as adjusted. The maximum award under the plan is $1,000,000 per
participant in any year. The PHC HR Committee will have the discretion to pay an
award that is lower than the calculated award.

Eligible earnings means a participant's annual base salary, including any
deferrals of such salary, as in effect on the date the performance objectives
are established by the PHC HR Committee.

Approved awards will be paid by March 15 after the plan year to which the
payment relates unless deferred pursuant to a PHC deferred compensation plan.
Awards that are otherwise payable to a participant who is no longer an employee
will be prorated, or the individual will be ineligible for an award, pursuant to
specified rules in the PHC Key Executive Incentive Plan. The participant will
recognize ordinary taxable income upon receipt of payments under the PHC Key
Executive Incentive Plan. The previous sentence is a brief summary of the tax
consequences relating to the PHC Key Executive Incentive Plan, it does not
describe state or local tax consequences, and it is not intended to be complete.

Since the PHC Key Executive Incentive Plan requires objectives to be set and
participants to be selected for each year, it is not determinable what benefits
would have been received by or allocated to any executive officer if the PHC Key
Executive Incentive Plan had been in effect for 1994.

The foregoing description of the PHC Key Executive Incentive Plan is
qualified in all respects by the actual provisions of the PHC Key Executive
Incentive Plan which is attached to this Proxy Statement as Annex VII.

Embassy, as the sole stockholder of PHC prior to the Distribution, has
adopted the PHC Nonmanagement Directors Stock Incentive Plan. The PHC
Nonmanagement Directors Stock Incentive Plan is being submitted for ratification
by the Promus shareholders as one of the Distribution Proposals. Under the PHC
Nonmanagement Directors Stock Incentive Plan, each nonmanagement director will
automatically receive 50% of his annual director fees in PHC Common Stock (and
the director may

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further elect to receive the remaining 50% of fees in PHC Common Stock) starting
with fees for the year of service commencing with the PHC annual stockholders
meeting in 1996. The grants would be made every three months (the "three month
grant period"), starting with the August 1, 1996 grant date. Each grant for a
three month grant period will be an amount of stock, valued on the grant date,
equal in value to 50% of the fees that the director earned during the previous
three month grant period (or 100% of the fees if the director elected to receive
the remaining 50% of fees in stock). The share value will be the average of the
high and low price of the PHC Common Stock based upon its consolidated trading
as generally reported for the principal securities exchange on which the PHC
Common Stock is listed. The shares that are granted cannot be disposed of for
six months after the grant.

As provided in the plan, each director may elect to receive the remaining
50% of his director fees in PHC Common Stock. Such election must be made prior
to the commencement of the first grant period to which such election applies and
such election shall be irrevocable. Individuals who are nominated to become
nonmanagement directors may make such election after such nomination but prior
to the time that they are elected to the Board.

Before the commencement of the plan year with respect to which grants are to
be made, the director can elect to defer receipt of the shares that would
otherwise be granted during that year until the director's board service
terminates. The deferred shares would then be issued to the director upon his
termination of service or in annual installments over a period of up to ten
years as the director may elect when the initial deferral election is made. If a
director terminates service during a three month grant period, the grant of
shares will be pro-rated and paid upon the termination of service (unless the
grant is deferred). If any dividends or other distributions are paid on PHC
stock during a deferral period, such amounts will be converted to rights to PHC
stock and such stock will be issued to the director after termination of service
as described in the plan.

A director will recognize ordinary taxable income six months after the grant
is made based on the value of the stock at that time unless the director files
an "83(b)" election whereby the director can elect to be taxed on the date of
the grant. If the stock grant is deferred by the director, the grant will not be
taxable until the director terminates service. The foregoing is a brief summary
of the tax consequences relating to the PHC Nonmanagement Directors Stock
Incentive Plan, it does not describe state or local tax consequences, and it is
not intended to be complete.

The foregoing description of the PHC Nonmanagement Directors Stock Incentive
Plan is qualified in all respects by the provisions of the PHC Nonmanagement
Directors Stock Incentive Plan which is attached hereto and incorporated herein
by reference as Annex VIII.

Plan Amendments. Amendments can be made to the PHC Stock Option Plan, the
PHC Restricted Stock Plan, the PHC Key Executive Incentive Plan and the PHC
Nonmanagement Directors Stock Incentive Plan that can increase the cost of the
plans to PHC and can alter the allocation of benefits as between executive
officers, employees, and directors. Such amendments can be made without
stockholder approval except as such approval may be required under Rule 16b-3 of
the Exchange Act or Section 162(m) of the Code. Rule 16b-3 of the Exchange Act
requires stockholder approval of an amendment to a stock plan that benefits
directors or officers if the amendment materially (a) increases benefits to
participants, (b) increases shares which may be issued under the plan, or (c)
modifies the eligibility requirements of the plan. In addition, the provisions
of the stock plans that deal with eligibility and benefits for non-employee
directors cannot be amended more than once every six months other than to comply
with changes in Federal law or regulations. The PHC Key Executive Officer Annual
Incentive Plan which is not a stock plan can be amended in a manner not
inconsistent with its purposes or as necessary to comply with applicable law
and, to the extent required by Section 162(m) of the Code, any changes to such
plan are subject to stockholder approval.

Employment and Severance Agreements. PHC has entered into a five year
employment agreement with Michael D. Rose under which he will serve as Chairman
of the PHC Board at a current

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annual salary of $250,000 per year subject to an annual review plus employee
benefits and the right to participate in PHC incentive compensation programs.
Under this agreement, Mr. Rose has agreed to spend up to 40% of his time as
Chairman of the PHC Board. Mr. Rose will also continue to serve as Chairman of
the Harrah's Entertainment Board. See "Election of Promus Directors--Certain
Employment Arrangements."

PHC has entered into individual severance agreements (the "PHC Severance
Agreements") with ten senior officers of PHC including its seven executive
officers. The PHC Severance Agreement for Mr. Schultz will replace a
substantially similar agreement between Promus and Mr. Schultz which agreement
will be cancelled. The PHC Severance Agreements will each provide for a
compensation payment of 2.99 times the average annual cash compensation (salary
and bonus) paid to such executive for the five preceding calendar years
including such compensation paid during service with Promus (the "PHC
Compensation Payment"), as well as accelerated payment of any compensation or
awards payable to such executive under any PHC incentive compensation or stock
option plan if the executive is terminated subsequent to a change in control of
PHC as defined in the PHC Severance Agreements (the "PHC Accelerated Payments")
(collectively, the "PHC Severance Payments"), with certain exceptions described
below. A change in control is defined to occur whenever: (i) any person becomes
the beneficial owner of 25% or more of PHC's then outstanding voting securities
regardless of comparative voting power of such securities; (ii) within a
two-year period, members of the PHC Board at the beginning of such period and
approved successors no longer constitute a majority of such Board; or (iii)
holders of securities entitled to vote thereon approve a merger or consolidation
(with certain exceptions) or a plan of complete liquidation. The executives will
not be entitled to the PHC Severance Payments subsequent to a change in control
if their termination is: (i) by PHC for cause (as defined); (ii) a result of
retirement or disability; or (iii) voluntary and not for good reason. The
acceleration of the vesting of the stock options and restricted stock of all
executives will occur effective upon such change in control.

Mr. Rose and Mr. Schultz will be entitled to the PHC Severance Payments if
they resign after a change in control of PHC. The other executives will be
entitled to the PHC Severance Payments subsequent to a change in control of PHC
if the executive resigns with good reason (as defined).

In addition, the PHC Severance Agreements each provide that in the event of
a potential change in control of PHC (as defined below): (i) PHC will deposit in
escrow a sum of money sufficient to fund the PHC Severance Payments in the event
of a change in control of PHC; and (ii) each executive will agree to remain in
the employ of PHC for a certain period of time. A potential change in control of
PHC is defined to occur whenever (i) PHC enters into an agreement which would
result in a change in control of PHC, (ii) any person publicly announces an
intention to take action which would result in a change of control of PHC, (iii)
any person, other than the trustee of an employee benefit plan of PHC who is or
becomes a beneficiary owner of 9.5% of the combined voting power of PHC's then
outstanding securities, increases his beneficial ownership of such securities by
5% or more over the percentage previously owned on the date of the PHC Severance
Agreement, or (iv) the Board adopts a resolution to the effect that a potential
change in control of PHC has occurred.

In the event that an executive becomes entitled to PHC Severance Payments,
which are subject to taxation under Section 4999 (the "Excise Tax") of the Code
the PHC Severance Agreements will provide that PHC will pay the executive an
additional amount (the "PHC Gross-Up Payment") such that the net amount retained
by the executive after deduction of any Excise Tax on the PHC Severance Payments
and all Excise Taxes and other taxes on the PHC Gross-Up Payment, will equal the
initial PHC Severance Payments.

The maximum amount of compensation that would be payable under the PHC
Severance Agreements to the executive officers named in the Summary Compensation
Table for PHC, as PHC Compensation Payments and PHC Accelerated Payments,
respectively, if a change in control occurred and if such executives were
terminated as of January 31, 1995, would be: Mr. Schultz $1,098,545 and

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<PAGE>
$2,021,936; Mr. Rose $2,262,640 and $4,549,997; Mr. Sullivan $860,298 and
$715,269; Mr. Keltner $989,531 and $11,794; and Mr. Wells $562,813 and $321,785.

Certain Transactions. Mr. Ronald Terry, who will be elected as a director of
PHC, is Chairman of First Tennessee National Corporation, the parent company of
First Tennessee Bank National Association ("First Tennessee"). It is anticipated
the First Tennessee will be one of the lending banks under the PHC Bank Credit
Facilities. The PHC Bank Facilities are expected to involve a total commitment
of $350 million and First Tennessee's share of this commitment is expected to be
no greater than $25 million. For information concerning fees that First
Tennessee received for various financial services rendered to Promus during
1994, see "Election of Promus Directors--Certain Transactions."

Mr. Michael I. Roth, who will be elected as a director of PHC, is Chairman
and Chief Executive Officer of Mutual of New York ("MONY"). MONY or its
affiliates own five franchised Hampton Inn hotels and a partnership interest in
a franchised Embassy Suites hotel. During 1994 and the first quarter of 1995,
MONY or its affiliates paid royalties and assessments of $920,870 to Hampton
Inns and $535,206 to Embassy Suites.

Mr. Rose will serve as the Chairman of the Board of Harrah's Entertainment
and as the Chairman of the Board of PHC. Mr. Peternell will serve as an
executive officer of Harrah's Entertainment and as a director of PHC. For a
discussion of certain relationships and related transactions to which Promus is
a party, see "Election of Promus Directors--Certain Transactions."

Mr. U. Bertram Ellis, Jr., who will be elected as a director of PHC, is
President and Chief Executive Officer of Ellis Communications, Inc., an
owner-operator of television and radio stations. During the period from January
1, 1994 through February 28, 1995, Promus and its subsidiaries paid Ellis
Communications, Inc. $97,125 for advertising.

MANAGEMENT OF HARRAH'S ENTERTAINMENT

The directors and executive officers of Harrah's Entertainment will be
substantially similar to the management of Promus. See "Election of Promus
Directors."

PRICE RANGE OF PROMUS COMMON STOCK

The Promus Common Stock is listed on the New York Stock Exchange as well as
several regional exchanges and is traded under the symbol "PRI." The following
table sets forth, for the fiscal periods indicated the high and low sales prices
per share of the Promus Common Stock as reported on the New York Stock Exchange
Composite Tape. As of January 27, 1995 (the trading day preceding public
announcement of the Distribution) and as of April 21, 1995, the closing price
per share of Promus Common Stock on the New York Stock Exchange was $31 1/4 and
$38 1/4, respectively.

HIGH LOW
---- ---
1993
1st Quarter........................................... 25 17 15/32
2nd Quarter........................................... 32 22 29/32
3rd Quarter........................................... 53 31/32 31 11/32
4th Quarter........................................... 55 39

1994
1st Quarter........................................... 55 1/4 36 1/2
2nd Quarter........................................... 41 27 1/8
3rd Quarter........................................... 38 27 3/4
4th Quarter........................................... 34 1/8 25 7/8

1995
1st Quarter........................................... 38 30
2nd Quarter (through April 21, 1995).................. 40 5/8 36 1/2

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OWNERSHIP OF PHC COMMON STOCK

PHC is currently a wholly-owned subsidiary of Embassy. The table following
sets forth information as to the beneficial ownership of PHC Common Stock as of
the Distribution Date (and following the Distribution) as if the Distribution
took place on January 31, 1995 by all expected directors and the persons listed
in the PHC Summary Compensation Table as well as by directors and executive
officers of PHC as a group and, to the best of PHC's knowledge, beneficial
owners of 5% or more of PHC Common Stock after the Distribution. The information
in the following table is based on the ownership of Promus Common Stock as of
January 31, 1995 and the number of shares of PHC Common Stock expected to be
distributed to each existing Promus stockholder in the Distribution.

<TABLE>
<CAPTION>
SHARES OF PHC
COMMON STOCK % OF SHARES
EXPECTED TO BE OUTSTANDING
BENEFICIALLY EXPECTED TO BE
NAME OWNED(A) BENEFICIALLY OWNED
- - ------------------------------------------------- -------------------- ------------------
<S> <C> <C>
U. Bertram Ellis, Jr............................. 1,000(b)
Debra J. Fields.................................. 1,000(b) *
Christoper W. Hart............................... 1,000(b) *
Thomas L. Keltner................................ 3,816 *
C. Warren Neel................................... 1,000(b) *
Ben C. Peternell................................. 227,273(b) *
Michael D. Rose.................................. 829,631(c)(d) 1.6%
Michael I. Roth.................................. 1,005(b) *
Raymond E. Schultz............................... 186,540 *
Jay Stein........................................ 1,000(b) *
David C. Sullivan................................ 44,400 *
Ronald Terry..................................... 47,369(b)(e) *
Mark C. Wells.................................... 34,062 *

All directors and executive officers as a
group.......................................... 1,446,198 2.8%

Massachusetts Financial Services Company......... 3,058,695(f) 6.0%
500 Boylston Street
Boston, MA 02116
Julian H. Robertson, Jr., Tiger Management
Corporation, Panther Partners L.P. and
Panther Management Company L.P. ............... 5,135,150(g) 10%
101 Park Avenue
New York, NY 10178
</TABLE>

- - ------------
* Indicates less than 1%.

(a) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock options: Mr. Rose 164,063; Mr. Schultz
40,294; Mr. Sullivan 20,885; Mr. Wells 6,620 and Mr. Keltner 1,852, all
directors and executive officers as a group, 289,811 shares. Shares listed
include shares allocated to accounts under Promus's Savings and Retirement
Plan as of December 31, 1994. Shares of PHC Common Stock underlying stock
options and allocated to accounts under Promus's Savings & Retirement Plan
were calculated by converting shares of Promus Common Stock to PHC shares
based on assumptions concerning the relative values of Promus Common Stock
and PHC Common Stock. See "--Management of PHC--PHC Compensation Plans."

(b) Includes 1,000 shares of PHC Common Stock to be granted pursuant to the
Promus Hotel Corporation 1995 Restricted Stock Plan.

(c) Includes 46,850 shares held by a charitable foundation of which Mr. Rose
serves as a director. Mr. Rose has shared voting and investment power over
these shares, but disclaims any other beneficial interest.

(d) Includes 37,000 shares held by a charitable lead trust of which Mr. Rose's
wife serves as the sole trustee. Mr. Rose disclaims any beneficial interest
in such shares.

(e) Included in the shares for Mr. Terry are 2,400 shares owned by members of
his family. Mr. Terry disclaims any beneficial interest in such shares.

(f) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission and dated February 6, 1995, reporting beneficial
ownership of 6,117,390 shares of Promus Common Stock as of December 31,
1994.

(g) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission and dated February 13, 1995, reporting beneficial
ownership of 10,270,300 shares of Promus Common Stock as of December 31,
1994.

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<PAGE>
DESCRIPTION OF PHC CAPITAL STOCK

General. PHC's authorized capital stock consists of 1,000 shares of PHC
Common Stock, of which 100 shares are issued and outstanding and are owned by
Embassy. Prior to the Distribution Date, the PHC's Certificate will be amended
by the PHC Board and by Embassy, as sole stockholder of PHC. Under such restated
PHC Certificate, which will be substantially in the form set forth in Annex II-A
to this Proxy Statement, the total number of shares of all classes of stock that
PHC will have authority to issue will be 365,150,000, of which 150,000 will be
shares of preferred stock, par value $100.00 per share ("PHC Preferred Stock"),
5,000,000 will be shares of special stock, par value $1.12 1/2 per share ("PHC
Special Stock"), and 360,000,000 will be shares of PHC Common Stock. Based on
the number of shares of Promus Common Stock outstanding on January 31, 1995,
approximately 51,231,744 shares of PHC Common Stock, constituting approximately
14% of the authorized PHC Common Stock, will be issued to Embassy, distributed
by Embassy to Promus in the Embassy Distribution, and distributed to
stockholders of Promus in the Distribution. Following the Embassy Distribution,
Promus and its subsidiaries will own no shares of PHC Common Stock. All of the
shares of PHC Common Stock issued in the Distribution will be validly issued,
fully paid and non-assessable.

The PHC Certificate will provide that the PHC Board is authorized to provide
for the issuance of shares of PHC Preferred Stock, from time to time, in one or
more series, and to fix any voting powers, full or limited or none, and the
designations, preferences and relative, participating, optional or other
restrictions thereon. No shares of PHC Preferred Stock of PHC will be
outstanding immediately following the Distribution.

There will be no material differences between the rights of holders of
capital stock of PHC and the rights of holders of capital stock in Promus
following the Distribution.

Preferred Stock. The PHC Board has the authority, without further action by
stockholders, to determine the principal rights, preferences and privileges of
the unissued PHC Preferred Stock. Provisions could be included in the shares of
PHC Preferred Stock, such as extraordinary voting, dividend, redemption or
conversion rights, which could discourage an unsolicited tender offer or
takeover proposal.

Common Stock. Subject to the limitations contained in PHC's debt instruments
and after provision for the payment of dividends on any series of PHC Preferred
Stock which might be issued and which has a preference with respect to the
payment of dividends, holders of PHC Common Stock are entitled to receive such
dividends as may be declared by the PHC Board out of funds legally available for
such purpose. The PHC Board does not presently intend to declare any cash
dividends after the Distribution. See "--Certain Special
Considerations--Dividend Policies."

The PHC Common Stock has no conversion rights. The PHC Common Stock can be
redeemed by PHC if, among other circumstances, in the judgment of the PHC Board
such redemption is necessary to avoid any regulatory sanctions against, or to
prevent the loss of, or to secure the reinstatement of, any license, franchise
or entitlement from any governmental agency held by PHC, any affiliate of PHC,
or any entity in which PHC or an affiliate is an owner, which license, franchise
or entitlement is needed to conduct any portion of the business of PHC, any such
affiliate or other entity or which license, franchise or entitlement is
conditioned upon some or all of the holders of PHC Common Stock possessing
prescribed qualifications. For further description of this provision, see
"--Certain Provisions of the PHC Certificate and PHC Bylaws." No holder of PHC
Common Stock has any preemptive right to subscribe for any stock or other
securities of PHC which may be issued.

The holders of shares of PHC Common Stock are entitled in the event of any
liquidation, dissolution or winding up of the affairs of PHC to share pro rata
in all lawful distributions of the remaining assets of PHC.

The holders of PHC Common Stock will be entitled to one vote per share.
Stockholders are not entitled to cumulative voting rights in the election of
directors.

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<PAGE>
Certain other provisions of the PHC Certificate affect the rights of holders
of PHC Common Stock. See "--Certain Provisions of the PHC Certificate and PHC
Bylaws."

PHC Rights and PHC Special Stock. PHC currently has 5,000,000 authorized
shares of PHC Special Stock. The PHC Board has the authority, without further
action by stockholders, to determine the rights, preferences and privileges of
the unissued PHC Special Stock. Provisions could be included in the shares of
PHC Special Stock, such as extraordinary voting, dividend, redemption or
conversion rights, which could discourage an unsolicited tender offer or
takeover proposal.

Concurrently with the Distribution and subject to the approval of the
Distribution Proposals by the stockholders, the PHC Board will authorize and
determine that one PHC Right be attached to each share of PHC Common Stock to be
received by the holders of Promus Common Stock in connection with the
Distribution. Each PHC Right will entitle the registered holder to purchase from
PHC one two-hundredth of a share (a "Unit") of Series A Special Stock, par value
$1.12 1/2 per share (the "Series A Stock") at a purchase price of $120.00 per
unit (the "Purchase Price"), subject to adjustment. The Purchase Price shall be
paid in cash or by certified bank check or bank draft payable to the order of
PHC. The description and terms of the PHC Rights are set forth in a Rights
Agreement (the "PHC Rights Agreement") between PHC and Continental Stock
Transfer & Trust Company, as rights agent.

PHC Rights will be attached to all PHC Common Stock certificates
representing outstanding shares, and no separate rights certificates will be
distributed, except as described below. The PHC Rights detach from the PHC
Common Stock and are distributed to holders of PHC Common Stock upon a date (the
"Rights Distribution Date") which is the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of PHC Common
Stock (the "Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 30% or more of such outstanding shares of PHC
Common Stock. The PHC Board may postpone such Rights Distribution Date beyond
the earlier of the dates set forth in the preceding sentence upon the vote of a
majority of the directors who are not Acquiring Persons or affiliated or
associated with an Acquiring Person (the "Continuing Directors"). Until the
Rights Distribution Date (or earlier redemption or expiration of the PHC
Rights), (i) the PHC Rights are evidenced by the PHC Common Stock certificates
and are transferred with and only with such certificates, (ii) new PHC Common
Stock certificates will contain a notation incorporating the Rights Agreement by
reference, (iii) the surrender for transfer of any certificates for PHC Common
Stock outstanding will also constitute the transfer of the PHC Rights associated
with the shares represented by such certificates, and (iv) PHC Rights shall be
issued in respect of all shares of PHC Common Stock which are issued after the
Distribution. Except as otherwise determined by the PHC Board, only shares of
PHC Common Stock issued prior to the Distribution Date will be issued with PHC
Rights.

The PHC Rights are not exercisable until the Rights Distribution Date and
expire at the close of business on May 1, 2005, unless earlier redeemed by PHC
as described below or upon the occurrence of certain merger or other acquisition
transactions approved by the PHC Board. As soon as practicable after the Rights
Distribution Date, PHC Rights Certificates will be mailed to holders of record
of shares of PHC Common Stock as of the close of business on the Rights
Distribution Date and, thereafter, the separate PHC Rights Certificate alone
will represent the rights.

In the event that, at any time following the Rights Distribution Date, (i)
PHC is the surviving corporation in a merger with an Acquiring Person and its
common stock is not changed or exchanged or (ii) an Acquiring Person becomes the
beneficial owner of more than 20% of the then outstanding shares of PHC Common
Stock (except pursuant to an offer for all outstanding shares of PHC Common
Stock which a majority of the Continuing Directors determine to be fair to and
otherwise in the best interests of stockholders), each holder of a PHC Right
will thereafter have the right to receive, upon exercise,

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<PAGE>
PHC Common Stock (or, in certain circumstances, cash, property or other
securities of PHC) having a value equal to two times the exercise price of the
PHC Right. Notwithstanding any of the foregoing, following the occurrence of any
of the events set forth in this paragraph, all PHC Rights that are, or (under
certain circumstances specified in the PHC Rights Agreement) were, beneficially
owned by any Acquiring Person will be null and void. However, PHC rights are not
exercisable following the occurrence of any of the events set forth above until
such time as the PHC Rights are no longer redeemable by PHC as set forth below.

For example, at an exercise price of $120.00 per PHC Right, each PHC Right
not owned by an Acquiring Person (or by certain related parties) following an
event set forth in the preceding paragraph would entitle its holder to purchase
$240.00 worth of PHC Common Stock (or other consideration, as noted above) for
$120.00. Assuming that the PHC Common Stock had a per share value of $20.00 at
such time, the holder of each valid PHC Right would be entitled to purchase 12
shares of PHC Common Stock for $120.00.

In the event that, at any time following the Stock Acquisition Date, (i) PHC
is acquired in a merger or other business combination transaction in which PHC
is not the surviving corporation or PHC Common Stock is changed into or
exchanged for securities of any other person, cash or other property (other than
a merger which follows an offer described in clause (ii) of the second preceding
paragraph), or (ii) 50% or more of PHC's assets or earning power is sold or
transferred, each holder of a PHC Right (except PHC Rights which previously have
been voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring or surviving company having a value
equal to two times the exercise price of the PHC Right. The events set forth in
this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."

The Purchase Price payable, and the number of Units or other securities or
property issuable, upon exercise of PHC Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A Stock, (ii) if
holders of the Series A Stock are granted certain rights or warrants to
subscribe for Series A Stock or convertible securities at less than the current
market price of the Series A Stock, or (iii) upon the distribution to holders of
the Series A Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. In addition, to the extent that PHC does not have sufficient shares of
PHC Common Stock issuable upon exercise of the PHC Rights following the
occurrence of a Triggering Event, PHC may, under certain circumstances, reduce
the Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Series A Stock
on the last trading day prior to the date of exercise.

At any time until ten days following the Stock Acquisition Date, PHC may
redeem the PHC Rights in whole, but not in part, at a price of $0.01 per PHC
Right, as such redemption price may be adjusted pursuant to the PHC Rights
Agreement. As long as the PHC Rights are redeemable, a majority of the
Continuing Directors of PHC may extend the period for redemption. After the
redemption period has expired, PHC's rights of redemption may be reinstated if
an Acquiring Person reduces his beneficial ownership to 10% or less of the
outstanding shares of PHC Common Stock in a transaction or series of
transactions not involving PHC. Immediately upon the action of the Board of
Directors ordering redemption of the PHC Rights, the PHC Rights will terminate
and the only right of the holders of PHC Rights will be to receive the $0.01
redemption price (as adjusted) per PHC Right.

Until a PHC Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of PHC, including, without limitation, the right to vote
or to receive dividends. While the distribution of the PHC Rights will not be
taxable to stockholders or to PHC, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the PHC Rights become
exercisable for PHC

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<PAGE>
Common Stock (or other consideration) or for common stock of the acquiring
company as set forth above.

Other than those provisions relating to the principal economic terms of the
PHC Rights, any of the provisions of the PHC Rights Agreement may be amended by
the PHC Board prior to the Rights Distribution Date. After the Rights
Distribution Date, the provisions of the PHC Rights Agreement may be amended by
the PHC Board only in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of PHC Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
PHC Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at such time as the PHC Rights are not
redeemable.

CERTAIN PROVISIONS OF THE PHC CERTIFICATE AND PHC BYLAWS

Embassy, as sole stockholder of PHC, has approved an amendment of the PHC
Certificate and the PHC Bylaws, effective as of the Distribution Date, to make
the PHC Certificate and PHC Bylaws substantially similar to the Promus
Certificate and Promus Bylaws as currently in effect. Such amendment to the PHC
Certificate and PHC Bylaws contains a variety of provisions designed to
encourage any person who desires to take control of and/or acquire PHC to enter
into negotiations with the PHC Board. In general, these provisions (i) provide
for a classified board of directors from which directors may only be removed by
the stockholders for cause, (ii) generally provide that only a majority of the
PHC Board shall have the authority to fill vacancies on the PHC Board, (iii)
limit the right of stockholders to amend PHC's Bylaws, (iv) eliminate the right
of stockholders to call special meetings and to take action without a meeting,
(v) establish an advance notice procedure regarding the nomination of directors
by stockholders and stockholder proposals to be brought before an annual
meeting, (vi) require that certain business combinations either meet certain
minimum price and procedural requirements, be approved by the members of the PHC
Board who are unaffiliated with the persons seeking to effect such business
combinations or be approved by a supermajority stockholder vote, and (vii)
authorize the PHC Board to redeem shares of capital stock of PHC to the extent
necessary to prevent the loss of, or to reinstate, certain governmental licenses
or franchises for the conduct of PHC's business. In addition to encouraging any
person intending to attempt a takeover of PHC to negotiate with the PHC Board,
these provisions also curtail such person's use of a dominant equity interest to
control any negotiations with the PHC Board. Under such circumstances, the PHC
Board may be better able to make and implement reasoned business decisions and
protect the interests of all of PHC's stockholders. A copy of the amended PHC
Certificate and the PHC Bylaws are set forth as Annexes II-A and II-B.

Classified Board of Directors. The PHC Certificate provides for the PHC
Board to be divided into three classes serving staggered terms so that
directors' initial terms will expire either at the 1996, 1997 or 1998 annual
meeting of stockholders. Starting with the 1996 annual meeting of PHC
stockholders, one class of directors will be elected each year for three-year
terms. See "--Management of PHC-- PHC Board." The classification of directors
makes it more difficult for a significant stockholder to change the composition
of the PHC Board in a relatively short period of time and, accordingly, provides
the PHC Board and stockholders time to review any proposal that a significant
stockholder may make and to pursue alternative courses of action which are fair
to all the stockholders of PHC.

Removal; Filling Vacancies. The PHC Certificate provides that, subject to
any rights of the holders of PHC Preferred Stock and PHC Special Stock, only a
majority of the PHC Board then in office or the sole remaining director shall
have the authority to fill any vacancies on the PHC Board, including vacancies
created by an increase in the number of directors. Moreover, because the PHC
Certificate provides for a classified board, Delaware law provides that the
stockholders may remove a member of the PHC Board only for cause. These
provisions relating to removal and filling of vacancies on the PHC Board will
preclude stockholders from enlarging the PHC Board or removing incumbent
directors and filling the vacancies with their own nominees.

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Amendment of the PHC Certificate and Bylaws. The PHC Certificate contains
provisions requiring the affirmative vote of the holders of at least 75 percent
of the voting power of the stock entitled to vote generally in the election of
directors to amend certain provisions of the PHC Certificate and PHC Bylaws
(including certain of the provisions discussed above). These provisions will
make it more difficult for stockholders to make changes in the PHC Certificate
or Bylaws, including changes designed to facilitate the exercise of control over
PHC.

Limitations on Stockholder Action by Written Consent; Special Meetings. The
PHC Certificate provides that stockholder action can be taken only at an annual
or special meeting of stockholders and prohibits stockholder action by written
consent in lieu of a meeting. The PHC Certificate and PHC Bylaws provide that,
subject to the rights of holders of any series of Preferred Stock, special
meetings of stockholders can be called only by a majority of the entire PHC
Board or by the President or Chairman of the Board. Stockholders are not
permitted to call a special meeting or to require that the PHC Board call a
special meeting of stockholders. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business
brought before the meeting by or at the direction of the PHC Board. These
provisions prohibit a significant stockholder from proposing a stockholder vote
on issues not approved by the PHC Board or from authorizing stockholder action
without a meeting at which all stockholders would be entitled to participate..

Nominations of Directors and Stockholder Proposals. The PHC Bylaws establish
an advance notice procedure with regard to the nomination other than by or at
the direction of the PHC Board of candidates for election as directors (the
"Nomination Procedure") and with regard to stockholder proposals to be brought
before an annual meeting of stockholders (the "Business Procedure"). The
Nomination Procedure provides that only persons who are nominated by or at the
direction of the PHC Board, or by a stockholder who has given timely prior
written notice to the Corporate Secretary of PHC prior to the meeting at which
directors are to be elected, will be eligible for election as directors. The
Business Procedure provides that stockholder proposals must be submitted in
writing in a timely manner in order to be considered at any annual meeting. To
be timely, notice for nominations or stockholder proposals must be received by
PHC not less than 60 days nor more than 90 days prior to the annual meeting;
provided, however, that in the event that less than 70 days notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs.

Under the Nomination Procedure, notice to PHC from a stockholder who
proposes to nominate a person at a meeting for election as a director must
contain certain information about that person, including age, business and
residence addresses, principal occupation, the class and number of shares of PHC
stock beneficially owned, the consent to be nominated and such other information
as would be required to be included in a proxy statement soliciting proxies for
the election of the proposed nominee, and certain information about the
stockholder proposing to nominate that person. Under the Business Procedure,
notice relating to a stockholder proposal must contain certain information about
such proposal and about the stockholder who proposes to bring the proposal
before the meeting, including the class and number of shares of PHC Common Stock
beneficially owned by such stockholder.

The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the PHC Board a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the PHC Board, to inform stockholders about such
qualifications. The purpose of the Business Procedure is, by requiring advance
notice of stockholder proposals, to provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the PHC Board, to provide the PHC Board with a meaningful
opportunity to inform stockholders, prior to such meetings, of any proposal to
be introduced at such meetings, together with any recommendation as to the PHC
Board's position or belief as to action to be taken with respect to such
proposal, so as to enable stockholders better to

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determine whether they desire to attend such meeting or grant a proxy to the PHC
Board as to the disposition of any such proposal. Although the PHC Bylaws do not
give the PHC Board any power to approve or disapprove stockholder nominations
for the election of directors or of any other proposal submitted by
stockholders, the PHC Bylaws may have the effect of precluding a nomination for
the election of directors or precluding the conducting of business at a
particular stockholder meeting if the proper procedures are not followed, and
may discourage or deter a third party from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of
the company, even if the conduct of such solicitation or such attempt might be
beneficial to the company and its stockholders.

Fair Price Provision. Article Ninth of the PHC Certificate (the "Fair Price
Provision") requires the approval by the holders of 75% of the voting power of
the outstanding capital stock of PHC entitled to vote generally in the election
of directors (the "Voting Stock") as a condition for mergers and certain other
business combinations ("Business Combinations") involving PHC and any holder of
more than 10% of such voting power (an "Interested Stockholder") unless the
transaction is either (i) approved by a majority of the members of the PHC Board
who are not affiliated with the Interested Stockholder and who were directors
before the Interested Stockholder became an Interested Stockholder (the
"Disinterested Directors") or (ii) certain minimum price and procedural
requirements are met.

The Fair Price Provision is designed to prevent a third party from utilizing
two-tier pricing and similar inequitable tactics in a takeover attempt. The Fair
Price Provision is not designed to prevent or discourage tender offers for PHC.
However, the separate provisions contained in the PHC Certificate and the PHC
Bylaws relating to "Classified Board of Directors" and "Limitations on
Stockholder Action by Written Consent; Special Meetings" discussed above will,
as therein indicated, curtail an Interested Stockholder's ability to exercise
control in several respects, including such stockholder's ability to change
incumbent directors who may oppose a Business Combination or to implement a
Business Combination by written consent without a stockholder meeting. In
addition, the Fair Price Provision would discourage some takeover attempts by
persons intending to acquire PHC in two steps and to eliminate remaining
stockholder interests by means of a business combination involving less
consideration per share than the acquiring person would propose to pay for its
initial interest in PHC.

In addition, under Section 203 of the DGCL as applicable to PHC, certain
"business combinations" (defined generally to include (i) mergers or
consolidations between a Delaware corporation and an interested stockholder (as
defined below) and (ii) transactions between a Delaware corporation and an
interested stockholder involving the assets or stock of such corporation or its
majority-owned subsidiaries, including transactions which increase the
interested stockholder's percentage ownership of stock) between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an interested stockholder (defined generally as
those stockholders, who, on or after December 23, 1987, become beneficial owners
of 15 percent or more of a Delaware corporation's voting stock) are prohibited
for a three-year period following the date that such stockholder became an
interested stockholder, unless (i) prior to the date such stockholder became an
interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction that made such stockholder an interested stockholder, the interested
stockholder owned at least 85 percent of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding voting stock owned
by officers who also are directors and voting stock held in employee benefit
plans in which the employees do not have a confidential right to tender or vote
stock held by the plan), or (iii) the business combination was approved by the
board of directors of the corporation and ratified by two-thirds of the voting
stock which the interested stockholder did not own. The three-year prohibition
also does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had been an interested
stockholder during the previous three

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years or who became an interested stockholder with the approval of a majority of
the corporation's directors.

Prior to effecting the Distribution, the PHC Board shall take action to
pre-approve the acquisition of shares of PHC Common Stock as a result of the
Distribution by certain stockholders in Promus, such that stockholders in Promus
who are not subject to the restrictions contained in Section 203 of the DGCL
prior to the Distribution with respect to business combinations with Promus will
not, as a result of the receipt of PHC Common Stock in the Distribution, become
subject to Section 203 restrictions subsequent to the Distribution with respect
to business combinations with PHC. Such pre-approval shall not apply to
stockholders in Promus who are "interested stockholders" in Promus under Section
203 prior to the Distribution and who are subject to Section 203 restrictions
with respect to business combinations with Promus such that such interested
stockholders will continue to be subject to Section 203 restrictions with
respect to business combinations with PHC upon receipt of PHC Common Stock in
the Distribution. Promus believes that there are no stockholders that currently
constitute "interested stockholders" under Section 203; however, any stockholder
who becomes the beneficial owner of 15 percent or more of the Promus Common
Stock between the date hereof and the Distribution Date would become an
interested stockholder in Promus and also in PHC upon consummation of the
Distribution.

Redemption. Under Section 151(b) of the DGCL, any stock of a corporation
which has a license or franchise from a governmental agency to conduct its
business, which license or franchise is conditioned upon some or all of the
holders of the corporation's stock possessing prescribed qualifications, may be
made subject to redemption by the corporation to the extent necessary to prevent
loss of such license or franchise or to reinstate such license or franchise. The
PHC Certificate contains such a redemption provision applicable to governmental
licenses, franchises or entitlements held by PHC, any of its affiliates or any
entity in which PHC or an affiliate is an owner. Under that provision,
outstanding shares of PHC Common Stock, or any other class or series of stock of
PHC, may be redeemed, among other circumstances, upon action of the PHC Board,
to the extent necessary to avoid any regulatory sanctions against, or to prevent
the loss of, or secure the reinstatement of, any such license, franchise or
entitlement. The redemption price of any stock so redeemed will be payable in
cash, debt or equity securities of PHC or another corporation, or any
combination thereof, equal to the "Fair Market Value" (as defined in the PHC
Certificate) of the stock to be so redeemed or such redemption price as required
by applicable law.

LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF PHC

Articles Tenth and Thirteenth of the PHC Certificate (the "Director
Liability and Indemnification Provisions") limit the personal liability of PHC
directors to the company or its stockholders for monetary damages for breach of
fiduciary duty. The Director Liability and Indemnification Provisions are
substantially identical to comparable provisions contained in the Promus
Certificate.

The Director Liability and Indemnification Provisions define and clarify the
rights of certain individuals, including PHC directors and officers, to
indemnification by PHC in the event of personal liability or expenses incurred
by them as a result of certain litigation against them. Such provisions are
consistent with Section 102(b)(7) of the DGCL. The limitation of liability in
the Director Liability and Indemnification Provisions may not cover claims
arising under the federal securities laws.

The Director Liability and Indemnification Provisions will be approved,
along with the rest of the PHC Certificate and the PHC Bylaws, by Embassy, as
sole stockholder of PHC prior to the Distribution Date.

Elimination of Liability in Certain Circumstances. Under the DGCL, unless
the corporation's certificate of incorporation provides otherwise, directors can
generally be held liable for gross negligence, but not simple negligence, in the
performance of their duties. As permitted by the DGCL, Article Thirteenth of the
PHC Certificate protects directors against monetary liability to PHC and its

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stockholders for gross negligence with respect to their fiduciary duty of care.
Article Thirteenth does not protect directors against personal liability for (i)
breaches of their duty of loyalty to PHC and its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) liability under Section 174 of the DGCL, or (iv)
transactions from which a director derives improper personal benefit. Article
Thirteenth eliminates director liability to the fullest extent permitted under
Section 174 of the DGCL, which Section otherwise makes directors personally
liable for unlawful dividends or unlawful stock repurchases or redemptions and
expressly sets forth a negligence standard with respect to such liability.

While Article Thirteenth provides directors with protection from awards of
monetary damages for breaches of the duty of care, it does not eliminate the
directors' duty of care. Accordingly, Article Thirteenth will have no effect on
the availability of equitable remedies such as an injunction or rescission based
upon a director's breach of the duty of care. The elimination of liability of
directors for monetary damages in the circumstances described above may deter
persons from bringing third party or derivative actions against directors to the
extent such actions seek monetary damages.

Consistent with Section 145 of the DGCL, Article Tenth of the PHC
Certificate provides that PHC will indemnify any person who is or was a party or
is threatened to be made a party to any action, suit or proceeding by reason of
the fact that such person is or was a director, officer, employee or agent of
PHC or at the request of PHC is or was serving as a director, officer, employee,
trustee, agent or fiduciary of another enterprise, against all expenses and
liabilities, including counsel fees, reasonably incurred by such person in
connection with such action, suit or proceeding if it is determined that such
person (i) acted in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of PHC, and (ii) with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.

PHC has also executed indemnification agreements in favor of certain of its
officers, directors and key employees which, subject to DGCL, provide
indemnification to such persons if any such person becomes a party to, or
witness or other participant in, any threatened, pending, or completed action,
suit or proceeding, or any inquiry or investigation that such person believes
might lead to the institution of any action, suit or proceeding, by reason of
any event or occurrence related to the fact that such person is or was a
director, officer, employee, agent or fiduciary of PHC, or at the request of PHC
is or was serving as a director, officer, employee, trustee, agent or fiduciary
of another enterprise, or by reason of anything done or not done by such person
in any such capacity.

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AMENDMENTS TO PROMUS 1990 STOCK OPTION PLAN

DESCRIPTION OF PLAN

On November 5, 1989, Promus adopted the Promus 1990 Stock Option Plan (the
"Promus Stock Option Plan"). Under the Promus Stock Option Plan, the Promus HR
Committee determines the key management employees who will be granted options
under the plan. Approximately 440 employees are in the group of key management
employees eligible for stock options. Members of the Board of Directors who are
not employees are not eligible to receive stock options under the Promus Stock
Option Plan. The Promus Stock Option Plan will continue in effect as the
Harrah's Entertainment Stock Option Plan after the Distribution Date.

As of January 31, 1995, the maximum number of shares authorized for the
issuance of new stock options or stock appreciation rights was 1,734,784. As
described below, it is proposed that an additional 4,500,000 shares be
authorized for options under the Promus Stock Option Plan. Any shares subject to
an option which expires for any reason, is forfeited or is terminated
unexercised as to such shares may again be subject to an option under the Promus
Stock Option Plan. The maximum number of shares subject to stock options or
stock appreciation rights that can be granted to any individual is limited to
250,000 shares in any one year period. This number of shares can be adjusted by
the Promus HR Committee in the event of certain corporate transactions or
events.

In connection with the Distribution, the Promus HR Committee intends to make
adjustments in outstanding options to preserve their approximate value
immediately following the Distribution. These adjustments will apply to options
held by employees who will be employed by Harrah's Entertainment.

The Promus HR Committee is proposing an amendment to the adjustment
provisions of the Promus Stock Option Plan to give additional discretion to the
Promus HR Committee to make future adjustments in outstanding options and in the
reserve of shares subject to the Promus Stock Option Plan when deemed
appropriate by the Promus HR Committee in the event of a future spin-off
dividend or any other corporate transaction or event. See "--Proposed
Amendments" below.

The outstanding stock options held by employees who will be employed by PHC
immediately following the Distribution will be cancelled as of the Distribution
Date. The shares subject to the cancelled options will be returned to the Promus
Stock Option Plan and will be available for future issuance. Such employees will
receive, subject to their individual consent, adjusted replacement options
granted under the PHC Stock Option Plan. The adjustment would preserve the
approximate aggregate spread value of stock options that existed immediately
prior to the Distribution. To accomplish this, the number of outstanding Promus
stock options held by a Harrah's Entertainment employee and the exercise price
of those options will be adjusted as follows: The number of shares subject to
the option will be multiplied by the Pre-Distribution Promus Share Price and the
resulting number will be divided by the Post-Distribution Harrah's Entertainment
Share Price; the exercise price of the option will be multiplied by the
Post-Distribution Harrah's Entertainment Share Price and the resulting number
will be divided by the Pre-Distribution Promus Share Price. Fractions will be
rounded to the next highest share and the next lowest cent, respectively. See
"The Distribution--Relationship Between PHC and Harrah's Entertainment after the
Distribution--Employee Benefits Allocation Agreement" and "--Management of PHC--
PHC Compensation Plans."

No stock option or stock appreciation right may be granted after ten years
following the adoption of the Promus Stock Option Plan by the Promus Board. In
general, except in case of death, disability, or retirement, no stock option may
be exercisable after the expiration of ten years and one day (ten years in the
case of an incentive stock option) from the date of grant of the option.

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options, the term of the option will be extended up to a maximum term of
thirteen years and one day to accommodate the two or three year extension in
cases where retirement, death or determination of disability occurs within the
three year prior to the end of the normal term of the option.

The Promus Stock Option Plan is administered by the Promus HR Committee. The
Promus HR Committee has a wide degree of flexibility in determining options to
be granted and determining the terms and conditions thereof. The expenses of
administering the Promus Stock Option Plan are borne by Promus.

A stock option gives the holder the right to purchase Promus Common Stock at
a fixed price over a specified period of time. Grants may consist of either
non-qualified stock options or incentive stock options. The option price of
stock options is set by the Promus HR Committee and options cannot be issued at
a price less than 100% (110% in the case of an incentive stock option granted to
a person owning, within the meaning of Section 424(d) of the Code, more than 10%
of the stock of Promus) of the fair market value of the Promus Common Stock on
the date the option is granted. The consideration for the grant of an option is
the employee's service to Promus. The Promus HR Committee has the right under
the terms of the Promus Stock Option Plan to decrease the option price on any
outstanding options and the right under the terms of the Promus Stock Option
Plan to accelerate the vesting of any option, except to the extent that such
action would cause the plan to violate Section 422 (b) (1) of the Code, Section
16 of the Exchange Act or Rule 16b-3 under such act, or would cause an option or
stock appreciation right intended to qualify as performance-based compensation
under Section 162(m) of the Code to fail to so qualify.

The option price may be paid in cash, by check, or in shares of Promus
Common Stock having a total fair market value on the date of exercise equal to
the option price. Promus may also permit the option price payable by reason of
the exercise of an option to be satisfied by withholding shares (that would
otherwise be obtained upon such exercise) having a fair market value equal to
the aggregate option price of the exercised option. Promus may also permit
optionees to use cashless exercise methods that are permitted by law.

Stock appreciation rights must pertain to, and be granted only in
conjunction with, a related underlying option granted under the Promus Stock
Option Plan and can be exercisable and exercised only to the extent that the
related option is exercisable. Upon the exercise of a stock appreciation right
and the surrender of the exercisable portion of the related option, the optionee
will be awarded cash, shares of Promus Common Stock or a combination of shares
and cash at the discretion of the Promus HR Committee. The award will have a
total value equal to the product obtained by multiplying (i) the excess of the
fair market value per share on the date on which the stock appreciation right is
exercised over the option price per share by (ii) the number of shares subject
to the exercisable portion of the related option so surrendered. No outstanding
options currently have stock appreciation rights.

In the case of an optionee's death, the options may only be exercisable by
the optionee's legal representative or beneficiary if Promus is properly assured
and legally advised of the rights of such persons.

The Promus HR Committee may terminate the Promus Stock Option Plan or modify
or amend the Promus Stock Option Plan in such respect as it may deem advisable;
provided, that the Promus HR Committee may not, without further approval by
Promus's stockholders, make any amendment which would require approval of
stockholders under Rule 16b-3 under Section 16(b) of the Exchange Act or Section
162(m) of the Code. No amendment, modification or termination of the Promus
Stock Option Plan may adversely affect a participant's rights under any
previously granted option without the participant's consent.

The Promus HR Committee may adjust the number of shares subject to each
outstanding option, the option prices of outstanding options, and the maximum
number of shares subject to the Promus

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Stock Option Plan and may take certain other actions in the event of certain
corporate transactions or events described in the Promus Stock Option Plan.

The Promus HR Committee also has authority to approve administrative rules
and regulations to govern administration of the Promus Stock Option Plan.

GENERAL FEDERAL INCOME TAX CONSEQUENCES

Certain of the federal income tax consequences applicable to the Promus
Stock Option Plan are set forth below. This discussion is intended to be general
in scope and does not specify all of the special tax rules that can apply to
various circumstances related to stock options.

Federal Income Tax Consequences; Non-Incentive Stock Options. Federal
taxable income is generally not recognized by an optionee when a non-incentive
stock option is granted. On the date a non-incentive stock option is exercised,
the amount by which the fair market value of the stock exceeds the exercise
price of the option is taxed as ordinary income to the optionee. Subject to
Section 162(m) of the Code, the amount of income taxed to the optionee will be
allowed as a deduction for federal income tax purposes to Promus in the same
year. When an optionee disposes of shares acquired by the exercise of the
option, any amount received in excess of the fair market value of the shares on
the date of exercise will be treated as long- or short-term capital gain to the
optionee, depending upon the holding period of the shares. If the amount
received is less than the market value of the shares on the date of exercise,
the loss will be treated as long-or short-term capital loss, depending upon the
holding period of the shares.

Federal Income Tax Consequences; Incentive Stock Options. Federal taxable
income is generally not recognized by an optionee on the grant of an incentive
stock option. When an optionee exercises an incentive stock option within the
term of such option, no ordinary income will be recognized by the optionee at
that time. However, the excess of the fair market value of the stock over the
exercise price is considered an "item of adjustment" for alternative minimum tax
purposes in the year of exercise.

If the shares acquired upon exercise are disposed of more than one year
after the date of transfer (and two years after grant date), the excess of the
sale proceeds over the aggregate option price of such shares will be taxed as
long-term capital gain to the optionee. Promus would not be entitled to a tax
deduction under such circumstances. In general, if the shares are disposed of
prior to such date(s) (a "Disqualifying Disposition"), the lesser of (a) the
excess of the fair market value of such shares at the time of exercise over the
aggregate option price or (b) the amount realized on such Disqualifying
Disposition over the basis of such shares would be taxed as ordinary income to
the optionee at the time of the Disqualifying Disposition. Subject to Section
162(m), Promus generally would be entitled to a federal tax deduction equal to
the amount of ordinary income recognized by the optionee as a result of a
Disqualifying Disposition. If a Disqualifying Disposition occurs in the year of
exercise, the "item of adjustment" for alternative minimum tax purposes can not
exceed the gain on disposition. For purposes of determining the alternative
minimum tax gain or loss in years following the year of exercise, the basis of
the acquired shares will be the exercise price increased by the amount of the
"item of adjustment" previously included in the alternative minimum taxable
income.

Promus believes that the terms and conditions of both the non-incentive and
incentive stock options granted under the Promus Stock Option Plan currently
meet the requirements for performance-based compensation under Section
162(m)(4)(c) of the Code and that therefore the compensation attributable to the
exercise of such a stock option is not subject to the deduction limit under
Section 162(m) of the Code.

Federal Income Tax Consequences; Stock Appreciation Rights. No taxable
income is realized upon the receipt of a stock appreciation right, but upon
exercise of the stock appreciation right, the fair market value of the shares
(or cash in lieu of shares) received must be treated as compensation taxable as
ordinary income to the recipient in the year of such exercise. Subject to
Section 162(m) of the Code,

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Promus will be entitled to a deduction for compensation paid in the same amount
which the recipient realized as ordinary income.

PROPOSED AMENDMENTS

The Promus HR Committee has determined that the Promus Stock Option Plan
(which will become the Harrah's Entertainment Stock Option Plan after the
Distribution) should be amended so that in the event of any dividend or other
distribution (whether in the form of cash, common stock, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of common stock or other securities of Promus, issuance
of warrants or other rights to purchase common stock or other securities of
Promus, or other similar corporate transaction or event, the Promus HR Committee
will have the following authority:

(1) if the corporate transaction or event affects the Promus Common
Stock and if the Promus HR Committee determines that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the plan or under an
option or stock appreciation right, then the Promus HR Committee shall
adjust any or all of:

(a) the number and type of shares of common stock (or other
securities or property) with respect to which options and stock
appreciation rights may be granted,

(b) the number and type of shares of common stock (or other
securities or property) subject to outstanding options and stock
appreciation rights, and

(2) if the corporate transaction or event results in shares of common
stock being exchanged for or converted into cash, securities (including
securities of another corporation) or other property, then the Promus HR
Committee will have the right to terminate the plan as of the date of the
event or transaction, in which case all options and stock appreciation
rights granted under the plan shall become the right to receive such cash,
securities or other property, net of any applicable exercise price.

In addition, in the event of any of the corporate transactions or events
described in the immediately preceding paragraph or other unusual or
nonrecurring transactions or events affecting Promus, any affiliate of Promus,
or the financial statements of Promus or any affiliate, or of changes in
applicable laws, regulations, or accounting principles, the proposed amendment
authorizes the Promus HR Committee, in its discretion, to take one or more of
the following actions, either at the time of the grant or any time thereafter,
if the Promus HR Committee determines that such action is appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the plan or an option or stock appreciation
right, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:

(a) provide for either the purchase of any option or stock appreciation
right for an amount of cash equal to the amount that could have been
attained upon the exercise of such option or stock appreciation right or
realization of the optionee's rights had such option or stock appreciation
right been currently exercisable or payable or the replacement of such
option or stock appreciation right with other rights or property selected by
the Committee in its sole discretion;

(b) provide that the option or stock appreciation right cannot be
exercised after such event;

(c) provide that for a specified period of time prior to such
transaction or event, the option or stock appreciation right shall be
exercisable as to all shares covered thereby;

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(d) provide that upon such event, the option or stock appreciation right
be assumed by the successor corporation, or a parent or subsidiary thereof,
or shall be substituted for by similar options, rights or awards covering
the stock of the successor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;

(e) make adjustments in the number and type of shares of common stock
(or other securities or property) subject to outstanding options and stock
appreciation rights, and/or in the terms and conditions of (including the
grant or exercise price), and the criteria governing, outstanding options
and stock appreciation rights and options and stock appreciation rights
which may be granted in the future.

Furthermore, the Promus HR Committee may, in its discretion, include such
further provisions and limitations in any option or stock appreciation right
agreement or certificate, as it may deem equitable and in the best interests of
Promus. Provided, however, that no adjustment or action authorized by this
proposed amendment or in any other provision of the Promus Stock Option Plan
shall be authorized to the extent that such adjustment or action would cause the
plan to violate Section 422(b)(1) of the Code, Section 16 or the Exchange Act or
Rule 16b-3 under such act, or, with respect to options and stock appreciation
rights intended to qualify as performance-based compensation under Section
162(m) of the Code, would cause such option or stock appreciation right to fail
to so qualify. For a description of adjustments to options to purchase Promus
Common Stock, see "The Distribution--Relationship Between PHC and Harrah's
Entertainment after the Distribution-- Employee Benefits Allocation Agreement."

The Promus Human Resources Committee has also determined that the Promus
Stock Option Plan should have an additional reserve of shares available for the
issuance of stock options or stock appreciation rights, so that Promus's policy
of providing equity incentives, in the form of stock options to executive
officers and key employees can continue for the remaining years of the Harrah's
Entertainment Stock Option Plan. Accordingly, the Promus Human Resources
Committee has approved a proposed amendment to the Promus Stock Option Plan for
stockholder approval authorizing an increase in the number of shares covered by
the plan. The proposed amendment provides that the total authorized shares that
may be issued under the Promus Stock Option Plan for stock options or stock
appreciation rights is increased by 4,500,000 shares. If this amendment is
approved by the stockholders, the reserve of shares that will be available for
the issuance of new options, after utilization of options and cancellation of
options in connection with adjustments related to the Distribution, will be a
total of approximately 5,550,000 shares (representing approximately 5% of the
outstanding shares of Common Stock). All of these options will be available for
grants to executive officers as well as other key employees.

It is not presently determinable who will receive these options or stock
appreciation rights since stock option and stock appreciation rights awards are
granted by the Promus Human Resources Committee in its discretion from time to
time including grants to executive officers as well as other key employees. It
is not currently expected that any of the additionally authorized options will
be granted prior to 1996. However, it is anticipated that most or all of the
authorized options will be granted prior to expiration of the Promus Stock
Option Plan in November 1999. See "Election of Promus Directors-- Report of the
Compensation Committee" for a discussion of the factors that the Promus Human
Resources Committee may consider in determining the grant of stock options to
executive officers.

Amendments can be made to the Promus Stock Option Plan that can increase the
cost of the plan to Promus and can alter the allocation of benefits as between
executive officers and key employees. (Nonmanagement directors are not eligible
for this plan.) Such amendments can be made without stockholder approval except
as such approval may be required under Rule 16b-3 of the Exchange Act or Section
162 (m) of the Code. Rule 16b-3 requires stockholder approval of an amendment to
a stock plan that benefits directors and officers if the amendment materially
(a) increases benefits to participants, (b) increases shares which may be issued
under the plan, or (c) modifies the eligibility requirements of the plan.

Attached to this Proxy Statement as Annex IV-A is a copy of the Amendments
to the Promus 1990 Stock Option Plan.

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AMENDMENTS TO PROMUS 1990 RESTRICTED STOCK PLAN

DESCRIPTION OF PLAN

Under the Promus 1990 Restricted Stock Plan (the "Promus Restricted Stock
Plan"), shares of Promus Common Stock are awarded on a periodic basis to key
employees who are selected by the Chief Executive Officer of Promus and approved
by the Promus HR Committee as making significant contributions to Promus. In
addition, nonmanagement directors are entitled to specified awards under the
Promus Restricted Stock Plan. The Promus HR Committee may also approve special
awards to employees nominated by the Chairman of the Promus Board in recognition
of the employee's superior past performance. Approximately 440 key employees are
eligible to participate in the Promus Restricted Stock Plan. This is the only
class of employees eligible to participate. Nine nonmanagement directors have
already received specified awards provided by the plan. Any new nonmanagement
director is eligible to receive a specified award. It is not determinable how
many new nonmanagement directors will be eligible since this depends on the
future make-up of the Promus Board and future elections of directors. The Promus
Restricted Stock Plan will continue in effect as the Harrah's Entertainment
Restricted Stock Plan after the Distribution Date.

The shares of Promus Common Stock which are awarded are restricted as to
transfer and subject to forfeiture during a specified period or periods. The
consideration for the grant of restricted stock is the employee's service to
Promus. Each award is subject to such conditions, terms and restrictions as are
determined by the Promus HR Committee. The Promus HR Committee also has the
power to permit acceleration of the expiration of the applicable restriction
period with respect to any part or all of the shares awarded to a participant;
provided, however, that with respect to any award of restricted shares intended
to qualify as performance-based compensation under Section 162(m) of the Code or
any successor provisions thereto, no such acceleration shall be authorized to
the extent that such acceleration would cause such restricted shares to fail to
so qualify. Generally, in the event of a participant's termination of employment
(except for death or disability) prior to the end of a restriction period, any
shares upon which restrictions have yet lapsed will be automatically forfeited
and returned to Promus without any payment to the participant or his successors,
heirs, assigns, or personal representatives. Restricted shares that are
forfeited are returned to the Promus Restricted Stock Plan and can be regranted
by the Promus HR Committee to any key employee.

In general, shares awarded, and any right to vote such shares and to receive
dividends thereon, may not be sold, assigned or in any way transferred during
the restriction period applicable to such shares. During the restriction period,
the recipient has all other rights of a stockholder, including, but not limited
to, the right to receive dividends and vote such shares. Accordingly, in
connection with the Distribution, each employee, including employees who will be
employed by Harrah's Entertainment immediately after the Distribution as well as
those who will be employed by PHC immediately after the Distribution Date,
holding shares of Promus restricted stock on the Distribution Record Date will
be entitled to receive the Distribution of PHC Common Stock with respect to his
or her shares of restricted Promus Common Stock. Such shares of PHC Common Stock
will not be restricted since each holder of shares of restricted stock is
entitled to the same rights as other stockholders.

In the Promus HR Committee's discretion, an award of restricted shares may
be designed to qualify as performance-based compensation under Section 162(m) of
the Code. It is intended that such restricted shares will vest based upon
Promus's satisfaction of certain performance goals which are based on some or
all of the following business criteria: pre-tax income, operating income, cash
flow, earnings per share, return on equity, return on average invested capital,
or a division's operating income or opened units.

On the Distribution Date, all shares of restricted Promus Common Stock held
by employees who will be employed by PHC will be forfeited. Such shares will be
returned to the Promus Restricted Stock Plan and will be available for future
issuance under the plan which will be renamed the Harrah's Entertainment 1990
Restricted Stock Plan. Such employees of PHC will receive, subject to their

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individual consent, adjusted awards of replacement shares of restricted PHC
Common Stock. See "The Distribution--Management of PHC--PHC Compensation Plans."
Certificates for restricted shares are deposited with Promus or its designee
during the restriction period.

In the discretion of the Promus HR Committee, the Promus Restricted Stock
Plan will remain in effect until all shares awarded under the Promus Restricted
Stock Plan are free of restrictions, but no award may be made more than ten
years after the date the Promus Restricted Stock Plan was approved by the
stockholders which was November 5, 1989. Upon certain changes in the number of
outstanding shares of common stock which occur as a result of corporate changes
described in the Promus Restricted Stock Plan, the Promus HR Committee may
adjust the number of shares to be issued under the Promus Restricted Stock Plan,
make equitable adjustments in restricted shares previously awarded and take
other action specified in the Promus Restricted Stock Plan.

The Promus HR Committee may discontinue or amend the Promus Restricted Stock
Plan at any time, except that without stockholder approval the Promus HR
Committee may not make any amendment that would require stockholder approval
under Rule 16b-3. The termination or any modification or amendment of the Promus
Restricted Stock Plan may not, without the consent of a participant, adversely
affect a participant's rights under an award previously granted. A maximum of
1,600,000 shares were originally authorized for issuance under the plan. As of
January 31, 1995, there were 443,045 shares remaining in the Promus Restricted
Stock Plan that could be granted. The proposed amendment to the Promus
Restricted Stock Plan would increase this by 500,000 shares.

The Promus HR Committee has authority to adopt policies and procedures
regarding various administrative matters arising under the Promus Restricted
Stock Plan.

Amendments can be made to the Promus Restricted Stock Plan that can increase
the cost of the plan to Promus and can alter the allocation of benefits as
between executive officers, employees, and directors. Such amendments can be
made without stockholder approval except as such approval may be required under
Rule 16b-3 of the Exchange Act. Rule 16b-3 requires stockholder approval of an
amendment to a stock plan that benefits directors and officers if the amendment
materially (a) increases benefits to participants, (b) increases shares which
may be issued under the plan, or (c) modifies the eligibility requirements of
the plan. In addition, the provisions of the plan that deal with eligibility and
benefits for non-employee directors cannot be amended more than once every six
months other than to comply with changes in Federal law or regulations.

GENERAL FEDERAL INCOME TAX CONSEQUENCES

Participants in the Promus Restricted Stock Plan must include in ordinary
income the fair market value of the stock at the time it vests. Promus has not
permitted participants to make an election under Section 83(b) of the Code with
respect to restricted stock awards and no such elections are in effect. Upon the
sale of restricted stock after it vests, a participant will recognize either
short-term or long-term capital gain (or loss) to the extent of any appreciation
(or depreciation) in the value of the stock after the vesting date. Subject to
Section162(m) of the Code, Promus is entitled to a tax deduction in an amount
equal to the participant's ordinary income recognized on the vesting date. The
tax deduction is taken by Promus in the same year that the participant
recognizes ordinary income by reason of the vesting of the stock. The
Distribution of PHC Common Stock to holders of restricted Promus Common Stock
will be treated as ordinary taxable income to such holders.

The foregoing is a brief summary of the tax consequences relating to
restricted stock and is not intended to be complete. It does not describe state
or local tax consequences.

PROPOSED AMENDMENTS

The Promus HR Committee has determined that the Promus Restricted Stock Plan
should be amended so that in the event of any dividend or other distribution
(whether in the form of cash, common

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stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of common stock or
other securities of Promus, issuance of warrants or other rights to purchase
common stock or other securities of Promus, or other similar corporate
transaction or event, the Promus HR Committee in the future will have the
authority to take the following actions:

(1) if the corporate transaction or event affects the Promus Common
Stock and if the Promus HR Committee determines that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the plan or under an
award or awards, then the Promus HR Committee shall adjust any or all of:

(a) the number and type of shares of common stock (or other
securities or property) which may be granted under the plan, and

(b) with respect to restricted shares which remain subject to
restrictions imposed under the plan, the number and type of shares of
common stock (or other securities or property) subject to such restricted
stock awards; and

(2) if the corporate transaction or event results in shares of common
stock being exchanged for or converted into cash, securities (including
securities of another corporation) or other property, the Promus HR
Committee will have the right to terminate the plan as of the date of the
event or transaction, in which case all restricted stock awards which remain
subject to restrictions imposed under the plan shall become the right to
receive such cash, securities or other property;

(3) In addition, in the event of any of the corporate transactions or
events described in the immediately preceding paragraph or other unusual or
nonrecurring transactions or events affecting Promus, any affiliate of
Promus, or the financial statements of Promus or any affiliate, or of
changes in applicable laws, regulations, or accounting principles, the
proposed amendment authorizes the Committee, in its discretion to take one
or more of the following actions, either at the time of the award or any
time thereafter, if the Committee determines that such action is appropriate
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the plan or an award or awards,
to facilitate such transaction or events or to give effect to such changes
in laws, regulations or principles:

(a) provide for either the purchase of any such shares of restricted
stock for an amount of cash equal to the amount that could have been
attained upon the sale of such shares or the realization of the
participation rights had the restrictions on such shares lapsed or the
replacement of some or all of such shares with other rights or property
selected by the Committee in its sole discretion;

(b) provide that at a specified time prior to such transaction or
event, the restrictions imposed under the restricted stock agreement on
participation certificate upon some or all shares of the restricted
shares may lapse and that some or all shares of such restricted shares
may cease to be subject to forfeiture after such event;

(c) provide that upon such event, some or all shares which remain
subject to restrictions imposed under this Promus Restricted Stock Plan
shall be substituted for by similar shares of stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares; and

(d) make adjustments in the terms and conditions of, or the criteria
governing, restricted shares which remain subject to restrictions imposed
under the plan and/or restricted shares which may be granted in the
future.

Furthermore, the Promus HR Committee may, in its discretion, include such
further provisions and limitations in any restricted stock agreement or
participation certificate, as it may deem equitable and in the best interests of
the company. Provided, however, that no adjustment or action authorized by

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this proposed amendment or in any other provision of the Promus Restricted Stock
Plan shall be authorized to the extent that such adjustment or action would
cause the plan to violate Section 16 of the Exchange Act or Rule 16b-3 under
such act, or, with respect to awards intended to qualify as performance-based
compensation under Section 162(m) of the Code, would cause such awards to fail
to so qualify.

The Promus Human Resources Committee has further determined that the Promus
Restricted Stock Plan should have an additional reserve of shares available so
that restricted stock can continue to be used as an equity incentive for
executive officers and key employees for the remaining years of the Harrah's
Entertainment Restricted Stock Plan. Accordingly, the Promus Human Resources
Committee has approved a proposed amendment to the Promus Restricted Stock Plan
for stockholder approval authorizing an increase in the number of shares covered
by the Promus Restricted Stock Plan. The proposed amendment provides that the
total authorized shares that may be issued under the Promus Restricted Stock
Plan is increased by 500,000 shares. If this amendment is approved by the
stockholders, the reserve of shares that will be available for the issuance of
new awards of restricted stock under the Harrah's Entertainment Restricted Stock
Plan will be a total of approximately 1,000,000 shares (representing
approximately 1% of the outstanding shares of Promus Common Stock). All of these
shares of restricted stock will be available for grants to executive officers as
well as other key employees.

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ELECTION OF PROMUS DIRECTORS

BOARD OF DIRECTORS

Promus's Certificate of Incorporation provides for a Board of Directors of
not less than three nor more than 17 directors and authorizes the Board to
determine the number within that range from time to time by the affirmative vote
of a majority of the directors then in office. The current Board of Directors
consists of eleven directors.

In accordance with the Certificate of Incorporation, Promus's Board of
Directors is divided into three classes with staggered terms. Each class of
directors is elected for a term of three years. Three Class II directors are to
be elected at the 1995 Annual Meeting for a three-year term ending in 1998. Upon
the recommendation of the Promus HR Committee, Philip G. Satre, Boake A. Sells,
and Shirley Young have been nominated by the Promus Board for election to these
Class II positions.

Susan Clark-Jackson was elected a director on July 29, 1994, by the Board of
Directors to fill a vacancy in Class III. Her election to the Board of Directors
was subject to her qualification by the New Jersey Casino Control Commission.
Promus filed a petition with the Commission seeking this qualification and on
November 16, 1994, the Commission issued an order temporarily approving Ms.
Clark-Jackson to serve as a director and as a member of the Audit Committee.

Ronald Terry, who is presently a member of the Promus Board, is expected to
retire from the Promus Board effective as of the Annual Meeting Date. The Promus
Board is entitled to elect an individual to fill the resulting vacancy.
Effective as of the Distribution Date, Mr. Terry will become a member of the PHC
Board.

In the event any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxy will be voted for any substitute nominee
selected by the current Promus Board. Management has no reason to believe, at
this time, that the persons named will be unable or will decline to serve if
elected, and each nominee has informed Promus that he or she consents to serve
and will serve if elected.

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OWNERSHIP OF PROMUS SECURITIES

Set forth in the following table is the beneficial ownership of Promus
Common Stock as of January 31, 1995, for all current directors, including all
nominees to the Board of Directors, the five executive officers of Promus named
in the Summary Compensation Table, see "Election of Promus Directors--Executive
Officer Compensation," and directors and executive officers as a group, and to
the best of Promus's knowledge, beneficial owners of 5% or more of Promus Common
Stock.

<TABLE>
<CAPTION>
SHARES OF PROMUS % OF SHARES
COMMON STOCK OUTSTANDING (NET
BENEFICIALLY OWNED OF TREASURY
ON JANUARY 31, SHARES) AS OF
NAME 1995(A) JANUARY 31, 1995
- - ---------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
James L. Barksdale........................................ 35,200 *
Susan Clark-Jackson....................................... 1,150 *
James B. Farley........................................... 17,818 *
Joe M. Henson............................................. 225,000 *
Charles A. Ledsinger, Jr.................................. 174,970 *
Ben C. Peternell.......................................... 298,582 *
Colin V. Reed............................................. 122,457 *
Michael D. Rose........................................... 1,423,905(b)(c) 1.4%
Walter J. Salmon.......................................... 14,601 *
Philip G. Satre........................................... 459,928 *
Boake A. Sells............................................ 18,000 *
Ronald Terry.............................................. 88,987(d) *
Eddie N. Williams......................................... 5,050 *
Shirley Young............................................. 34,850 *

All directors and executive officers as a group........... 3,031,940 3.0%

Trustees of the Promus Companies
Incorporated Savings and Retirement Plan................ 5,594,355(e) 5.5%
1023 Cherry Road
Memphis, TN 38117

Massachusetts Financial Services Company.................. 6,117,390(f) 6.0%
500 Boylston Street
Boston, MA 02116

Julian H. Robertson, Jr., Tiger Management
Corporation, Panther Partners L.P. and
Panther Management Company L.P. ........................ 10,270,300(g) 10.0%
101 Park Avenue
New York, NY 10178
</TABLE>

- - ------------

* Indicates less then 1%

(a) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock options: Mr. Ledsinger, 24,750 shares;
Mr. Peternell, 18,300 shares; Mr. Reed 29,835 shares; Mr. Rose, 93,750
shares; Mr. Satre, 43,200 shares; all directors and executive officers as a
group, 223,982 shares. Shares listed include shares allocated to accounts
under Promus's Savings and Retirement Plan as of December 31, 1994.

(b) Includes 93,700 shares held by a charitable foundation of which Mr. Rose
serves as a director. Mr. Rose has shared voting and investment power over
these shares, but disclaims any other beneficial interest.

(c) Includes 74,000 shares held by a charitable lead trust of which Mr. Rose's
wife serves as the sole trustee. Mr. Rose disclaims any beneficial interest
in such shares.

(Footnotes continued on following page)

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(Footnotes continued from preceding page)

(d) Included in the shares for Mr. Terry are 4,800 shares owned by members of
his family. Mr. Terry disclaims any beneficial interest in such shares.

(e) The trustees of the Promus S&RP have sole voting power of the shares listed
except that each participant in the Plan has the right, to the extent of
shares of Common Stock allocated to the participant's account in the Plan
(including vested and unvested amounts), to direct the trustees in writing
as to how to respond to a solicitation of proxies opposed by management of
the Company. The trustees do not have shared voting power, sole investment
power, or shared investment power over any of the shares listed. The
participants in the Plan have the right to direct the disposition of the
securities held in their respective accounts pursuant to the terms of the
Plan. No one participant has such rights with respect to more than 5% of the
Promus Common Stock. The source of this information is a Schedule 13G filed
by the trustees of the Plan with the Securities and Exchange Commission and
dated February 10, 1995. Ownership (number of shares and percent of shares
outstanding) is reported as of December 31, 1994.

(f) Massachusetts Financial Services Company ("MFS") is a registered investment
adviser and has reported beneficial ownership of the shares listed, which
shares are also beneficially owned by certain other non-reporting entities
as well as MFS. MFS has sole voting power as to 6,112,890 of the shares
listed and has no power to vote 4,500 of the shares listed. MFS has sole
dispositive power as to the 6,117,390 shares listed. The source of this
information is a Schedule 13G filed by MFS with the Securities and Exchange
Commission and dated February 6, 1995. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1994.

(g) Tiger Management Corporation, Panther Partners L.P., Panther Management
Company L.P., and Julian H. Robertson, Jr. have reported beneficial
ownership of the shares listed. Tiger Management Corporation, a registered
investment adviser, has shared voting power and shared dispositive power
with respect to 9,450,100 of the shares listed; Panther Partners L.P., a
registered investment company, has shared voting power and shared
dispositive power with respect to 772,700 of the shares listed; Panther
Management Company L.P., a registered investment adviser, has shared voting
power and shared dispositive power with respect to 772,700 of the shares
listed; and Julian H. Robertson, Jr., an individual, has shared voting power
and shared dispositive power with respect to 10,270,300 of the shares
listed. The source of this information is a Schedule 13G filed with the
Securities and Exchange Commission and dated February 13, 1995. Ownership
(number of shares and percent of shares outstanding) is reported as of
December 31, 1994.

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NOMINEES

Upon recommendation of the Promus Human Resources Committee, Philip G.
Satre, Boake A. Sells, and Shirley Young have been nominated by the Board of
Directors for election to Class II positions with their term in office expiring
in 1998.

THE BOARD OF DIRECTORS OF PROMUS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF
THE FOREGOING NOMINEES AS DIRECTORS OF PROMUS.

Set forth below are the Class II nominees and the current Class I and III
directors.

NOMINEES: CLASS II, TERM EXPIRES 1998

<TABLE>
<C> <S>
[Picture] PHILIP G. SATRE
Mr. Satre, 45, has been President of Promus since April 1991 and Chief Executive
Officer since April 1994. He has been President of Harrah's since 1984 and was
Chief Executive Officer of Harrah's from 1984 to April 1991. He was a Senior Vice
President of Promus from November 1989 to April 1991. He also is a member of the
Executive Committee of Harrah's Jazz Company and a director of Harrah's Jazz
Finance Corp. He has been a director of Promus since November 1989. He is a
member of the Executive Committee.

[Picture] BOAKE A. SELLS
Mr. Sells, 57, a private investor, was Chairman of the Board and Chief Executive
Officer of Revco D.S., Inc. from September 1987 to October 1992 and was President
of that company from April 1988 to June 1992. Mr. Sells is also a director of
Huffy Corporation. He has been a Promus director since February 1990. He is a
member of the Audit Committee.

[Picture] SHIRLEY YOUNG
Ms. Young, 59, has been Vice President-Consumer Market Development, General
Motors Corporation since June 1988. From June 1988 to December 1990, she was
Chairman of Grey Strategic Marketing, Inc., a subsidiary of Grey Advertising,
Inc. She is also a director of Bell Atlantic Corporation, Bombay Company and a
Consultant Director of Dayton Hudson Corporation. Ms. Young has been a Promus
director since February 1990. She is a member of the Audit Committee.
</TABLE>

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<PAGE>
DIRECTORS: CLASS III, TERM EXPIRES 1996

<TABLE>
<C> <S>
[Picture] JAMES L. BARKSDALE
Mr. Barksdale, 52, has been President and Chief Executive Officer of Netscape
Communications Corp. since January 1995. He was President and Chief Operating
Officer and a director of McCaw Cellular Communications, Inc. from January 1992
to January 1995. He was also Chief Executive Officer of AT&T Wireless Services,
Inc. from September, 1994 to January 1995. He served as Executive Vice President
and Chief Operating Officer of Federal Express Corporation from 1983 to October
1991. He has been a Promus director since February 1991. He is also a director of
3Com Corporation. He is a member of the Executive Committee and the Human
Resources Committee.

[Picture] SUSAN CLARK-JACKSON
Ms. Clark-Jackson, 48, has been Senior Group President, Pacific Newspaper Group,
Gannett Co., Inc. since July 1994. She has been publisher of the Reno
Gazette-Journal since 1985. She was President of Gannett West Newspaper Group
from 1985-1994. She has been a Promus director since July 1994. She is a member
of the Audit Committee.

[Picture] JAMES B. FARLEY
Mr. Farley, 64, has been a trustee of Mutual Of New York since October 1988. He
was Chairman of the Board of Mutual Of New York from April 1989 to July 1993, was
Chief Executive Officer of that company from April 1989 to January 1993 and was
President from October 1988 to January 1991. Mr. Farley is also a director of
Ashland Oil, Inc. Mr. Farley has been a Promus director since February 1990. He
is a member of the Human Resources Committee.

[Picture] WALTER J. SALMON
Mr. Salmon, 64, since 1980 has been the Stanley Roth, Sr. Professor of Retailing,
Harvard University. Mr. Salmon is also a director of Hannaford Brothers Company,
Luby's Cafeterias, Inc., The Neiman Marcus Group, The Quaker Oats Company, Telxon
Corp., and Circuit City Stores, Inc. He has been a Promus director since February
1990. He is Chairman of the Human Resources Committee.
</TABLE>

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<PAGE>
DIRECTORS: CLASS I, TERM EXPIRES 1997

<TABLE>
<C> <S>
[Picture] JOE M. HENSON
Mr. Henson, 61, was Chairman of the Board of LEGENT Corporation from 1989 until
February 1995. He currently serves as a director of LEGENT Corporation and is
Chairman of its Executive Committee. He was Chief Executive Officer of LEGENT
Corporation from 1989 to April 1992. Mr. Henson has been a Promus director since
April 1991. He is a member of the Human Resources Committee.

[Picture] MICHAEL D. ROSE
Mr. Rose, 53, has been Chairman of the Board of Promus since November 1989 and
was Chief Executive Officer from November 1989 to April 1994. Mr. Rose is also
Chairman of the Board of PHC. He was President of Promus from November 1989 to
April 1991. Mr. Rose is also a director of Ashland Oil, Inc., First Tennessee
National Corporation and General Mills, Inc. He has been a Promus director since
November 1989. He is Chairman of the Executive Committee.

[Picture] RONALD TERRY
Mr. Terry, 64, has been Chairman of the Board of First Tennessee National
Corporation since 1973, was Chief Executive Officer from 1973 to April 1994 and
was President from 1988 to August 1991. He is also a director of BellSouth
Corporation and AutoZone, Inc. Mr. Terry has been a Promus director since
February 1990 and he is a member of the Executive Committee and is Chairman of
the Audit Committee. Mr. Terry is expected to retire from the Promus Board on the
Annual Meeting Date and, effective as of the Distribution Date, become a member
of the PHC Board.

[Picture] EDDIE N. WILLIAMS
Mr. Williams, 62, has been President and Chief Executive Officer of the Joint
Center for Political and Economic Studies in Washington, D.C. since 1972. He is a
director of Riggs National Bank of Washington, D.C. He also is a member of the
Executive Committee of Harrah's Jazz Company and a director of Harrah's Jazz
Finance Corp. Mr. Williams has been a Promus director since October 1992. He is a
member of the Audit Committee.
</TABLE>

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THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

The Promus Board met seven times during 1994. During the year, attendance at
Board meetings averaged 92% and attendance at Committee meetings averaged 98%.
Should the Distribution be effected as described above in "The Distribution,"
the composition and committees of the Promus Board will be unchanged except that
Ronald Terry is expected to retire on the Annual Meeting Date. The Promus Board
is entitled to elect an individual to fill the resulting vacancy.

The Promus Board has three standing committees: (i) Executive, (ii) Audit
and (iii) Human Resources.

During the intervals between meetings of the Board of Directors, the
Executive Committee, subject to specified limitations, may act on behalf of the
Board. Action taken by the Executive Committee is reported to the Board of
Directors at its first meeting following such action. Without specific delegated
authority, the Executive Committee may not declare dividends except current
quarterly dividends not in excess of those last declared by the Board of
Directors and may not increase or decrease the number of directors or appoint
new directors. Unless within an overall plan previously approved by the Board of
Directors, action taken by the Executive Committee approving a transaction in
excess of $75,000,000 is subject to revision or rescission by the Board of
Directors at the Board's first meeting following such action. The Executive
Committee did not meet during 1994.

The Audit Committee, which met five times in 1994, (1) recommends annually
to the Board of Directors the independent public accountants for Promus and its
direct or indirect subsidiaries; (2) meets with the independent public
accountants concerning their audit, their evaluation of Promus's financial
statements, accounting developments that may affect Promus and their nonaudit
services; (3) meets with management and the internal auditors concerning similar
matters; and (4) makes recommendations to all of the aforesaid groups that it
deems appropriate.

The Human Resources Committee met six times during 1994. The Human Resources
Committee acts as the nominating committee of the Board of Directors. It
considers and makes recommendations to the Board of Directors concerning the
size and composition of the Board, the number of nonmanagement directors, the
qualifications of members and potential nominees for membership, the
compensation of directors, membership of committees of the Board and certain
administrative matters. The Human Resources Committee considers nominees
recommended by stockholders. Detailed resumes of business experience and
personal data of potential nominees may be submitted to the Corporate Secretary
at the address shown on the front page of this Proxy Statement.

The Human Resources Committee also approves the annual compensation of
corporate officers who are members of the Board of Directors and administers
Promus's bonus, restricted stock, stock option and other incentive compensation
plans. The Committee also makes various decisions and policy determinations in
connection with Promus's Savings and Retirement Plan and Employee Stock
Ownership Plan.

COMPENSATION OF DIRECTORS

Directors who are not employees of Promus or its direct or indirect
subsidiaries are paid a monthly fee of $2,083 plus $1,000 for each board meeting
and $1,000 for each committee meeting they attend. Committee chairmen are paid
an additional $500 for each committee meeting attended. These fees are reviewed
every three years by the Board to determine if they are competitive. In February
1995, the Board completed a three year review of the compensation of boards of
directors of companies with revenues similar to Promus. Based on this review,
the Board determined that commencing May 1, 1995 the fees of nonmanagement
directors should be as follows: monthly fee, $2,500; Board meetings fee, $1,500
for each meeting; Committee meetings fee, $1,200 for each meeting; Committee
chairman, an

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additional $800 for each Committee meeting. Under the provisions of Promus's two
unfunded compensation deferral programs, directors may defer the receipt of all
or a portion of their directors' fees. Under the first plan, amounts, while
deferred, earn interest at a rate based on a calculated average prime interest
rate. Under the second plan, the Promus Executive Deferred Compensation Plan,
amounts, while deferred, earn interest at a termination rate (which cannot be
lower than the Citibank prime rate) or at a retirement rate (which cannot be
lower than a specified formula rate), both of which are approved annually by the
Promus Human Resources Committee. The termination rate for 1994 was 8.5% and the
retirement rate was 15.5%. For 1995, these rates are the same. The retirement
rate is established as an incentive to encourage long-term service. Therefore,
only those participants meeting the plan's service requirements will receive
interest at the retirement rate. A director generally will receive the
retirement rate when he or she retires from the Board. All nonmanagement
directors except Susan Clark-Jackson deferred their fees under the Executive
Deferred Compensation Plan during 1994. The directors' eligibility for further
deferrals under the Executive Deferred Compensation Plan will terminate upon
commencement of the Nonmanagement Directors Stock Incentive Plan which is
anticipated to commence on or about May 1, 1996.

In connection with the administration of the Executive Deferred Compensation
Plan, Promus has purchased company-owned life insurance policies insuring the
lives of certain directors, officers and key employees. In purchasing these life
insurance policies, certain assumptions have been made regarding mortality
experience, interest rates and policy dividends. Promus expects to recover
policy premiums and the net cost of benefits paid under the Executive Deferred
Compensation Plan through the operation of these insurance contracts.
Participants in the plan have no rights in the insurance policies. Amounts
deferred under either plan may be paid in a lump sum or in installments, as
selected by the director when making the deferral election.

Each nonmanagement director is also provided with travel accident insurance
of $500,000 while traveling on behalf of Promus and the opportunity to
participate in Promus's standard group health insurance plans. During 1994 the
total cost for these insurance benefits was approximately $1,826 per director
participating in the plans. Each director receiving these benefits incurred
taxable income equal to the cost of the group insurance.

In February 1990, each nonmanagement director in office at that time was
awarded 1,000 shares of restricted stock under the Promus Restricted Stock Plan
which replaced 1,000 shares of Holiday Corporation ("Holiday") restricted stock
awarded in April 1989. Nonmanagement directors who were elected in 1991 and 1992
also received such an award. These awards, which have subsequently been adjusted
for stock splits, vest in equal installments over ten years. If a director who
had prior service on the Holiday Board of Directors retires, he or she will also
receive vesting credit for each full year of such service prior to April 28,
1989. Any new director receives an award of 1,000 restricted shares vesting in
equal installments over ten years.

Each nonmanagement director of Promus may receive Promus Common Stock
pursuant to the Promus Nonmanagement Directors Stock Incentive Plan which, if
approved by the stockholders, is meant to provide additional equity in lieu of
directors fees and thereby more closely align the interests of directors with
stockholders. See "Adoption of Promus Nonmanagement Directors Stock Incentive
Plan."

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EXECUTIVE OFFICER COMPENSATION

Summary of Compensation. The Summary Compensation Table below sets forth
certain compensation information concerning Promus's Chief Executive Officer and
the four additional most highly compensated executive officers.

THE PROMUS COMPANIES INCORPORATED
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S)(2) OPTIONS(3) COMPENSATION(4)
- - ---------------------------- ---- -------- --------- --------------- ---------- ---------- ------------

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Philip G. Satre............. 1994 $425,385 $421,131 36,667 $151,406
President and Chief 1993 345,639 342,183 164,400 108,624
Executive Officer 1992 341,446 191,210 80,859
1994 541,385(5) 530,611 $ 108,772 30,000 428,885
Michael D. Rose............. 1993 509,233 504,141 88,234 240,000 318,807
Chairman of the Board 1992 505,108 282,860 89,968 236,408
Colin V. Reed............... 1994 268,846 220,454 $ 393,750 13,333 47,882
Senior Vice President, 1993 244,231 200,269 24,000 33,675
Corporate Development 1992 171,346 88,819 61,440 20,927
Charles A. Ledsinger, Jr.... 1994 237,123 200,000 10,000 30,968
Senior Vice President 1993 210,576 172,672 63,000 23,782
and Chief Financial 1992 208,731 98,103 15,090
Officer
Ben C. Peternell............ 1994 214,338 176,000 8,000 162,907
Senior Vice President, 1993 194,577 159,553 47,100 122,198
Human Resources and 1992 192,254 88,437 92,935
Communications
</TABLE>

- - ------------

(1) Other Annual Compensation for Mr. Rose includes allocated amounts for
aircraft usage and for household security. Such amounts, respectively, were
as follows: for 1994: $31,570 and $37,468; for 1993: $22,349 and $28,707;
for 1992: $35,600 and $28,800. For the fiscal years 1992-1994, amounts of
Other Annual Compensation for each individual named above (other than Mr.
Rose) aggregated less than (a) 10% of the total annual salary and bonus for
each individual or (b) $50,000 whichever is lower. Accordingly, no such
amounts are included.

(2) The 1993 award of restricted stock to Mr. Reed was 21,000 shares with
vesting in equal annual installments over the period 1994 to 1995. Dividends
will be paid on restricted stock in the same manner and to the same extent
as dividends are paid on other shares of Common Stock. The number of
unvested shares of restricted stock awards held by Mr. Satre, Mr. Reed, Mr.
Ledsinger and Mr. Peternell as of December 31, 1994, was 74,973, 22,497,
25,500 and 30,000 respectively. These shares vested on January 1, 1995. The
market value of unvested restricted stock awards held by Mr. Satre, Mr.
Reed, Mr. Ledsinger and Mr. Peternell as of December 31, 1994, was
$2,314,791, $694,595 $787,313, and $926,250 respectively. Mr. Rose held no
unvested shares of restricted stock at December 31, 1994.

(3) The options shown as granted in 1994 are net of the cancellation of options
that occurred in December 1994. See "--Report of the Human Resources
Committee on Executive Compensation."

(4) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation balances and (b) matching contributions to the
Company's Savings and Retirement Plan. Such amounts, respectively, were as
follows: for 1994: Mr. Satre, $143,098 and $8,308; Mr. Rose, $420,517 and
$8,368; Mr. Reed, $38,882 and $9,000; Mr. Ledsinger, $21,968 and $9,000 and
Mr. Peternell, $153,907 and $9,000; for 1993: Mr. Satre, $99,630 and $8,994;
Mr. Rose, $309,813 and $8,994; Mr. Reed, $24,681 and $8,994; Mr. Ledsinger,
$12,134 and $11,648; and Mr. Peternell, $113,442 and $8,756; for 1992: Mr.
Satre, $72,131 and $8,728; Mr. Rose, $228,214 and $8,194; Mr. Reed, $12,845
and $8,082; Mr. Ledsinger, $6,407 and $8,683; and Mr. Peternell, $84,607 and
$8,328. The Company does not provide a fixed benefit pension plan for its
executives. The amounts set forth above are retirement benefits which are a
function of deferred income voluntarily contributed by the executives.

(5) Mr. Rose has entered into an employment agreement with Harrah's
Entertainment pursuant to which, from the Distribution Date until April 30,
1996, he will spend at least 60% of his time as Chairman of the Harrah's
Entertainment Board and receive, among other things, an annual salary of
$350,000. After April 30, 1996, Mr. Rose will spend approximately 30% to 50%
of his time as Chairman of the Harrah's Entertainment Board and receive,
among other things, an annual salary of $250,000. Mr. Rose has also entered
into an employment agreement with PHC pursuant to which, for a period of
five years from the Distribution Date, he will spend up to 40% of his time
as Chairman of the PHC Board and receive, among other things, an annual
salary of $250,000. See "--Certain Employment Arrangements" and "The
Distribution--Management of PHC--Employment and Severance Agreements."

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<PAGE>
The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during 1994, including information as to the potential realizable value of such
options at assumed annual rates of stock price appreciation for the ten year
option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1994, and for all
Promus stockholders.

THE PROMUS COMPANIES INCORPORATED
OPTION GRANTS IN THE LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE OF ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION OF OPTION TERM (1)
------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(3) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
- - ----------------------- --------- ------------- ------------ ---------- ---- -------------- --------------
Philip G. Satre........ 25,000 6.1% $49.4375 1/11/04 $ - $ 777,274 $ 1,969,766
11,667 2.8% 50.0000 2/26/04 - 366,866 929,710
Michael D. Rose........ 30,000 7.3% 49.4375 1/11/04 - 932,729 2,363,719
Colin V. Reed.......... 13,333 3.2% 49.4375 1/11/04 - 414,536 1,050,516
Charles A. Ledsinger,
Jr.................... 10,000 2.4% 49.4375 1/11/04 - 310,910 787,906
Ben C. Peternell....... 8,000 1.9% 49.4375 1/11/04 - 248,728 630,325
All Stockholders(2).... n/a n/a n/a n/a - 3,116,853,406 7,898,718,486
All Optionees.......... 411,302 100.0% 48.4500(4) various - 12,531,678 31,757,731
All Optionees as a
percent of All
Stockholders Gain..... n/a n/a n/a n/a n/a 0.40% 0.40%
</TABLE>

- - ------------

(1) The dollar amounts under these columns are the result of calculations at
zero percent, and at five percent and 10 percent rates set by the Securities
and Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of Promus's stock price. In the above table,
Promus did not use an alternative formula for a grant date valuation, as
Promus is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.

(2) These amounts represent the appreciated value which common stockholders
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Common Stock outstanding at or near the option grant
dates.

(3) Does not include options that were cancelled in December, 1994. Employees
vest in the right to exercise these options over a four-year period. In
general, major option awards have been granted once a year: Options may also
be granted at other times at the discretion of the Human Resources Committee
based on promotions or similar reasons. See "--Report of the Human Resources
Committee on Executive Compensation" and "Amendments to Promus 1990 Stock
Option Plan" for more information concerning stock option awards.

(4) Represents average exercise price of options granted to all optionees.

The following table sets forth certain information concerning stock option
exercises during 1994 by the executive officers named in the Summary
Compensation Table.

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<PAGE>
THE PROMUS COMPANIES INCORPORATED
AGGREGATED OPTION EXERCISES IN 1994 AND
DECEMBER 31, 1994, OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1994(1) AT DECEMBER 31, 1994(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip G. Satre................... 21,000 $513,188 2,100 177,967 $ 44,187 $ 2,605,685
Michael D. Rose................... - - 33,750 236,250 738,281 3,811,715
Colin V. Reed..................... - - 8,475 90,298 181,734 1,255,039
Charles A. Ledsinger, Jr.......... - - 9,000 64,000 196,875 1,001,249
Ben C. Peternell.................. - - 6,525 48,575 141,672 744,390
</TABLE>

- - ------------

(1) The numbers shown are net of the cancellation of options that occurred in
December 1994. See "--Report of the Human Resources Committee on Executive
Compensation" and "Amendments to Promus 1990 Stock Option Plan" for more
information concerning stock option awards.

CERTAIN EMPLOYMENT ARRANGEMENTS

On February 25, 1994, the Promus Board elected Mr. Satre Chief Executive
Officer of Promus effective April 29, 1994, replacing Mr. Rose in this position.
Mr. Satre also serves as President. Pursuant to an employment agreement with Mr.
Satre, Promus has agreed to employ Mr. Satre as Chief Executive Officer of
Promus from April 29, 1994, until December 31, 1998 at an annual salary of
$450,000, subject to merit increases as may be approved by the Promus HR
Committee. During the term of this employment agreement, Mr. Satre will continue
to be eligible for his current benefits, including eligibility for bonus
compensation and long-term incentive compensation in the form of stock options
and restricted stock awards as may be approved by the Promus HR Committee. The
Promus Board reserves the right to terminate the employment agreement with or
without cause, and Mr. Satre has the right to resign with good reason (as
defined). If the agreement is terminated without cause or if he resigns for good
reason, Mr. Satre will receive two years' salary continuation and his stock
options and any shares of restricted stock will continue in force during this
period of time for vesting purposes. If the agreement is terminated for cause,
his unvested options and any shares of restricted stock will be cancelled and
his salary will end. He will be entitled to the retirement rate for his account
under the Executive Deferred Compensation Plan if he is terminated without cause
or if he resigns for good reason. If a change in control were to occur during
his employment agreement and his employment terminated voluntarily or
involuntarily within two years after the change in control, Mr. Satre would be
entitled to receive the severance payments under his severance agreement (if
then in force) in lieu of the salary and rights under his employment agreement.

On February 25, 1994 the Promus Board approved an employment agreement with
Mr. Rose, replacing an existing agreement. Under the new agreement, Promus
agreed to employ Mr. Rose in a full time capacity as Chairman of the Board,
subject to his election to the Promus Board, until December 31, 1998, at an
annual salary of $550,000, subject to merit increases as may be approved by the
Promus HR Committee. The agreement can be extended on a year to year basis after
December 31, 1998 pursuant to mutual agreement. After April 30, 1996, the Promus
Board may modify his duties to serve as Chairman of the Board at 50% time and
50% salary or to serve in a more limited role with a commensurate lesser salary.
During the term of this employment agreement, Mr. Rose will continue to be
eligible for his current benefits, including eligibility for bonus compensation
and long-term incentive compensation in the form of stock options and restricted
stock awards as may be approved by the

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Promus HR Committee. The Promus Board reserves the right to terminate the
employment agreement at any time with or without cause and Mr. Rose may resign
for good reason (as defined). If the agreement is terminated by the Promus Board
without cause or if he resigns for good reason, his unvested stock options and
any unvested shares of restricted stock held by him will vest at that time and
he will receive two years' salary continuation. If the agreement is terminated
for cause or if he resigns without good reason, his unvested stock options and
any unvested shares of restricted stock held by him will be cancelled and his
salary will end. The agreement further provides that such options and restricted
shares will vest if he retires after April 30, 1996 or on December 31, 1998, if
his employment continues to that date. If a change in control were to occur
during his employment agreement and his employment terminated voluntarily or
involuntarily within two years after the change in control, Mr. Rose would be
entitled to receive the severance payments under his severance agreement (if
then in force) in lieu of the salary and rights under his employment agreement.

After the termination of their employment with Promus, both Mr. Rose and Mr.
Satre will be entitled to receive group insurance benefits at Promus's cost for
their respective lifetimes similar to the benefits provided to other retired
management directors of Promus.

In connection with the proposed Distribution, Mr. Rose's employment contract
with Promus has been modified as follows: From the Distribution Date until April
30, 1996, Mr. Rose will spend at least 60% of his time as Chairman of Harrah's
Entertainment at an annual salary rate of $350,000. From April 30, 1996 until
December 31, 1998, he will spend approximately 30% to 50% of his time as
Chairman of Harrah's Entertainment at an annual salary rate of $250,000. For
periods after April 30, 1996, he will not be eligible for any incentive stock
awards. He also will not be eligible for an annual bonus unless a bonus were to
be approved by the Promus Board acting upon the recommendation of the Chief
Executive Officer. His employment as Chairman of PHC will not be deemed a breach
of his employment contract with Harrah's Entertainment nor of the noncompete
clause in such contract. If Mr. Rose's employment were terminated without cause
or if he resigned for good reason, the two year noncompete covenant in his
employment contract would commence on the termination of his active employment.
Also in connection with the Distribution, Mr. Rose's existing stock options will
be prorated in proportion to the percentage of his salary to be paid by Harrah's
Entertainment and PHC. Pursuant to the adjustment formula approved by the Promus
HR Committee, on the Distribution Date the prorated options will be converted to
an adjusted amount, with an adjusted exercise price, of Harrah's Entertainment
stock options and PHC stock options. See "The Distribution--Relationship Between
PHC and Harrah's Entertainment after the Distribution--Employee Benefits
Allocation Agreement." For a description of Mr. Rose's employment contact with
PHC, see "The Distribution-- Management of PHC--Employment and Severance
Agreements."

Promus has entered into severance agreements with each of the executive
officers named in the Summary Compensation Table above. Each severance agreement
provides for a compensation payment of 2.99 times the average "annual
compensation" paid to such executive for the five preceding calendar years (the
"Promus Compensation Payment"), as well as accelerated payment or accelerated
vesting of any compensation or awards payable to such executive under any
incentive plan of Promus if the executive is terminated subsequent to a change
in control of Promus, as defined in the severance agreements (the "Promus
Accelerated Payments") (collectively, the "Promus Severance Payments"), with
certain exceptions described below. With respect to restricted stock and stock
options, such stock awards vest automatically upon a change of control
regardless of termination of the employee. The "annual compensation" for
purposes of determining the Promus Compensation Payment under the severance
agreement excludes restricted stock vestings and compensation or dividends
related to restricted stock or stock options. A change in control is defined to
occur whenever: (i) any person becomes the beneficial owner of 25% or more of
Promus's then outstanding voting securities regardless of comparative voting
power of such securities, (ii) within a two-year period, members of the Promus
Board at the beginning of such period and approved successors no longer
constitute a majority of such

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board, or (iii) holders of securities entitled to vote thereon approve a merger
or consolidation (with certain exceptions) or a plan of complete liquidation.

The executives are not entitled to the Promus Compensation Payments
subsequent to a change in control if their termination is: (i) by Promus for
cause (as defined), (ii) a result of retirement or disability, or, except for
Mr. Rose and Mr. Satre, (iii) voluntarily and not for good reason (as defined).
In the event that an executive becomes entitled to Promus Severance Payments,
which are subject to the "Excise Tax," the severance agreements provide that
Promus shall pay the executive an additional amount (the "Promus Gross-Up
Payment") such that the net amount retained by the executive after deduction of
any Excise Tax on the Promus Severance Payments and all Excise Tax and other
taxes on the Promus Gross-Up Payment, shall equal the initial Promus Severance
Payments, subject to certain exceptions.

Mr. Rose and Mr. Satre are entitled to the Promus Compensation Payments if,
after a change in control of Promus, such executive's employment terminates
involuntarily or he resigns. The other executives are entitled to the Promus
Compensation Payments subsequent to a change in control of Promus if the
executive's employment is terminated involuntarily or if the executive resigns
with good reason (as defined).

In addition, the severance agreements each provide that in the event of a
potential change in control of Promus (as defined below): (i) Promus will
deposit in escrow a sum of money sufficient to fund the Promus Severance
Payments in the event of a change in control of Promus, and (ii) each executive
will agree to remain in the employ of Promus for a certain period of time. A
potential change in control of Promus is defined to occur whenever (i) Promus
enters into an agreement which would result in a change in control of Promus,
(ii) any person publicly announces an intention to take action which would
result in change of control of Promus, (iii) any person, other than the trustee
of an employee benefit plan of Promus, who is or becomes a beneficial owner of
9.5% of the combined voting power of Promus's then outstanding securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage previously owned on the date of the severance agreement, or (iv) the
Promus Board adopts a resolution to the effect that a potential change in
control of Promus has occurred.

Each severance agreement has a term of one calendar year and is renewed
automatically each year starting January 1 unless Promus gives notice of the
non-renewal of any such agreement by the preceding September 30. Each severance
agreement provides that if a change in control occurs during the original or
extended term of the agreement, then the agreement will automatically continue
in effect for a period of 24 months beyond the month in which the change in
control occurred.

The Promus Compensation Payments and Promus Accelerated Payments,
respectively, that would have been payable to the executive officers named in
the Summary Compensation Table for Promus on January 1, 1995, if a change in
control occurred and if such executives had been terminated as of that date,
would have been approximately: Mr. Satre, $1,554,715 and $4,964,663; Mr. Rose,
$2,262,640 and $4,549,997; Mr. Reed, $807,761 and $2,131,368; Mr. Ledsinger,
$851,605 and $1,985,437; and Mr. Peternell, $809,506 and $1,812,311. Such
Accelerated Payments include the value of any unvested restricted stock, valued
as of December 31, 1994, and any unvested stock options that would accelerate
upon a change in control.

Promus's executive officers participate in the Promus Executive Deferred
Compensation Plan which provides for two alternative interest rates, a
termination rate and a retirement rate. See "-- Compensation of Directors" for
more information concerning these rates. In the event of a change in control, as
defined in the Promus Executive Deferred Compensation Plan, a participant who is
not yet entitled to the retirement rate will receive such rate if his employment
is terminated within a 24 month period after the change in control. Messrs.
Satre, Ledsinger, Reed and Peternell are not yet entitled to the retirement
rate. Consequently, if a change in control as defined in the Promus Executive
Deferred Compensation Plan were to occur, these executive officers will be
entitled to such rate on their Promus Executive Deferred Compensation Plan
account balances if their employment were to terminate within 24 months after
the change in control.

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Promus has established an escrow fund and has deposited insurance policies
and cash proceeds received from insurance policies into the escrow fund. This
escrow fund assures the payment of benefits, as they accrue, to, among others,
the executive officers and nine nonmanagement directors which will be payable
under the Promus Executive Deferred Compensation Plan or other deferred
compensation plans. Upon occurrence of a potential change in control of Promus,
Promus also will place into this escrow fund the severance payments which become
payable to the executive officers and certain other executives only following a
change in control. Promus intends to increase the escrow fund, if necessary, to
assure payment of future deferrals and also has the right to increase the escrow
fund to pay premiums on the insurance policies and interest on policy loans. The
escrow fund is subject to the claims of Promus's creditors in the case of
Promus's insolvency or bankruptcy.

REPORT OF THE PROMUS HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION

The Promus Human Resources Committee is composed entirely of independent
outside directors. The Human Resources Committee is responsible for approving
the compensation of the management directors (Mr. Rose and Mr. Satre), reviewing
the compensation of other executive officers, including the executive officers
named in the Summary Compensation Table, and approving stock awards, including
stock options, for each such officer.

Executive Compensation Policy. Promus's executive compensation policy is
designed to attract and retain high caliber executives and motivate them to
superior performance for the benefit of Promus's stockholders. Under this
policy: (i) salaries are also linked to competitive factors and salary increases
are based on merit, (ii) the annual bonus program is competitively-based and
provides incentive compensation based on Promus's annual financial performance,
and (iii) long-term compensation is tied solely and directly to performance of
Promus's stock over periods of four to five years.

In summary, Promus's executive compensation policy is primarily performance
based, with a large portion of executive compensation at risk. This policy not
only extends to executive officers but also to key managers and professional
staff. Approximately 450 key employees participate in Promus's Stock Option and
Restricted Stock Plans.

The following discussion describes the basic components of executive
compensation in further detail.

Cash Compensation Competitively-Based. Cash compensation for executive
officers (salary and annual bonus) is approximately comparable to the median
ranges of amounts paid to executives who are employed in similar positions in
companies primarily in service and entertainment industries with revenues
regressed to be comparable to Promus's revenues. Various surveys prepared by
national compensation specialists are considered for purposes of company
salaries and cash bonus. There is no specific list of companies that are used to
make the comparison.

Salary. Salaries are reviewed each year and merit increases are based
primarily on (i) an officer's achievement of performance objectives and (ii) the
current salary of the executive within the salary range for his grade level.
Greater weight is normally given to the achievement of objectives than to the
executive's current salary level within the range of his grade level, although
specific weights for each factor have not been established. In addition, salary
can be substantially increased if an executive officer is promoted to a higher
position with greater responsibilities.

The objectives of the Chairman and the Chief Executive Officer are approved
annually by the Human Resources Committee and the full Board. These objectives
vary from year to year but in general relate to such matters as ensuring an
in-depth and skilled organizational structure to operate and develop Promus's
businesses, positioning Promus for further growth and development and achieving
Promus's annual business plan and its various financial goals. The Human
Resources Committee's assessment of the Chairman's and the Chief Executive
Officer's performance is based on a subjective

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review of such officer's performance against these objectives. Specific weights
are not assigned to any particular objective.

The objectives of the other executive officers are approved by the Chief
Executive Officer or the Chairman. These objectives relate to achieving
functional goals and financial objectives within the officer's assigned area of
responsibility. For example, an objective could relate to completion of a
project assigned to that executive's area of responsibility. The Chief Executive
Officer's or Chairman's assessment of the performance of the other executive
officers is based on a subjective review of each officer's performance. Specific
weights are not given to each objective in this assessment.

The Human Resources Committee approves merit salary increases for the
Chairman and the Chief Executive Officer. The Chief Executive Officer or the
Chairman approves merit salary increases for the other executive officers and
such increases are reviewed by the Human Resources Committee. In April 1994, Mr.
Satre was promoted to Chief Executive Officer and his salary was increased to
$450,000. The Chief Executive Officer and the Chairman determined that Promus's
excellent performance as well as competitive factors also warranted significant
merit increases for the other executive officers.

Annual Incentive Bonus. Under Promus's annual incentive bonus plan, at the
beginning of each year the Human Resources Committee assigns a corporate bonus
objective for Promus's executive officers that is a targeted level of pre-tax
earnings for Promus. The current target is the pre-tax earnings contained in
Promus's annual plan. The target is calculated before interest expense,
extraordinary items, property transactions and minority interests, and further
does not consider variances from budgeted development expenses.

A target bonus is established for each executive officer that will result in
the payment of a specified percentage of the officer's salary if the pre-tax
earnings objective is achieved. This percentage of salary increases or decreases
on a matrix (the "Bonus Matrix") in relation to the pre-tax earnings objective.
If 100% of the pre-tax earnings objective is achieved, the target bonus for the
Chief Executive Officer is 60% of his base salary. For performance above 100% of
the pre-tax earnings objective, additional bonus, up to a maximum bonus of 120%
of such executive officer's base salary, can be awarded. For the other executive
officers, the target bonus for achieving 100% of the pre-tax earnings target
ranges from 45% to 50% of their base salary. This is increased on a graduated
scale to a maximum bonus of 90% to 100% of their base salary. For the plan year
1995, these maximum amounts will be increased for certain executive officers
under the Key Executive Officer Annual Incentive Plan upon approval of such plan
by the Company's stockholders. See "Approval of Promus Key Executive Officer
Annual Incentive Plan."

After the end of the plan year, the Human Resources Committee determines the
extent to which the targeted corporate pre-tax earnings objective has been
achieved. A bonus pool for all corporate management employees in the bonus plan
is then established by multiplying (a) an amount equal to the specific
percentage of salary hypothetically payable to each individual in the plan based
on the objective achieved, by (b) each individual's salary. These amounts are
then added to create a corporate bonus pool. If the Human Resources Committee
determines that a minimum pre-tax earnings target was not achieved, then no
bonus pool is established and no bonuses are payable unless an exception were to
be approved by the Human Resources Committee because of unusual circumstances.
No such exceptions to the corporate plan have been approved in the last three
years. If an exception were approved, it would be a subjective decision by the
Human Resources Committee.

The bonuses payable to the Chief Executive Officer and the Chairman of the
Board from the bonus pool is the percentage of salary that is payable based
solely on the result achieved under the Bonus Matrix. As a result, their annual
bonuses are tied solely to Promus's financial performance. The bonuses of the
other executive officers depend on the percentage of salary payable on the Bonus
Matrix (company financial performance) as well as an assessment of their
achievement of personal objectives (personal performance). The personal
objectives for bonuses are the same objectives that are evaluated for purposes
of merit salary increases as discussed above. The assessment of personal
objectives is a

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subjective evaluation by the Chief Executive Officer or the Chairman. As a
result of the assessment of personal objectives, the bonuses of an executive
officer (other than the Chairman and the Chief Executive Officer) may be higher
or lower than shown on the Bonus Matrix. However, the total bonus pool
established for all corporate employees eligible for the plan cannot be
exceeded.

For 1994, the Human Resources Committee determined that Promus exceeded its
pre-tax earnings objective and thus the bonuses for 1994 performance that were
paid to executive officers were greater than target bonuses.

In February 1995, the Human Resources Committee approved the Key Executive
Officer Annual Incentive Plan which is being submitted to the stockholders for
approval. This plan will apply, starting for the calendar year 1995, to certain
executive officers selected by the Human Resources Committee and is intended to
comply with Section 162(m) of the Code concerning the $1 million dollar limit on
executive compensation. See "Adoption of Promus Key Executive Officer Annual
Incentive Plan."

Stock Awards. Awards of stock options and restricted stock are specifically
approved by the Human Resources Committee for each executive officer and other
plan participants and are granted in the sole discretion of the Human Resources
Committee. Based on an assessment of competitive factors, the Human Resources
Committee determines an award that is suitable for providing an adequate
incentive for both performance and retention purposes. Awards are currently
granted with a vesting period extending four years from the initial grant date.
The Human Resources Committee may grant a combination of restricted stock and/or
stock options to officers and other key employees.

Each executive officer is granted a stock award that will give such officer
an estimated dollar value of stock compensation vesting each year which is equal
to a specific percentage of the officer's salary. This percentage increases in
line with the higher grade level of the officer. The Chief Executive Officer's
annual stock compensation value is currently targeted at 100% of salary. The
dollar value of the award is based on estimated annual increases in the market
value of the Promus Common Stock in the future to reach the targeted level of
compensation. There is no certainty or assurance that such increases will occur.
The applicable estimated stock compensation, is determined for each executive
after the Human Resources Committee reviews the market-level equity incentive
awards granted to comparably-ranked executives in service and entertainment
related companies. Various surveys prepared by national compensation specialists
are considered for purposes of this review. No specific list of companies is
used to make the comparison.

For the past several years, it was the Human Resources Committee's practice
to approve awards each year for executive officers. This resulted in stock
options being granted annually at new option prices each year. For grants in
1994, the Human Resources Committee re-evaluated the need to provide longer term
incentives for its executive officers given the intense competitive environment
for executive talent in which Promus operated. Accordingly, the Human Resources
Committee decided to grant stock option awards in January 1994 to Promus's
executive officers and a limited number of other key executives that combined,
in one award, the shares that would in all likelihood have been awarded during
the three years 1994, 1995 and 1996. Such a three year award was made in January
1994 to each of the executive officers with an option price set at the current
market price on the grant date. An additional three year award was made to Mr.
Satre in February 1994 in connection with his promotion to Chief Executive
Officer. The options under the three year awards became exercisable in annual
installments of various amounts starting January 1, 1996 and extending to
January 1, 2000.

In December 1994, the Human Resources Committee determined that the
three-year awards made earlier in 1994 did not appropriately align the
compensation of key executives with the interests of Promus's shareholders. In
addition, in view of the retention purposes of the Plan, the Human Resources
Committee was concerned about the option price of the three year award in
relation to the market price of the Common Stock in December 1994. Therefore, to
insure the retention of key executives in order that Promus's competitive
strength was not compromised, the Human Resources Committee decided to return to
the past practice of making annual grants to certain employees. As a part of
this decision, the

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Human Resources Committee decided to cancel two-thirds of the three-year awards
granted to such employees, subject to each employee's consent. Each employee
consented to the cancellation. A total of 654,718 options for all officers and
key managers were cancelled in December 1994. The options cancelled for Mr. Rose
covered 60,000 shares and the options cancelled for Mr. Satre covered 73,333
shares. The shares which were subject to such cancelled options are available
for re-grant under the Plan. On January 5, 1995, the Human Resources Committee
implemented its decision to return to annual grants and approved one year grants
for all eligible employees including Promus's executive officers. Pursuant to
such approval, a total of 627,239 options were granted to those employees whose
options were cancelled in December 1994, and 135,810 options were granted to
other key employees. Pursuant to this Human Resources Committee action, Mr.
Satre was awarded 59,000 stock options and Mr. Rose was awarded 49,000 stock
options under the normal annual award procedures previously followed by the
Human Resources Committee. Under these procedures, the grants were valued
utilizing a base value equal to the market value of the Promus Common Stock on
the award date. The exercise price of the annual stock option awards granted by
the Human Resources Committee on January 5, 1995 was the market price of Promus
Common Stock on that date. These awards become exercisable in four equal annual
installments starting January 1, 1996.

The amount of a stock option award is not dependent on past corporate
performance nor on the amount of options or restricted stock previously granted
to an executive officer. The actual value of the stock compensation vesting each
year is dependent on the market value of Promus Common Stock. For executive
officers, Promus has no other long-term incentive plans under which future
awards will be made, so that long-term stock market performance is the sole
determinant of long-term incentive compensation.

Policy Concerning Tax Deductibility. The Human Resources Committee's policy
with respect to qualifying compensation paid to its executive officers for tax
deductibility purposes is that executive compensation plans will generally be
designed and implemented to ensure full tax deductibility. However, the Human
Resources Committee reserves the right to approve the payment of non-deductible
compensation to its executive officers when the Human Resources Committee deems
such compensation necessary for competitive reasons or to attract or retain a
key executive, or where achieving full tax deductibility would be considered
disadvantageous to the best interests of Promus. The Human Resources Committee
has approved a proposed Key Executive Officer Annual Incentive Plan that is
being submitted to the stockholders for approval. This Plan is intended to
comply with Section 162(m) of the Code so that annual bonuses will be fully tax
deductible for Promus.

Chief Executive Officer's Compensation. Mr. Satre's base salary is based on
his rights under his employment agreement. Under his agreement, he is entitled
to merit salary increases. These merit increases are determined in accordance
with the procedures and guidelines described above. Promus had excellent
performance in 1994, exceeding its targeted pre-tax earnings goal for the year.
Mr. Satre's bonus for 1994 was based on this financial performance. Mr. Satre
was awarded stock options in 1994. These options are described in the table
titled "Option Grants in Last Fiscal Year," above, and were awarded in
accordance with the Human Resources Committee's policies as described above.

Human Resources Committee
Walter J. Salmon (Chairman)
James L. Barksdale
James B. Farley
Joe M. Henson

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<PAGE>
PERFORMANCE OF PROMUS COMMON STOCK AND DIVIDENDS

Promus paid no dividends with respect to Promus Common Stock for the fiscal
years ended December 31, 1993 and 1994. See "The Distribution--Certain Special
Considerations--Dividend Policies." Set forth below is a line graph comparing
the total cumulative return of Promus's Common Stock to (a) the Standard &
Poor's 500 Stock Index (the "S&P 500 Index"), and (b) a group of peer issuers
with similar businesses. See Note (1). The graph assumes reinvestment of
dividends. Performance of Promus's Common Stock includes the performance of
Holiday common stock prior to February 7, 1990. See Note (2).

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
FOR PROMUS(2), THE S&P 500 INDEX AND A PEER GROUP(1)

1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----

THE PROMUS
COMPANIES
INCORPORATED 100 44 65 163 406 274
- - -------------------------------------------------------------------
PEER GROUP 100 57 79 102 128 119
- - -------------------------------------------------------------------
S&P 500 100 97 126 136 150 152
- - -------------------------------------------------------------------

* $100 Invested on 12/31/89 in Stock or Index including
reinvestment of dividends.
Fiscal years ending December 31.

- - ------------

(1) The Peer Group companies consist of Bally Manufacturing Corp., Caesars
World, Inc., Circus Circus Enterprises, Inc., Hilton Hotels Corp., La Quinta
Inns, Inc., Marriott International, Mirage Resorts, Inc., and Showboat Inc.

(2) The line graph for Promus Common Stock assumes that $100 was invested in the
common stock of Holiday on December 31, 1989. On February 7, 1990, Promus
Common Stock was spun off on a share-for-share basis to the stockholders of
Holiday. Immediately after the spin-off, Bass PLC acquired Holiday's Holiday
Inn hotel division by means of a merger between Holiday and a subsidiary of
Bass PLC. In the merger Holiday stockholders received an approximate
quarter-share of Bass ADRs for each Holiday share owned, and their Holiday
shares were cancelled. The Promus Board thereafter declared a cash dividend
of $30 per share of Promus stock ($10 per share when adjusted for the Stock
Splits). The line graph assumes reinvestment in shares of Promus Common
Stock of both the special cash dividend and the market value on February 8,
1990 of the Bass ADRs received in the merger (approximately $4.39 per share
of Holiday common stock). In connection

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with these transactions, the executive officers and directors of Holiday
became the senior management and directors of Promus. Because of the
acquisition of the Holiday Inn business by Bass PLC, the performance of
Holiday's common stock prior to the merger is not necessarily indicative of
what the performance of Promus Common Stock might have been during such
period.

CERTAIN TRANSACTIONS

Mr. Ronald Terry, a director of Promus, is Chairman of First Tennessee
National Corporation, the parent company of First Tennessee. First Tennessee is
one of the lending banks under a loan agreement that Promus has with several
banks (the "Bank Facility"). Pursuant to the Bank Facility, First Tennessee has
committed to loan to Embassy $25,000,000, representing a 3.846% share of the
total commitment covered by the Bank Facility. As of February 28, 1995,
$17,692,308 of this $25,000,000 commitment had been funded and $1,512,880 had
been provided in the form of unfunded letters of credit. In connection with this
commitment, First Tennessee received fees of $167,434 during 1994.

Also, First Tennessee acted as the merchant bank for Mastercard and Visa and
received fees of $34,000 during 1994 and $6,948 during January and February,
1995 for providing this service to Promus and its direct and indirect
subsidiaries. In addition, the total discount received by First Tennessee in
connection with credit card merchant processing for Promus and its subsidiaries
in 1994 was $3,358,000 and in January and February, 1995 was $567,336. Certain
direct and indirect subsidiaries of Promus and hotels managed by such entities
maintained deposit accounts with First Tennessee during 1994. The average ledger
balance during 1994 was $921,810 and the ledger balance on December 31, 1994,
was $620,601; the average ledger balance during January and February, 1995, was
$638,481 and the ledger balance on February 28, 1995 was $589,620. Deposit
account service fees paid to First Tennessee in excess of the earning credit
assigned to these accounts were $173,849 during 1994 and $27,040 during January
and February, 1995. First Tennessee also received fees of approximately $4,400
on other miscellaneous transactions with Promus in 1994.

Ms. Susan Clark-Jackson, a director of Promus, is Senior Group President,
Pacific Newspaper Group, Gannett Co., Inc. From January 1, 1994 to February 28,
1995, Promus and its subsidiaries paid Gannett's Pacific Newspaper Group
$890,251 for newspaper advertising.

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AMENDMENT TO THE PROMUS CERTIFICATE OF INCORPORATION
REGARDING REDEMPTION OF COMMON STOCK

The Promus Certificate currently entitles Promus to redeem the shares of any
stockholder of Promus to the extent necessary, in the judgment of the Promus
Board, to protect any license or franchise held by Promus or any of its
majority-owned subsidiaries. Pursuant to a partnership agreement to which a
Promus subsidiary is a party in connection with the New Orleans casino
facilities that are currently under construction, Promus is required to amend
the Promus Certificate to allow the redemption of any shares of Promus Common
Stock in situations that are not expressly provided for in the current Promus
Certificate. The purpose of this redemption procedure is to enable Promus and
its affiliates and other companies in which Promus has any ownership interest to
further protect their gaming and other governmental licenses by providing for
redemption of shares of Promus Common Stock in those situations.

Accordingly, subject to stockholder approval, the proposed amendment (the
"Redemption Certificate Amendment") will amend Section E of Article Fourth of
the Promus Certificate to permit the redemption of such shares, in the judgment
of the Promus Board, in the following additional circumstances:

(i) if a stockholder of Promus is determined by any gaming regulatory
agency to be unsuitable, is denied a license or has a license suspended or
revoked;

(ii) to protect any license held by any of Promus's affiliates, as
defined (which includes entities in which Promus owns less than a majority
interest) or any entity in which Promus or such affiliate is an owner; and

(iii) to avoid any regulatory sanctions against Promus or any of its
affiliates or such other entities.

The Redemption Certificate Amendment contains certain other changes related
to the above provisions. The foregoing description of the Charter Amendment is
qualified in its entirety by reference to the Charter Amendment which is
attached to this Proxy Statement as Annex V.

The Redemption Certificate Amendment requires the affirmative vote of the
holders of at least a majority of the outstanding shares of Promus Common Stock
regardless of whether the holders of such shares are present at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING AMENDMENT TO THE
PROMUS CERTIFICATE.

ADOPTION OF PROMUS KEY EXECUTIVE OFFICER
ANNUAL INCENTIVE PLAN

The proposed Promus Key Executive Officer Annual Incentive Plan (the "Promus
Key Executive Incentive Plan") is an annual bonus plan designed to provide
certain senior executives with incentive compensation based upon the achievement
of pre-established performance goals. Executive officers at the corporate senior
vice president level or above may be eligible for the Promus Key Executive
Incentive Plan. Prior to, or at the time of, establishment of the performance
objectives for a calendar year, the Promus Human Resources Committee will
approve the specific executive officers who will participate in the Promus Key
Executive Incentive Plan that year. Subject to stockholder approval of the
Promus Key Executive Incentive Plan, for the year 1995 it is expected that
Messrs. Rose, Satre and Reed will be selected to participate.

The Promus Key Executive Incentive Plan is designed to comply with Section
162(m) of the Code which limits the tax deductibility by Promus of compensation
paid to officers named in the compensation tables of the Proxy Statement to
$1,000,000. Compensation paid pursuant to a plan approved by

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stockholders that meets the requirements of Section 162(m) is exempted from this
limitation and is fully deductible. Because Promus's current annual bonus plan
for its executive officers and other key employees does not meet all the
requirements of this legislation, the Promus HR Committee has approved the
Promus Key Executive Incentive Plan for submission to the stockholders in order
to maintain the full deductibility of compensation paid to executive officers.
In order for the awards to qualify as performance-based compensation for
purposes of Section 162(m) of the Code, the plan is also being submitted for
approval of the holders of a majority of the shares of Promus Common Stock
present in person or represented by proxy at the Annual Meeting.

Under the Promus Key Executive Incentive Plan, prior to March 30 of each
year the Promus HR Committee will approve performance goals including specific
performance objectives for that year. The objectives may include any one or more
of the following corporate business criteria for the year (or a combination of
any of these criteria): pre-tax income, operating income, cash flow, earnings
per share, return on equity, return on average invested capital, a division's
operating income or a division's opened units. These criteria will be determined
in accordance with GAAP unless certain exceptions are approved by the Promus HR
Committee as further explained below.

At or after the end of a plan year, the Promus HR Committee will certify
achievement of the objectives in writing based on Promus's performance during
the year. When establishing objectives and approving the achievement of
objectives, the Promus HR Committee will (unless an exception is pre-approved as
discussed below) ignore extraordinary items, minority interests, property
transactions, changes in accounting standards and losses or gains arising from
discontinued operations. The Promus HR Committee may, in any year, include
property transactions and/or discontinued operations (either specifically or
generally or both) and may further include or exclude any specified interest
expense items, corporate expense items and/or development expense items when
determining the pre-established objectives.

The actual results of the property transactions and/or discontinued
operations that are included in the objectives will then be included, in
accordance with GAAP, in the calculation of the achievement of the objectives.
Similarly, any included or excluded items of interest expense, corporate
expense, and/or development expense will be included or excluded, as the case
may be, in the calculation of achievement of the objectives. If the objectives
approved by the Promus HR Committee include operations or businesses (including
those being accounted for as discontinued operations) that are subsequently
spun-off or disposed of during the plan year, the objectives and the results
will be appropriately adjusted to exclude such operations or businesses.

The actual award for a participant will be determined by multiplying the
participant's eligible earnings by the percentage adjacent to a points column on
tables or matrices that have been approved by the Promus HR Committee prior to
March 30 of the plan year. No award will exceed 200% of an individual's eligible
earnings as adjusted. The maximum per participant award under the plan in any
year is $1,000,000. The Promus HR Committee will have the discretion to pay an
award that is lower than the calculated award.

Eligible earnings means a participant's annual base salary, including any
deferrals of such salary, as in effect on the date the performance objectives
are established by the Promus Human Resources Committee.

Approved awards will be paid by March 15 of the year after the plan year to
which such payment relates, unless the participant elects to defer such payment
pursuant to the terms of a Promus deferred compensation plan. Awards that are
otherwise payable to a participant who is no longer an employee will be
prorated, or the individual will be ineligible for an award, pursuant to
specified rules in the Promus Key Executive Incentive Plan. The participant will
recognize ordinary taxable income upon receipt of payments under the Promus Key
Executive Incentive Plan. The previous sentence is a brief summary of the tax
consequences relating to this plan, it does not describe state or local tax
consequences, and it is not intended to be complete.

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<PAGE>
Since the Promus Key Executive Incentive Plan requires objectives to be set
and participants to be selected for each year, it is not determinable what
benefits would have been received by or allocated to any executive officer if
the Promus Key Executive Incentive Plan had been in effect for 1994.

Amendments can be made to the Promus Key Executive Officer Incentive Plan
that can increase the cost of the plan to Promus and can alter the allocation of
benefits as between executive officers, employees, and directors. Such
amendments can be made without stockholder approval, except that such approval
may be required under Section 162(m) of the Code. The Promus Key Executive
Officer Annual Incentive Plan can be amended in a manner not inconsistent with
its purpose or as necessary to comply with applicable law and, to the extent
required by Section 162(m) of the Code, any changes to such plan are subject to
stockholder approval.

The foregoing description of the Promus Key Executive Incentive Plan is
qualified in all respects by the actual provisions of such plan which is
attached to this Proxy Statement as Annex VIII.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROMUS KEY
EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN.

ADOPTION OF PROMUS NONMANAGEMENT DIRECTORS
STOCK INCENTIVE PLAN

GENERAL

Nonmanagement directors currently receive cash fees for their service as
directors of Promus. For 1994, these cash fees averaged $37,875 for each
director who served for a full year. Each director also receives specified
shares of restricted stock vesting over ten years.

The Promus Human Resources Committee has evaluated the system of cash
remuneration for nonmanagement directors and determined that it would be
appropriate to modify their cash compensation to provide an additional equity
incentive and thereby more closely align the interests of directors with
stockholders.

Accordingly, subject to stockholder approval, the Promus Human Resources
Committee has adopted the Promus Nonmanagement Directors Stock Incentive Plan
(the "Promus Nonmanagement Directors Stock Incentive Plan"). Under the Promus
Nonmanagement Directors Stock Incentive Plan, a director will automatically
receive 50% of his annual director fees in Harrah's Entertainment Common Stock
starting with fees for the year of service commencing with the Harrah's
Entertainment annual stockholders meeting in 1996. The grants would be made
every three months, starting May 1, 1996. Each grant for a three month grant
period would be an amount of stock, valued on the grant date, equal in value to
50% of the fees that the director earned during the previous three month grant
period (or 100% of the fees if the director elected to receive the remaining 50%
of fees in stock). The share value shall be the average of the high and low
price of the Promus Common Stock based upon its consolidated trading as
generally reported for the principal securities exchange on which the Promus
Common Stock is listed. The shares that are granted could not be disposed of for
six months after the grant.

In accordance with the plan, each director may elect to receive the
remaining fifty percent of his director fees in PHC Common Stock. Such election
must be made prior to the commencement of the first grant period to which such
election applies and such election shall be irrevocable. Individuals who are
nominated to become nonmanagement directors may make such election after such
nomination but prior to the time that they are elected to the Board.

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his termination of service. If a director terminates service during a Three
Month Grant Period, the grant of shares will be pro-rated and paid upon the
termination of service. If any dividends or other distributions are paid on
Harrah's Entertainment Common Stock during a deferral period, such amounts will
be converted to rights to Harrah's Entertainment Common Stock and such stock
will be issued to the director after termination of services as described in the
plan.

The following table sets forth the amounts that would have been received by
the persons shown in the table if the Promus Nonmanagement Directors Stock
Incentive Plan had been in effect during 1994.

1994 NEW PLAN BENEFITS

<TABLE>
<CAPTION>
PROMUS NONMANAGEMENT DIRECTORS
INCENTIVE PLAN
------------------------------------
<S> <C> <C>
NUMBER OF UNITS
(SHARES OF
NAME AND POSITION DOLLAR VALUE($) COMMON STOCK)
- - ---------------------------------------------------------- --------------- ---------------
Philip G. Satre........................................... -- --
President and Chief Executive Officer
Michael D. Rose........................................... -- --
Chairman of the Board
Colin V. Reed............................................. -- --
Senior Vice President, Corporate Development
Charles A. Ledsinger, Jr.................................. -- --
Senior Vice President and Chief Financial Officer
Ben C. Peternell.......................................... -- --
Senior Vice President, Human Resources and
Communications
Non-Executive Director Group.............................. $ 307,249(1) 4,709(1)
Non-Executive Officer Employee Group...................... -- --
</TABLE>

- - ------------

(1) These amounts are based on grants that would have been made in lieu of 50%
of director fees on February 1, May 1, August 1 and November 1, 1994 using
closing prices for Promus Common Stock on those dates and the fees that were
paid for the three months prior to such dates. This also assumes none of the
directors elected the additional 50% of stock in lieu of fees. The amount of
shares resulting from such an election is not determinable since this is an
individual decision by each director. Nine nonmanagement directors would
have been eligible for the plan if the plan were in effect for 1994. It is
anticipated that approximately the same number will be eligible to
participate when the plan commences in 1996.

Amendments can be made to the Promus Nonmanagement Directors Stock Incentive
Plan that can increase the cost of the plan to Promus. Such amendments can be
made without stockholder approval except as such approval may be required under
Rule 16b-3 of the Exchange Act. Rule 16b-3 of the Exchange Act requires
stockholder approval of an amendment to a stock plan that benefits directors and
officers if the amendment materially (a) increases benefits to participants, (b)
increases shares which may be issued under the plan, or (c) modifies the
eligibility requirements of the plan. In addition, the provisions of stock plans
that deal with eligibility and benefits for non-employee directors cannot be
amended more than once every six months other than to comply with changes in
Federal law or regulations.

GENERAL FEDERAL INCOME TAX CONSEQUENCES

The director will recognize ordinary taxable income six months after the
grant is made based on the value of the stock at that time unless the director
files an "83(b)" election whereby the director can

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elect to be taxed on the date of the grant. If the stock grant is deferred by
the director, the grant will not be taxable until the director terminates
service.

The foregoing description of the Promus Nonmanagement Directors Stock
Incentive Plan is qualified in all respects by the provisions of such plan which
is attached to this Proxy Statement as Annex IX.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROMUS
NONMANAGEMENT DIRECTORS STOCK INCENTIVE PLAN.

APPOINTMENT OF AUDITORS

Subject to stockholder approval, the Promus Board, acting on the
recommendation of its Audit Committee, has appointed Arthur Andersen LLP, a firm
of independent public accountants, as auditors, to examine and report to
stockholders on the consolidated financial statements of Promus and its
subsidiaries for fiscal year 1995. Embassy, as sole stockholder of PHC, has
approved the PHC Board's appointment of Arthur Andersen LLP to act as PHC's
independent auditors for fiscal year 1995. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting and will be given an opportunity to
make a statement. They will be available to respond to appropriate questions.

The action of the Promus Board in appointing Arthur Andersen LLP as Promus's
auditors for fiscal year 1995 is subject to ratification by an affirmative vote
of the holders of a majority of shares of Promus Common Stock present in person
or represented by proxy at the Annual Meeting.

THE BOARD OF DIRECTORS OF PROMUS UNANIMOUSLY RECOMMENDS A VOTE FOR SUCH
APPOINTMENT.

OTHER MATTERS AT THE MEETING

The Board of Directors does not know of any matters to be presented at the
meeting other than those mentioned in this Proxy Statement. If any other matters
are properly brought before the meeting, it is intended that the proxies will be
voted in accordance with the best judgment of the person or persons voting such
proxies.

STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING

Any stockholder who meets the requirements of the proxy rules under the
Exchange Act may submit to the Board of Directors proposals to be considered for
submission to the stockholders at the Promus 1996 Annual Meeting. Any such
proposal must comply with the requirements of Rule 14a-8 under the Exchange Act
and be submitted in writing by notice delivered or mailed by first-class United
States mail, postage prepaid, to the Corporate Secretary, The Promus Companies
Incorporated, 1023 Cherry Road, Memphis, Tennessee 38117, and must be received
no later than December 28, 1995. Any such notice shall set forth: (a) the name
and address of the stockholder and the text of the proposal (including the
information required by the Promus Bylaws) to be introduced; (b) the number of
shares of stock held of record, owned beneficially and represented by proxy by
such stockholder as of the date of such notice; and (c) a representation that
the stockholder intends to appear in person or by proxy at the meeting to
introduce the proposal specified in the notice. The chairman of the meeting may
refuse to acknowledge the introduction of any stockholder proposal not made in
compliance with the foregoing procedures. In addition, Promus's Bylaws provide
for notice procedures to recommend a person for nomination as a director and to
propose business to be considered by stockholders at a meeting.

114
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents or portions of documents filed by Promus with the
Securities and Exchange Commission are incorporated by reference herein:

1. Annual Report on Form 10-K for the fiscal year ended December 31,
1994, as amended by the Form 10-K/A filed with the Securities and Exchange
Commission on April 21, 1995.

All documents subsequently filed by Promus pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date
of this Proxy Statement and prior to the date of the Annual Meeting or any
adjournment thereof shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the date of filing of such
documents.

FORM 10-K ANNUAL REPORT

Any stockholder who desires a copy of Promus's Annual Report on Form 10-K
filed with the Securities and Exchange Commission may obtain a copy (excluding
exhibits) without charge by written or oral request to the Corporate Secretary,
Promus, 1023 Cherry Road, Memphis, Tennessee 38117, (901) 762-8600. Promus will
send such copy by first class mail or other equally prompt means within one
business day of receipt of such request. A charge equal to the reproduction cost
will be made if the exhibits are requested.

INDEX OF DEFINED TERMS

PAGE
----------
Acquiring Person................. 75
Additional Proposals............. 2
Annual Meeting................... 1
Annual Meeting Date.............. 1
Annual Meeting Record Date....... 2
Asset Transfers.................. 4
Bank Facility.................... 109
Base Rate........................ 35
Bonus Matrix..................... 105
Business Combinations............ 79
Business Procedure............... 78
Casino Business.................. 2
Code............................. 5
Commission....................... 23
Company.......................... 1
Consent Record Date.............. 36
Consent Solicitation............. 5
Continuing Directors............. 75
Declaration Date................. 19
Deferred Compensation Assumption
Agreements...................... 67
DGCL............................. 27
Director Liability and
Idemnification Provisions....... 80
Disinterested Directors.......... 79
Disqualifying Disposition........ 65, 84
Distribution..................... 1
Distribution Agent............... 3
Distribution Agreement........... 28
Distribution Date................ 2
Distribution Proposals........... 1
PAGE
----------
Distribution Record Date......... 3
8 3/4% Notes..................... 5
Embassy.......................... 2
Embassy Bank Credit Facility..... 5
Embassy Distribution............. 2
Employee Benefits Allocation
Agreement....................... 29
Exchange Act..................... 23
Excise Tax....................... 71
Extendible Revolver.............. 5
Fair Price Provision............. 79
First Tennessee.................. 72
Five Year Revolver............... 4
Form 10 Registration Statement... 23
GAAP............................. 69
Harrah's Entertainment........... 2, 12
Harrah's Entertainment Board..... 7
Harrah's Entertainment Bylaws.... 6
Harrah's Entertainment
Certificate..................... 6
Harrah's Entertainment Common
Stock........................... 12
Harrah's Entertainment
Employees....................... 29
Harrah's Entertainment S&RP...... 30
Holiday.......................... 98
Hotel Business................... 2
Interested Stockholder........... 79
IRS.............................. 21
Lodge............................ 53
MFS.............................. 93
MONY............................. 112
NationsBank...................... 4

115
<PAGE>

PAGE
----------
1994 Promus 10-K................. 8
Nomination Procedure............. 78
Noncompetition Agreement......... 33
Notes............................ 24
Opinion.......................... 21
PHC.............................. 1
PHC Accelerated Payments......... 71
PHC Bank Credit Facilities....... 4
PHC Board........................ 6
PHC Bylaws....................... 6
PHC Certificate.................. 6
PHC Common Stock................. 2
PHC Compensation Payment......... 71
PHC Deferred Compensation Plan... 31
PHC Employees.................... 29
PHC ESOP......................... 62
PHC Executive Deferred
Compensation Plan............... 31
PHC Gross-Up Payment............. 71
PHC Key Executive Incentive
Plan............................ 68
PHC Nonmanagement Directors Stock
Incentive Plan.................. 58
PHC Preferred Stock.............. 74
PHC Restricted Stock Plan........ 31
PHC Rights....................... 2
PHC Rights Agreement............. 75
PHC S&RP......................... 30
PHC Severance Agreements......... 71
PHC Severance Payments........... 71
PHC Special Stock................ 74
PHC Stock Option Plan............ 31
Post-Distribution Harrah's
Entertainment Share Price....... 32
Post-Distribution PHC Share
Price........................... 66
Pre-Distribution Promus Share
Price........................... 32
Promus........................... 1
Promus Accelerated Payments...... 102
Promus Board..................... 2
Promus Bylaws.................... 6
Promus Certificate............... 6
Promus Common Stock.............. 2
Promus Compensation Payment...... 102
Promus Deferred Compensation
Plan............................ 30
PAGE
----------
Promus ESPP...................... 30
Promus Executive Deferred
Compensation Plan............... 30
Promus Gross-Up Payment.......... 103
Promus HR Committee.............. 1
Promus Key Executive Incentive
Plan............................ 110
Promus Nonmanagement Directors
Stock Incentive Plan............ 112
Promus Restricted Stock Plan..... 30, 87
Promus S&RP...................... 30
Promus Severance Payments........ 102
Promus Stock Option Plan......... 30, 82
Proposal One..................... 1
Proposal Two..................... 1
Proposal Three................... 1
Proposal Four.................... 1
Proposal Five.................... 1
Proposal Six..................... 1
Proposal Seven................... 1
Proposal Eight................... 1
Proposal Nine.................... 1
Proposal Ten..................... 2
Proposal Eleven.................. 2
Proposal Twelve.................. 2
Proposal Thirteen................ 2
Proposal Fourteen................ 2
Proposals........................ 2
Purchase Price................... 75
Redemption Certificate
Amendment....................... 110
RevPAR/S......................... 43
Rights Distribution Date......... 75
S & P 500 Index.................. 108
Securities Act................... 23
Series A Stock................... 75
Stock Acquisition Date........... 75
Tax Sharing Agreement............ 32
10 7/8% Notes.................... 5
three month grant period......... 70
Trademark Assignment Agreement... 33
Triggering Events................ 76
Unit............................. 75
Voting Stock..................... 79
Wolfensohn....................... 18

BY ORDER OF THE BOARD OF DIRECTORS

/s/ E. O. Robinson, Jr.

E. O. Robinson, Jr.
Corporate Secretary

116
<PAGE>
INDEX TO FINANCIAL STATEMENTS

The following combined financial statements of Promus Hotel Corporation and
the related report of independent public accountants are filed as part of this
Proxy Statement.

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Report of Independent Public Accountants.............................................. F-2

Combined Balance Sheets as of December 31, 1994 and 1993.............................. F-3

Combined Statements of Income for the Fiscal Years Ended December 31,
1994, 1993 and 1992................................................................. F-4

Combined Statements of Cash Flows for the Fiscal Years Ended December 31,
1994, 1993 and 1992................................................................. F-5

Notes to Combined Financial Statements................................................ F-6
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Promus Companies Incorporated:

We have audited the accompanying combined balance sheets of Promus Hotel
Corporation (a Delaware corporation) and subsidiaries (PHC--See Note 1) as of
December 31, 1994 and 1993, and the related combined statements of income and
cash flows for each of the three years ended December 31, 1994. These financial
statements are the responsibility of PHC's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PHC as of December 31, 1994
and 1993 and the results of its operations and its cash flows for each of the
three years ended December 31, 1994, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Memphis, Tennessee,
March 2, 1995.

F-2
<PAGE>
PROMUS HOTEL CORPORATION
COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................ $ 2,222 $ 3,653
Receivables, including notes receivable of $66 and $231 less
allowance for doubtful accounts of $1,270 and $1,611............... 18,148 15,540
Deferred income taxes (Note 6)....................................... 2,844 2,859
Prepayments.......................................................... 528 700
Supplies............................................................. 1,095 1,274
Other................................................................ 728 233
-------- --------
Total current assets............................................. 25,565 24,259
-------- --------
Land, buildings and equipment
Land................................................................. 60,025 63,774
Buildings and improvements........................................... 237,044 238,373
Furniture, fixtures and equipment.................................... 113,682 105,806
-------- --------
410,751 407,953
Less: accumulated depreciation....................................... (88,611) (71,252)
-------- --------
322,140 336,701
Investments in and advances to nonconsolidated affiliates (Note 13).... 35,856 38,169
Deferred costs and other (Note 3)...................................... 37,004 47,097
-------- --------
$420,565 $446,226
-------- --------
-------- --------
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities
Accounts payable..................................................... $ 14,437 $ 18,917
Accrued expenses (Note 3)............................................ 18,769 17,866
Current portion of long-term debt (Note 4)........................... 1,255 1,158
-------- --------
Total current liabilities........................................ 34,461 37,941
Long-term debt (Note 4)................................................ 189,943 174,645
Deferred credits and other............................................. 28,649 28,847
Deferred income taxes (Note 6)......................................... 24,504 24,271
-------- --------
277,557 265,704
-------- --------
Commitments and contingencies (Notes 9 through 12)

Parent company investment (Note 5)..................................... 143,008 180,522
-------- --------
$420,565 $446,226
-------- --------
-------- --------
</TABLE>

The accompanying notes are an integral part of these combined balance sheets.

F-3
<PAGE>
PROMUS HOTEL CORPORATION
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues
Rooms..................................................... $110,205 $121,104 $124,192
Food and beverage......................................... 8,001 8,094 8,310
Franchise and management fees............................. 76,874 60,359 51,719
Other..................................................... 47,644 41,653 34,460
-------- -------- --------
Total revenues........................................ 242,724 231,210 218,681
-------- -------- --------
Operating expenses
Direct
Rooms................................................... 56,952 65,529 71,191
Food and beverage....................................... 7,760 8,235 8,696
Depreciation of buildings and equipment................... 22,336 22,961 20,612
Other..................................................... 58,711 63,907 60,484
-------- -------- --------
Total operating expenses.............................. 145,759 160,632 160,983
-------- -------- --------
96,965 70,578 57,698

General and administrative.................................. (3,337) (4,471) (8,156)
Property transactions....................................... 626 1,345 (5,713)
-------- -------- --------
Operating income............................................ 94,254 67,452 43,829
Interest expense, net of interest capitalized (Notes 2 and
8)........................................................ (31,148) (33,482) (40,711)
Other income (expense), including interest income........... 11 (3,175) 124
-------- -------- --------
Income before income taxes and extraordinary items.......... 63,117 30,795 3,242
Provision for income taxes (Note 6)......................... (26,798) (13,869) (1,401)
-------- -------- --------
Income before extraordinary items........................... 36,319 16,926 1,841
Extraordinary items, net of tax provision of $2,865 (Note
7)........................................................ - - 4,520
-------- -------- --------
Net income.................................................. $ 36,319 $ 16,926 $ 6,361
-------- -------- --------
-------- -------- --------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-4
<PAGE>
PROMUS HOTEL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(NOTE 8)
(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 36,319 $ 16,926 $ 6,361
Adjustments to reconcile net income to cash flows from
operating activities
Extraordinary items................................... - - (7,385)
Depreciation and amortization......................... 24,705 27,889 28,517
Other noncash items................................... (768) 3,411 1,065
Equity in and distributions of earnings of
nonconsolidated affiliates.......................... 2,969 2,819 6,285
Net (gains) losses from property transactions......... (280) (1,677) 4,379
Net change in long-term accounts...................... 7,651 1,643 4,888
Net change in working capital accounts................ (5,512) 5,211 977
-------- -------- ---------
Cash flows provided by operating activities....... 65,084 56,222 45,087
-------- -------- ---------
Cash flows from investing activities
Land, buildings, furniture and equipment additions........ (17,222) (16,725) (24,960)
Proceeds from property transactions....................... 19,164 16,921 97
Investments in and advances to nonconsolidated
affiliates.............................................. (1,657) 32 (4,437)
Other..................................................... (3,930) (2,043) (3,673)
-------- -------- ---------
Cash flows used in investing activities........... (3,645) (1,815) (32,973)
-------- -------- ---------
Cash flows from financing activities
Debt retirements.......................................... (1,895) (1,628) (14,646)
Advances (to) from Parent................................. (60,975) (51,367) 2,626
-------- -------- ---------
Cash flows used in financing activities........... (62,870) (52,995) (12,020)
-------- -------- ---------
Net (decrease) increase in cash and cash equivalents........ (1,431) 1,412 94
Cash and cash equivalents, beginning of period.............. 3,653 2,241 2,147
-------- -------- ---------
Cash and cash equivalents, end of period.................... $ 2,222 $ 3,653 $ 2,241
-------- -------- ---------
-------- -------- ---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-5
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 1--BASIS OF PRESENTATION AND ORGANIZATION

On January 30, 1995, The Promus Companies Incorporated (Parent) announced a
plan to transfer the operations, assets and liabilities of its hotel business
(the Hotel Business), composed of three different hotel brands targeted at
specific market segments: Embassy Suites, Hampton Inn and Homewood Suites, to a
new entity, expected to be named Promus Hotel Corporation (PHC). This entity
will then be spun-off (the Spin-off) from the Parent and its stock distributed
(the Distribution) to the Parent's stockholders on a one-for-two basis. The
Spin-off is subject to a number of conditions, including regulatory and other
third party approvals, including bondholders and bank lenders, receipt of an
opinion from outside legal counsel regarding the tax-free status of the
transaction, market conditions, final approval of the Parent's Board of
Directors and stockholder approval.

In anticipation of the PHC Spin-off, Embassy Suites, Inc. ("Embassy"), a
wholly-owned subsidiary of Parent, is negotiating a new $350 million bank
facility, to be secured by the stock of PHC and its material subsidiaries.
Immediately prior to the PHC Spin-off, Embassy will draw approximately $210
million on this facility and retire a portion of Parent's existing corporate
debt, which is not specifically related to either Parent's casino entertainment
or hotel segment. However, Parent's corporate debt service requirements have
been met using cash flows provided by both segments. Upon consummation of the
PHC Spin-off, the facility will be assumed by a wholly-owned subsidiary of PHC,
and Embassy will be released from liability under this facility. Therefore, in
anticipation of these transactions in which a portion of Parent's historical
corporate debt balance will be refinanced using proceeds under the new facility,
a pro-rata portion of Parent's historical corporate debt balance, unamortized
deferred finance charges and interest expense has been allocated to PHC for all
periods presented (see Note 4). These allocations were based on the percentage
of Parent's existing corporate debt expected to be retired using proceeds drawn
under the PHC Bank Credit Facilities. The amounts of these balances allocated to
PHC were based on the estimate that approximately 20.5 percent, computed as of
December 31, 1994, of Parent's corporate debt will be assumed by PHC at the time
of the Distribution and result in a reasonable approximation, in management's
judgment, of the portion of Parent's historical corporate debt balance that was
serviced by the cash flows of PHC's operations in the periods presented.
Parent's corporate interest expense has been allocated to PHC on the same basis
and percentage applied to the corporate debt allocation. PHC will use the
remaining borrowing capacity available to it under the facility for working
capital purposes and future development.

The accompanying combined financial statements include the indebtedness and
related interest expense, specifically identified with PHC, together with such
amounts related to indebtedness retired by the previously described new bank
facility.

The Spin-off will result in the division of certain of Parent's existing
corporate support functions between the two resulting entities. Historically,
Parent allocated to its operating units all corporate overhead expenses
specifically identified with those operations. The amounts of such costs
allocated to the entities comprising PHC and included in PHC financial results
were $10.6 million in 1994, $11.7 million in 1993 and $12.2 million in 1992.
Since these allocations will be discontinued after the Distribution and
responsibility for these support functions will be assumed by PHC, operating
expenses and general and administrative expense in the historical financial
statements may not be indicative of such costs in the future. In addition, the
accompanying combined financial statements do not reflect any estimated
incremental costs expected to be incurred by PHC to support its operations as a
stand-alone entity after the Distribution. Had the Distribution occurred on
January 1, 1994, PHC estimates that such incremental costs, related primarily to
information technology, insurance programs and administrative support functions,
would have been approximately $6.6 million, before income taxes, in 1994.

F-6
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 1--BASIS OF PRESENTATION AND ORGANIZATION--(CONTINUED)
Had the Distribution occurred at the beginning of the earliest period presented,
a similar amount, adjusted for the impact of inflation, would have been incurred
in each of the periods presented in these financial statements.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying combined financial statements include the assets,
liabilities, revenues and expenses of the Hotel Business. All significant
intercompany accounts and transactions among PHC entities have been eliminated
from these combined financial statements. Investments in 50% or less owned
companies and joint ventures over which PHC has the ability to exercise
significant influence are accounted for using the equity method. PHC reflects
its share of income before interest expense and extraordinary gain of these
nonconsolidated affiliates in Revenues--other. PHC's proportionate share of
interest expense and extraordinary gain on forgiveness of debt of such
nonconsolidated affiliates is included in interest expense and extraordinary
items, respectively, in the combined statements of income (see Note 13 for
combined summarized financial information regarding these nonconsolidated
affiliates). Management believes PHC's inclusion of its proportionate share of
the interest expense of its equity investees in interest expense is the
preferable presentation due to the nature of PHC's equity investments.

FISCAL YEAR

As of the beginning of 1992, PHC changed from a fiscal year to a calendar
year for financial reporting purposes. The impact of this change on PHC's
combined financial statements was immaterial. For years prior to fiscal 1992,
PHC's fiscal year ended on the Friday nearest to December 31. Fiscal year 1992
began on January 4, 1992.

CASH EQUIVALENTS

Cash equivalents are liquid investments with a maturity of less than three
months and are stated at the lower of cost or market.

LAND, BUILDINGS AND EQUIPMENT

Land, buildings and equipment are stated at cost. Land includes land held
for future development or disposition which totaled $9.6 million and $11.7
million at December 31, 1994 and 1993, respectively. Improvements and
extraordinary repairs that extend the life of the asset are capitalized.
Maintenance and repairs are expensed as incurred. Interest expense is
capitalized on constructed assets at the Parent's overall weighted average
borrowing rate of interest. No material amounts of capitalized interest were
recorded during any year presented.

Depreciation of buildings, furniture and equipment are calculated using the
straight-line method over the estimated useful life of the assets or over the
related lease term, as follows:

Buildings and improvements.................................. 4 to 40 years
Furniture, fixtures and equipment........................... 2 to 15 years

F-7
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
REVENUE RECOGNITION

Room revenue represents revenue derived from the rental of rooms and suites
for hotels majority owned by PHC. Food and beverage revenues represent revenues
from company-owned restaurants and lounges.

PHC also earns revenues from franchising and the managing of franchisees'
hotels. Franchise fees are generally 4% of suite or room rentals. In addition,
PHC earns a licensing fee for licenses granted to new franchisees when the
franchise is approved. Management fee income is based on a percentage of gross
revenues, profits, or both of the related managed property.

AMORTIZATION

Deferred management and franchise contract costs are amortized on a straight
line basis over the term of the related contract, generally 10 to 20 years.
Deferred finance charges allocated to PHC by the Parent were amortized using the
interest method based on the terms of the related debt agreements (see Note 4).

PREOPENING COSTS

Preopening costs, composed primarily of salaries and other operating costs
incurred prior to the opening of new facilities, are capitalized as incurred
prior to opening and expensed upon opening of the facility.

PROPERTY TRANSACTIONS

Property transactions include gains and losses from asset sales, including
sales of joint venture equity interests, writedowns of assets to net realizable
value and the ongoing costs of PHC's asset management staff. The operations of
properties sold are included in the financial statements through the date of
sale.

NOTE 3--DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

Deferred costs and other consisted of the following:

<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Deferred management and franchise contract costs........ $ 9,371 $10,173
Receivables due after one year, net of allowance for
doubtful accounts of $644 in 1993..................... 7,970 13,811
Cash surrender value of life insurance (Note 12)........ 4,799 4,478
Deferred finance charges (allocated by Parent) (Note
4).................................................... 3,163 3,885
Other................................................... 11,701 14,750
------- -------
$37,004 $47,097
------- -------
------- -------
</TABLE>

F-8
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 3--DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS--(CONTINUED)
Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Payroll and other compensation.......................... $ 6,978 $ 5,815
Taxes, including income taxes........................... 4,010 3,810
Deposits and customer funds............................. 2,461 2,509
Other accruals.......................................... 5,320 5,732
------- -------
$18,769 $17,866
------- -------
------- -------
</TABLE>

NOTE 4--LONG-TERM DEBT

All indebtedness, together with related interest expense, specifically
identified with a PHC entity is included in the accompanying combined financial
statements. In addition, a pro-rata portion of Parent's historical corporate
debt balance, unamortized deferred finance charges and interest expense has been
allocated to PHC and included in these combined financial statements for all
periods presented based on the percentage of Parent's existing corporate debt
expected to be retired using proceeds from a new $350 million bank facility to
be secured by the stock of PHC and its material subsidiaries (the PHC Bank
Credit Facilities). Immediately prior to the PHC Spin-off, Embassy will draw
approximately $210 million on the PHC Bank Credit Facilities and retire a
portion of Parent's existing corporate debt. The PHC Bank Credit Facilities are
expected to provide PHC with revolving credit facilities in aggregate principal
amount of $350 million, to consist of a $300 million revolving credit facility
with a maturity of five years (the Five-Year Revolver) and a $50 million
annually extendible revolving credit facility with an initial maturity of 364
days (the Extendible Revolver). The Extendible Revolver is convertible into a
two-year term loan with equal amortizing payments over such two-year period.
Interest on the drawn portion of the PHC Bank Credit Facilities will be, at the
option of PHC, equal to either (i) the Base Rate, as defined, or (ii) the LIBOR
rate plus an applicable margin presently expected to range at the closing from
35 to 50 basis points for the Five-Year Revolver and from 40 to 55 basis points
for the Extendible Revolver. Upon consummation of the PHC Spin-off, the PHC Bank
Credit Facilities will be assumed by a wholly-owned subsidiary of PHC and
Embassy will be released from liability. The amounts of Parent's corporate
interest expense allocated to PHC for fiscal 1994, 1993 and 1992 were $17.2
million, $17.0 million and $19.5 million, respectively. The amounts of Parent's
corporate interest allocated to PHC is in addition to the interest expense
included in PHC's financial statements on indebtedness specifically identified
with a PHC entity and PHC's proportionate share of interest expense of its
nonconsolidated affiliates (see Note 13). Total interest expense included in
PHC's financial statements from all sources, including the amounts allocated
from Parent, for fiscal 1994, 1993 and 1992 were $31.1 million, $33.5 million
and $40.7 million, respectively. PHC's indebtedness consisted of the following:

1994 1993
-------- --------
Debt specifically related to PHC
Notes payable and other-unsecured, 13%, maturities
to 1999........................................... $ 976 $ 1,126
Mortgages, 8.0%-8.75%, maturities to 2005........... 297 309
Capital lease obligations, 5.2%-13.4%, maturities
to 1998........................................... 2,065 2,591
Corporate debt allocated by Parent.................... 187,860 171,777
-------- --------
191,198 175,803
Current portion of long-term debt..................... (1,255) (1,158)
-------- --------
$189,943 $174,645
-------- --------
-------- --------

F-9
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 4--LONG-TERM DEBT--(CONTINUED)
As of December 31, 1994, annual principal requirements for the four years
subsequent to 1995, excluding the corporate debt allocated by the Parent, were:
1996, $1.1 million; 1997, $0.7 million; 1998, $0.3 million; and 1999, $0.1
million.

Based on the borrowing rates currently available for debt with similar terms
and maturities and quoted market prices of Parent's publicly traded debt, the
fair value of PHC's long-term debt was $187.7 million and $182.4 million at
December 1994 and 1993, respectively.

NOTE 5--PARENT COMPANY INVESTMENT

Changes in Parent company investment consisted of the following:

1994 1993 1992
-------- -------- --------
Beginning balance.......................... $180,522 $212,229 $191,667
Net income................................. 36,319 16,926 6,361
Intercompany activity with Parent.......... (73,833) (48,633) 14,201
-------- -------- --------
Ending balance............................. $143,008 $180,522 $212,229
-------- -------- --------
-------- -------- --------

NOTE 6--INCOME TAXES

Income tax expense attributable to Income before income taxes consisted of
the following:

1994 1993 1992
------- ------- -------
Current
Federal...................................... $25,396 $12,087 $(4,080)
State........................................ 1,154 1,186 226
Deferred....................................... 248 596 5,255
------- ------- -------
$26,798 $13,869 $ 1,401
------- ------- -------
------- ------- -------

The differences between the statutory federal income tax rate and the
effective tax rate expressed as a percentage of Income before income taxes were
as follows:

1994 1993 1992
---- ---- ----
Statutory tax rate.................................... 35.0% 35.0% 34.0%
Increases (decreases) in tax resulting from:
State taxes, net of federal tax benefit............. 1.8 3.9 8.1
Adjustment of valuation of deferred tax assets and
liabilities due to change in tax rate............. - 0.7 -
Targeted jobs tax credit............................ (0.2) (0.4) (5.3)
Other............................................... 5.9 5.8 6.4
---- ---- ----
42.5% 45.0% 43.2%
---- ---- ----
---- ---- ----

F-10
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 6--INCOME TAXES--(CONTINUED)
The components of PHC's net deferred tax liability included in the Combined
Balance Sheets were as follows:

1994 1993
-------- --------
Deferred tax assets
Deferred income..................................... $ 4,643 $ 5,563
Compensation........................................ 3,623 3,206
Bad debt reserve.................................... 593 842
Basis difference in other assets.................... 18 925
Tax credits......................................... - 309
Other............................................... 516 12
-------- --------
9,393 10,857
-------- --------
Deferred tax liabilities
Property and equipment.............................. (19,494) (17,797)
Investments in nonconsolidated affiliates........... (8,813) (11,144)
Marketing fund prepayments.......................... (2,746) (3,328)
-------- --------
(31,053) (32,269)
-------- --------
Net deferred tax liability...................... $(21,660) $(21,412)
-------- --------
-------- --------

PHC is included in the consolidated federal income tax return of Parent. All
current tax liabilities have been paid by Parent. The income tax provision for
each period presented in these combined financial statements has been calculated
as if PHC had prepared and filed a separate income tax return for those periods.

See Note 10 for information regarding a Tax Sharing Agreement to be entered
into between Parent and PHC in connection with the Spin-off.

NOTE 7--EXTRAORDINARY ITEMS

The components of the net extraordinary items for 1992 were as follows:

1992
-------
Gain on forgiveness of joint venture debt......................... $ 4,353
Gain due to discounting of debt at extinguishment................. 3,032
-------
7,385
Income tax provision.............................................. (2,865)
-------
Extraordinary items, net of income taxes.......................... $ 4,520
-------
-------

There were no extraordinary items reported in 1994 or 1993.

F-11
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION

The increase (decrease) in cash and cash equivalents due to the changes in
long-term and working capital accounts was as follows:

<TABLE>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Long-term accounts
Deferred costs and other assets....................... $ 737 $ (794) $ (267)
Deferred credits and other long-term liabilities...... 6,914 2,437 5,155
------- ------- -------
Net change in long-term accounts.................. $ 7,651 $ 1,643 $ 4,888
------- ------- -------
------- ------- -------
Working capital accounts
Receivables........................................... $ (852) $ 1,469 $ 963
Supplies.............................................. 181 (443) 303
Prepayments........................................... (219) (1,128) 1,338
Other current assets.................................. (366) 3,297 (2,450)
Accounts payable...................................... (5,748) 1,874 (103)
Accrued expenses...................................... 1,492 142 926
------- ------- -------
Net change in working capital accounts............ $(5,512) $ 5,211 $ 977
------- ------- -------
------- ------- -------
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

During 1993, PHC transferred its ownership interest in five hotel properties
to a third party in exchange for cash, the assumption by the third party of the
related existing mortgage debt totaling $42.2 million and the issuance of $10
million in notes receivable maturing in three to five years. In an unrelated
1993 transaction, PHC sold a hotel property to a third party for cash and
assumption by the third party of the related existing $3.3 million mortgage
debt.

During April 1992, PHC invested an additional $10 million in its hotel
finance subsidiary. The funds for this investment were provided by a certificate
of deposit, which had been previously recorded as a long-term investment.

The noncash component of these transactions has been excluded from the
Combined Statements of Cash Flows.

F-12
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION--(CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR INTEREST AND TAXES

The following table reconciles PHC's Interest expense, net of interest
capitalized, to cash paid for interest:

<TABLE>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Interest expense, net of amount capitalized (Note
2)................................................ $ 31,148 $ 33,482 $ 40,711
Adjustments to reconcile to cash paid for interest:
PHC's share of interest expense of nonconsolidated
affiliates (Note 13)............................ (12,749) (12,707) (14,395)
Net change in accruals............................ - 125 190
Amortization of deferred finance charges.......... (733) (846) (1,202)
Net amortization of discounts and premiums........ (45) (869) (50)
Other............................................. (143) (128) (1,754)
-------- -------- --------
Cash paid for interest, net of amount capitalized... $ 17,478 $ 19,057 $ 23,500
-------- -------- --------
-------- -------- --------
</TABLE>

For purposes of this presentation, interest expense allocated to PHC by the
Parent is assumed to be paid in the year allocated.

No income taxes were paid by PHC as these payments were the responsibility
of the Parent.

NOTE 9--LEASES

PHC leases both real estate and equipment used in its operations through
operating and capital leases. Leases which transfer substantially all benefits
and risks incidental to ownership of the property are capitalized. In addition
to minimum rentals, many leases provide for contingent rents based on
percentages of revenue. The average remaining term for other operating leases,
which generally contain renewal options, extends approximately seven years. The
costs of leased assets are amortized over periods not in excess of the lease
terms.

Rental expense associated with operating leases included in the Combined
Statements of Income was as follows:

<TABLE>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Noncancelable rental
Minimum......................................... $4,693 $5,131 $6,748
Contingent...................................... 740 601 557
Other............................................. 904 1,700 1,037
------ ------ ------
$6,337 $7,432 $8,342
------ ------ ------
------ ------ ------
</TABLE>

F-13
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 9--LEASES--(CONTINUED)
The future minimum rental commitments as of December 31, 1994, were as
follows:

NON-
CANCELABLE
CAPITAL OPERATING
LEASES LEASES
------- ----------
1995.................................................... $ 1,075 $ 2,657
1996.................................................... 975 1,561
1997.................................................... 263 1,290
1998.................................................... 20 1,207
1999.................................................... - 878
Thereafter.............................................. - 11,197
------- ----------
Total minimum lease payments............................ 2,333 $ 18,790
----------
----------
Amounts representing executory costs.................... (10)
-------
Net minimum lease payments.............................. 2,323
Amounts representing interest........................... (258)
-------
Total obligations under capital leases.................. 2,065
Obligations under capital leases due within one year.... (768)
-------
Long-term obligations under capital leases.............. $ 1,297
-------
-------

Minimum rental commitments exclude contingent rentals, which may be paid
under certain leases based on a percentage of revenues in excess of specified
amounts.

NOTE 10--COMMITMENTS AND CONTINGENCIES

CONTRACTUAL COMMITMENTS

PHC manages certain hotels for others under agreements that provide for
payments/loans to the hotel owners if stipulated levels of financial performance
are not maintained. In addition, PHC is liable under certain lease agreements
where it has assigned the direct obligation to third party interests. PHC
believes the likelihood is remote that material payments will be required under
these agreements. PHC's estimated maximum exposure under such agreements is
currently less than $38 million over the next 30 years.

TAX SHARING AGREEMENTS

In connection with the Spin-off, PHC and Parent will enter into a tax
sharing agreement that defines each company's rights and obligations with
respect to deficiencies and refunds of federal, state and other income or
franchise taxes relating to PHC's business for tax years prior to the
Distribution and with respect to certain tax attributes of PHC after the
Distribution. In general, with respect to periods ending on or before the last
day of the year in which the Distribution occurs, Parent is responsible for (i)
filing federal tax returns for the Parent and PHC for the periods such companies
were members of the same consolidated group, and (ii) paying the taxes relating
to such returns, (to include any subsequent adjustments resulting from the
redetermination of such tax liabilities by the applicable taxing authorities;
PHC will reimburse Parent for the portion of such adjustments relating to the
Hotel

F-14
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 10--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Business). PHC is responsible for filing returns and paying taxes for periods
after the Spin-off. PHC and Parent have agreed to cooperate with each other and
to share information in preparing such tax returns and in dealing with other tax
matters.

NOTE 11--LITIGATION

PHC is involved in various inquiries, administrative proceedings and
litigation relating to contracts, sales of property and other matters arising in
the normal course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the final outcome of these matters will
not have a materially adverse effect upon PHC's combined financial position or
its results of operations.

In connection with the Distribution, Parent is expected to assume any
obligation relating to the Bass Litigation.

NOTE 12--EMPLOYEE BENEFIT PLANS

SAVINGS AND RETIREMENT PLAN

Parent maintains a defined contribution savings and retirement plan in which
employees of PHC may participate. This plan, among other things, allows pre-tax
and after-tax contributions to be made by employees, and participating employees
may elect to contribute up to 16 percent of their eligible earnings, the first
six percent of which Parent will match fully. Amounts contributed to the plan
are invested, at the participant's option, in a Parent company stock fund, a
diversified stock fund, an income fund and a treasury fund. Participants become
vested in Parent's matching contribution over seven years of credited service.
PHC's contribution for its participants amounted to $1.3 million, $1.0 million
and $1.0 million in 1994, 1993 and 1992, respectively.

RESTRICTED STOCK AND STOCK OPTION PLANS

Parent has a restricted stock plan (RSP) under which executives and key
employees may be awarded shares of Parent's common stock. Shares granted under
the RSP are both restricted as to transfer and subject to forfeiture prior to
vesting. The shares generally vest evenly over periods from two to four years.
The deferred compensation expense related to PHC employees participating in the
plan is amortized to expense over the vesting period. This expense totaled $0.4
million, $0.5 million and $0.9 million in 1994, 1993 and 1992, respectively. In
connection with the Spin-off, the PHC employees participating in the RSP will
receive a dividend of one share of PHC common stock for each of two shares of
Parent RSP common stock held as of the Spin-off date. Concurrent with the
Spin-off, the remaining Parent RSP shares held by PHC employees will be
cancelled and replaced by an adjusted number of PHC RSP shares which will vest
under the same terms and conditions as the Parent RSP shares they replace.

Parent also has a stock option plan under which options have been granted to
PHC key management personnel to purchase Parent's common stock at a price equal
to its market value at the date of grant. The plan also provides to certain
employees the grant of stock appreciation rights exercisable for cash and/or
stock in lieu of options. A stock appreciation right's value equals the
difference between the market value of the share under the option at the date of
exercise and the grant price. The accompanying combined statements of income do
not reflect any expenses associated with this plan. In connection

F-15
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 12--EMPLOYEE BENEFIT PLANS--(CONTINUED)
with the Spin-off, outstanding options in the Parent's common stock held by
PHC's employees will be cancelled and replaced with new options for PHC shares.
The number of shares subject to the options and the exercise price of the option
shares will be calculated so as to preserve the value of the Parent options
cancelled as of the Spin-off date.

DEFERRED COMPENSATION PLANS

Parent maintains deferred compensation plans under which certain employees
and directors may defer a portion of their compensation. Amounts deposited into
these plans are unsecured liabilities and earn interest at rates approved by the
Human Resources Committee of the Parents' Board of Directors. As of the Spin-off
date, the total liability related to PHC employees included in Deferred credits
and other liabilities for these plans at December 31, 1994 and 1993 was $3.5
million and $2.9 million, respectively. In connection with the administration of
one of these plans, Parent has purchased company-owned life insurance policies
insuring the lives of certain directors, officers and key employees. A pro rata
portion of the value of these insurance policies has been allocated to PHC for
the periods presented.

NOTE 13--NONCONSOLIDATED AFFILIATES

Combined summarized balance sheet information and income statements of
nonconsolidated affiliates which PHC accounted for using the equity method as of
December 31, 1994 and 1993, and for the three fiscal years ended December 31,
1994, were as follows:

<TABLE>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Combined Summarized Balance Sheet Information
Current assets........................................ $ 26,178 $ 21,616
Land, buildings and equipment, net.................... 376,480 418,927
Other assets.......................................... 26,097 47,346
-------- --------
Total assets...................................... 428,755 487,889
-------- --------
Current liabilities................................... 21,226 50,529
Long-term debt........................................ 297,537 319,018
Other liabilities..................................... 633 375
-------- --------
Total liabilities................................. 319,396 369,922
-------- --------
Net assets...................................... $109,359 $117,967
-------- --------
-------- --------
Combined Summarized Income Statements
Revenues.............................................. $157,686 $150,431 $143,133
-------- -------- --------
-------- -------- --------
Operating income...................................... $ 32,240 $ 27,613 $ 14,917
-------- -------- --------
-------- -------- --------
Net income (loss)..................................... $ 5,221 $ 559 $ (5,486)
-------- -------- --------
-------- -------- --------
</TABLE>

F-16
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE STATED)

NOTE 13--NONCONSOLIDATED AFFILIATES--(CONTINUED)
PHC's share of nonconsolidated affiliates' combined net income (loss) are
reflected in the accompanying Combined Statements of Income as follows:

<TABLE>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Pre-interest operating income (included in
Revenues--other)........................................... $ 18,077 $ 15,503 $ 10,253
-------- -------- --------
-------- -------- --------
Interest expense (included in Interest expense).............. $(12,749) $(12,707) $(14,395)
-------- -------- --------
-------- -------- --------
Extraordinary gain on forgiveness of debt (included in
Extraordinary items, net).................................. $ - $ - $ 4,353
-------- -------- --------
-------- -------- --------
PHC's investments in and advances to nonconsolidated
affiliates
At equity.................................................. $ 25,551 $ 27,511
At cost.................................................... 10,305 10,658
-------- --------
$ 35,856 $ 38,169
-------- --------
-------- --------
</TABLE>

The values of certain PHC joint venture investments have been reduced below
zero due to PHC's intention to fund its share of operating losses in the future,
if needed. The total amount of these negative investments included in Deferred
credits and other liabilities on the Combined Balance Sheets was $5.0 million
and $5.1 million at December 31, 1994 and 1993, respectively.

F-17
<PAGE>

JAMES D. WOLFENSOHN
INCORPORATED
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
PHONE: (212)909-8100
FAX: (212)909-8158
ANNEX I

April 24, 1995

The Board of Directors
The Promus Companies Incorporated
1023 Cherry Road
Memphis, Tennessee 38117
Dear Sirs:

We have acted as financial advisor to The Promus Companies Incorporated, a
Delaware corporation ("Promus"), in connection with the proposed distribution
(the "Distribution") to the holders of Promus common stock, par value $0.10 per
share (the "Promus Common Stock"), of 100% of the outstanding shares of the
common stock, par value $0.10 per share, of Promus Hotel Corporation, a Delaware
corporation ("PHC"). Following the Distribution, Promus will be renamed Harrah's
Entertainment Inc. ("Harrah's"). We have been advised that the purposes of the
Distribution are as set forth in the Proxy Statement filed with the Securities
and Exchange Commission (the "Proxy Statement") and to be sent to holders of
Promus Common Stock. The Distribution is described more fully in the Proxy
Statement. You have requested our opinion as to whether the Distribution is
fair, from a financial point of view, to the holders of Promus Common Stock.

In connection with our review of the Distribution, and in arriving at our
opinion, we have, among other things:

(i) reviewed the publicly available consolidated financial statements of
Promus for recent years and interim periods to date and certain other
relevant financial and operating data of Promus available from public
sources or provided to us by Promus;

(ii) reviewed the consolidated pro forma financial statements of PHC and
Harrah's provided to us by Promus;

(iii) reviewed certain internal financial and operating information,
including certain projections, relating to Promus, PHC and Harrah's,
provided to us by Promus;

(iv) discussed the business, financial condition and prospects of
Promus, PHC and Harrah's with certain officers of Promus and certain members
of management of the businesses to be operated by PHC;

(v) reviewed the financial terms of the Distribution;

(vi) reviewed certain publicly available transactions we deemed
comparable to the Distribution;

(vii) reviewed certain public information of certain companies we deemed
appropriate in analyzing Promus, PHC and Harrah's;

(viii) reviewed the historical market prices and trading activity for
the common shares of Promus;

I-1
<PAGE>
(ix) reviewed the historical market prices and trading activity for
equity securities of publicly-traded companies engaged in businesses that we
believed to be generally comparable to those of Promus, PHC and Harrah's;

(x) reviewed Promus's financial and strategic objectives as described to
us by the management of Promus;

(xi) reviewed the Proxy Statement; and

(xii) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.

We have not assumed responsibility for independent verification of any
information, whether publicly available or furnished to us, concerning Promus,
Harrah's or PHC, including, without limitation, any financial information,
forecasts or projections, considered in connection with the rendering of our
opinion. Accordingly, for purposes of our opinion, we have assumed and relied
upon the accuracy and completeness of all such information and we have not
conducted a physical inspection of any of the properties or assets, and have not
prepared or obtained any independent evaluation or appraisal of any of the
assets or liabilities, of Promus, Harrah's or PHC. With respect to the financial
forecasts and projections made available to us and used in our analysis, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Promus as to
the matters covered thereby and in rendering our opinion we express no view as
to the reasonableness of such forecasts and projections or the assumptions on
which they are based. We were not requested or authorized to solicit, and did
not solicit, any proposals from any third parties for the acquisition of any of
the assets or businesses of PHC or Harrah's nor have we made any determination
as to whether any such proposals could be obtained if solicited. Our opinion is
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to us as of, the date hereof.

In connection with our opinion, we have assumed that the Distribution will
be consummated on the terms and subject to the conditions described in the Proxy
Statement. In addition, we have, with your consent, assumed the correctness of
the conclusions of Latham & Watkins in its opinion to Promus described in the
Proxy Statement that the Distribution will be tax free to Promus and the holders
of Promus Common Stock. We have also assumed that all necessary governmental and
regulatory approvals and consents of third parties will be obtained on terms and
conditions that will not have a material adverse effect on Promus, Harrah's or
PHC.

James D. Wolfensohn Incorporated will receive a fee for its financial
advisory services rendered in connection with the currently contemplated
Distribution, a portion of which fee is contingent upon the Distribution being
effected.

Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Distribution is fair, from a financial
point of view, to the holders of Promus Common Stock.

Very truly yours,

/s/ JAMES D. WOLFENSOHN INCORPORATED

JAMES D. WOLFENSOHN INCORPORATED

I-2
<PAGE>
ANNEX II-A

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PROMUS HOTEL CORPORATION

FIRST: The name of the Corporation is Promus Hotel Corporation.

SECOND: The address of the registered office of the Corporation in the State
of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").

FOURTH: A. The total number of shares of stock which the Corporation shall
have authority to issue is 365,150,000 (the "Capital Stock") consisting of
360,000,000 shares of Common Stock, par value $0.10 per share (the "Common
Stock"), 150,000 shares of Preferred Stock, par value of $100.00 per share (the
"Preferred Stock"), and 5,000,000 shares of Special Stock, par value $1.12 1/2
per share (the "Special Stock").

B. Shares of Preferred Stock may be issued from time to time in one or more
series, as provided for herein or as provided for by the Board of Directors as
permitted hereby. All shares of Preferred Stock shall be of equal rank and shall
be identical, except in respect of the terms fixed herein for the series
provided for herein or fixed by the Board of Directors for series provided for
by the Board of Directors as permitted hereby. All shares of any one series
shall be identical in all respects with all the other shares of such series,
except the shares of any one series issued at different times may differ as to
the dates from which dividends thereon may be cumulative.

The Board of Directors is hereby authorized, by resolution or resolutions,
to establish, out of the unissued shares of Preferred Stock not then allocated
to any series of Preferred Stock, additional series of Preferred Stock. Before
any shares of any such additional series are issued, the Board of Directors
shall fix and determine, and is hereby expressly empowered to fix and determine,
by resolution or resolutions, the distinguishing characteristics and the
relative rights, preferences, privileges and immunities of the shares thereof,
so far as not inconsistent with the provisions of this Article FOURTH. Without
limiting the generality of the foregoing, the Board of Directors may fix and
determine:

1. The designation of such series, the number of shares which shall
constitute such series and the par value, if any, of such shares;

2. The rate of dividend, if any, payable on shares of such series;

3. Whether the shares of such series shall be cumulative, non-cumulative
or partially cumulative as to dividends, and the dates from which any
cumulative dividends are to accumulate;

4. Whether the shares of such series may be redeemed, and, if so, the
price or prices at which and the terms and conditions on which shares of
such series may be redeemed;

5. The amount payable upon shares of such series in the event of the
voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation;

6. The sinking fund provisions, if any, for the redemption of shares of
such series;

7. The voting rights, if any, of the shares of such series;

8. The terms and conditions, if any, on which shares of such series may
be converted into shares of capital stock of the Corporation of any other
class or series;

II-A-1
<PAGE>
9. Whether the shares of such series are to be preferred over shares of
capital stock of the Corporation of any other class or series as to
dividends, or upon the voluntary or involuntary dissolution, liquidation, or
winding up of the affairs of the Corporation, or otherwise; and

10. Any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of this
Article FOURTH.

C. Shares of Special Stock may be issued from time to time in one or more
classes or series as provided in this Section C of Article FOURTH.

Subpart I of this Section C sets forth provisions respecting the Special
Stock as a class. Subpart II vests in the Board of Directors authority to
designate series of Special Stock and to determine and fix the distinguishing
characteristics and rights, privileges and immunities thereof.

SUBPART I. The Special Stock as a Class

1. General. Shares of Special Stock may be issued from time to time in one
or more series, as provided for by the Board of Directors as permitted hereby.
All shares of Special Stock shall be of equal rank and shall be identical,
except in respect of the terms fixed by the Board of Directors for series
provided for by the Board of Directors as permitted hereby. All shares of any
one series shall be identical in all respects with all the other shares of such
series, except the shares of any one series issued at different times may differ
as to the dates from which dividends thereon may be cumulative.

2. Status of Reacquired Shares. Shares of any series of Special Stock which
have been redeemed, purchased or otherwise acquired by the Corporation, or which
are no longer deemed to be outstanding by virtue of funds or securities
necessary for redemption or payment having been set aside or deposited in trust
or otherwise, or which, if convertible, have been converted into shares of stock
of the Corporation of any other class or series, shall, upon appropriate filing
and recording to the extent required by law, have the status of authorized and
unissued shares of Special Stock and may be reissued as part of any series of
Special Stock provided for by the Board of Directors as permitted hereby.

SUBPART II. ]Series of Special Stock

The Board of Directors is hereby authorized, by resolution or resolutions,
to establish, out of the unissued shares of Special Stock not then allocated to
any series of Special Stock, additional series of Special Stock. Before any
shares of any such additional series are issued, the Board of Directors shall
fix and determine, and is hereby expressly empowered to fix and determine, by
resolution or resolutions, the distinguishing characteristics and the relative
rights, preferences, privileges and immunities of the shares thereof, so far as
not inconsistent with the provisions of this Article FOURTH. Without limiting
the generality of the foregoing, the Board of Directors may fix and determine:

1. The designation of such series, the number of shares which shall
constitute such series and the par value, if any, of such shares;

2. The rate of dividend, if any, payable on shares of such series;

3. Whether the shares of such series shall be cumulative, non-cumulative
or partially cumulative as to dividends, and the dates from which any
cumulative dividends are to accumulate;

4. Whether the shares of such series may be redeemed, and, if so, the
price or prices at which and the terms and conditions on which shares of
such series may be redeemed;

5. The amount payable upon shares of such series in the event of the
voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation;

6. The sinking fund provisions, if any, for the redemption of shares of
such series;

7. The voting rights, if any, of the shares of such series;

8. The terms and conditions, if any, on which shares of such series may
be converted into shares of capital stock of the Corporation of any other
class or series;

II-A-2
<PAGE>
9. Whether the shares of such series are to be preferred over shares of
capital stock of the Corporation of any other class or series as to
dividends, or upon the voluntary or involuntary dissolution, liquidation, or
winding up of the affairs of the Corporation, or otherwise; and

10. Any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of this
Article FOURTH.

D. Except as otherwise provided in this Certificate of Incorporation, each
holder of Common Stock shall be entitled to one vote for each share of Common
Stock held by him on all matters submitted to stockholders for a vote and each
holder of Preferred Stock or Special Stock of any series that is Voting Stock
shall be entitled to such number of votes for each share held by him as may be
specified in the resolutions providing for the issuance of such series.

Except as otherwise provided by law, the presence, in person or by proxy, of
the holders of record of shares of Capital Stock entitling the holders thereof
to cast a majority of the votes entitled to be cast by the holders of shares of
Capital Stock entitled to vote shall constitute a quorum at all meetings of the
stockholders.

E. Notwithstanding any other provision of this Certificate of Incorporation
to the contrary, but subject to the provisions of any resolutions of the Board
of Directors adopted pursuant to this Article FOURTH creating any series of
Preferred Stock, Special Stock or any other class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
outstanding shares of Common Stock, Preferred Stock, Special Stock or any other
class or series of stock of the Corporation shall always be subject to
redemption by the Corporation, by action of the Board of Directors, if, in the
judgment of the Board of Directors, any holder of such stock is determined by
any gaming regulatory agency to be unsuitable, has an application for a license
or permit rejected, or has a previously issued license or permit rescinded,
suspended, revoked or not renewed, as the case may be, whether or not any of the
foregoing is final and nonappealable, or if such action otherwise should be
taken, pursuant to Section 151(b) of the GCL or any other applicable provision
of law, to the extent necessary to avoid any regulatory sanctions against, or to
prevent the loss of or secure the reinstatement of any license, franchise or
entitlement from any governmental agency held by, the Corporation, any Affiliate
of the Corporation or any entity in which the Corporation or such Affiliate is
an owner, which license, franchise or entitlement is (i) conditioned upon some
or all of the holders of the Corporation's stock of any class or series
possessing prescribed qualifications, or (ii) needed to allow the conduct of any
portion of the business of the Corporation or any such Affiliate or other
entity. The terms and conditions of such redemption shall be as follows:

(a) the redemption price of the shares to be redeemed pursuant to this
Section E of Article FOURTH shall be equal to the Fair Market Value of such
shares (excluding any dividends thereon not entitled to be received pursuant
to paragraph (e) of this Section E of Article FOURTH) or such other
redemption price as required by any applicable law, regulation or rule;

(b) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;

(c) if less than all the shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection
first of the most recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of Directors;

(d) at least 30 days' written notice of the Redemption Date shall be
given to the record holders of the shares selected to be redeemed (unless
waived in writing by any such holder), provided that the Redemption Date may
be the date on which written notice shall be given to record holders if the
cash or Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record holders and subject
to immediate withdrawal by them upon surrender of the stock certificates for
their shares to be redeemed;

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(e) from and after the Redemption Date or such earlier date as mandated
by any applicable law, regulation or rule, any and all rights of whatever
nature, which may be held by the owners of shares selected for redemption
(including without limitation any rights to vote or participate in dividends
declared on stock of the same class or series as such shares), shall cease
and terminate and they shall thenceforth be entitled only to receive the
cash or Redemption Securities payable upon redemption; and

(f) such other terms and conditions as the Board of Directors shall
determine.

For purposes of this Section E of Article FOURTH:

(i) "Disqualified Holder" shall mean any holder of shares of stock of
the Corporation of any class (or classes) or series who, either individually
or when taken together with any other holders of shares of stock of the
Corporation of any class (or classes) or series, in the judgment of the
Board of Directors, is determined by any gaming regulatory agency to be
unsuitable, or has an application for a license or permit rejected, or has a
previously issued license or permit rescinded, suspended, revoked or not
renewed, as the case may be, whether or not any of the foregoing is final
and nonappealable, or whose holding of such stock, either individually or
when taken together with the holding of shares of stock of the Corporation
of any class (or classes) or series by any other holders, may result, in the
judgment of the Board of Directors, in any regulatory sanctions against, or
the loss of or the failure to secure the reinstatement of any license,
franchise or entitlement from any governmental agency held by, the
Corporation, any Affiliate of the Corporation or any entity in which the
Corporation or such Affiliate is an owner.

(ii) "Fair Market Value" of a share of the Corporation's stock of any
class or series shall mean the average Closing Price for such share for each
of the 45 most recent days of which shares of stock of such class or series
shall have been traded preceding the day on which notice of redemption shall
be given pursuant to paragraph (d) of this Section E of Article FOURTH;
provided, however, that if shares of stock of such class or series are not
traded on any securities exchange or in the over-the-counter market, "Fair
Market Value" shall be determined by the Board of Directors in good faith;
and provided further, however, that "Fair Market Value" as to any
stockholder who purchased any stock of the class (or classes) or series
subject to redemption within 120 days of a Redemption Date need not (unless
otherwise determined by the Board of Directors) exceed the purchase price
paid by him for any stock of such class (or classes) or series of the
Corporation. "Closing Price" on any day means the reported closing sales
price or, in case no such sale takes place, the average of the reported
closing bid and asked prices on the Composite Tape for the New York Stock
Exchange-Listed Stocks, or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing sales price or
bid quotation for such stock on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if
no such prices or quotations are available, the fair market value on the day
in question as determined by the Board of Directors in good faith.

(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the Corporation
pursuant to this Section E of Article FOURTH.

(iv) "Redemption Securities" shall mean any debt or equity securities of
the Corporation, any Subsidiary or any other corporation, or any combination
thereof, having such terms and conditions as shall be approved by the Board
of Directors and which, together with any cash to be paid as part of the
redemption price, in the opinion of any nationally recognized investment
banking firm selected by the Board of Directors (which may be a firm which
provides other investment banking, brokerage or other services to the
Corporation), has a value, at the time notice of redemption is given
pursuant to paragraph (d) of this Section E of Article FOURTH, at least
equal to the Fair

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Market Value of the shares to be redeemed pursuant to this Section E of
Article FOURTH (assuming, in the case of Redemption Securities to be
publicly traded, such Redemption Securities were fully distributed and
subject only to normal trading activity).

(v) "Subsidiary" shall mean any corporation more than 50% of whose
outstanding stock entitled to vote generally in the election of directors is
owned by the Corporation, by one or more Subsidiaries or by the Corporation
and one or more Subsidiaries.

(vi) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 under the Act as in effect on the date that Article FOURTH is approved
by the Board (the term "registrant" in said Rule 12b-2 meaning in this case
the Corporation).

FIFTH: A. The Board of Directors shall have the power to make, adopt, alter,
amend, change or repeal the Bylaws of the Corporation by resolution adopted by
the affirmative vote of a majority of the entire Board of Directors.

B. Stockholders may not make, adopt, alter, amend, change or repeal the
Bylaws of the Corporation except upon the affirmative vote of at least 75% of
the votes entitled to be cast by the holders of all outstanding shares then
entitled to vote generally in the election of directors, voting together as a
single class.

SIXTH: The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which shall consist of not less
than three or more than seventeen directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The Board of Directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. At the 1995
annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders,
beginning in 1996, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor.

Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock or Special Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation applicable thereto (including
the resolutions of the Board of Directors pursuant to Article FOURTH), and such
Directors so elected shall not be divided into classes pursuant to this Article
SIXTH unless expressly provided by such terms.

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SEVENTH: Special meetings of the stockholders of the Corporation, for any
purpose or purposes, may only be called at any time by a majority of the entire
Board of Directors or by either the Chairman or the President of the
Corporation.

EIGHTH: No stockholder action may be taken except at an annual or special
meeting of stockholders of the Corporation and stockholders may not take any
action by written consent in lieu of a meeting.

NINTH: A. In addition to any affirmative vote required by law or this
Certificate of Incorporation (including any resolutions of the Board of
Directors pursuant to Article FOURTH hereof) or the Bylaws of the Corporation,
and except as otherwise expressly provided in Section B of this Article NINTH, a
Business Combination (as hereinafter defined) with, or proposed by or on behalf
of, any Interested Stockholder (as hereinafter defined) or any Affiliate or
Associate (as hereinafter defined) of any Interested Stockholder or any person
who thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of (i) not less than 75% of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock (as hereinafter defined), voting together as a single class and (ii) not
less than a majority of the votes entitled to be cast by holders of all the then
outstanding Voting Stock, voting together as a single class, excluding Voting
Stock beneficially owned by such Interested Stockholder. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.

B. The provisions of Section A of this Article NINTH shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of this Certificate of Incorporation (including any resolutions
of the Board of Directors pursuant to Article FOURTH hereof) or the Bylaws of
the Corporation, or any agreement with any national securities exchange, if all
the conditions specified in either of the following Paragraphs 1 or 2 are met
or, in the case of Business Combination not involving the payment of
consideration to the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following Paragraph 1 is
met:

1. The Business Combinations shall have been approved, either
specifically or as a transaction which is in an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure of
the intention to acquire, beneficial ownership of the Voting Stock that
caused the Interested Stockholder to become an Interested Stockholder) of
the Continuing Directors (as hereinafter defined).

2. All of the following conditions shall have been met:

a. The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under clauses (i) and (ii) below:

(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any share of
Common Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common Stock (x)
within the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock; and

(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder

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<PAGE>
(the "Determination Date"), whichever is higher, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock.

b. The aggregate amount of cash and the Fair Market Value, as of the
date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of each
class or series of outstanding Capital Stock, other than Common Stock,
shall be at least equal to the highest amount determined under clauses
(i), (ii) and (iii) below:

(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any share of
such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date or (y) in
the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock;

(ii) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; and

(iii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation regardless of whether the Business Combination to be
consummated constitutes such an event.

The provisions of this Paragraph 2(b) shall be required to be met
with respect to every class or series of outstanding Capital Stock,
whether or not the Interested Stockholder has previously acquired
beneficial ownership of any shares of a particular class or series of
Capital Stock.

c. The consideration to be received by holders of a particular class
or series of outstanding Capital Stock shall be in cash or in the same
form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock.
If the consideration so paid for shares of any class or series of Capital
Stock varied as to form, the form of consideration for such class or
series of Capital Stock shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such class or
series of Capital Stock previously acquired by the Interested
Stockholder.

d. After the Determination Date and prior to the consummation of such
Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full periodic dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding
Capital Stock; (ii) there shall have been no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock), except
as approved by a majority of the Continuing Directors; (iii) there shall
have been an increase in the annual rate of dividends paid on the Common
Stock as necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction
that has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure so to increase such annual rate is

II-A-7
<PAGE>
approved by a majority of the Continuing Directors; and (iv) such
Interested Stockholders shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder
and except in a transaction that, after giving effect thereto, would not
result in any increase in the Interested Stockholder's percentage
beneficial ownership of any class or series of Capital Stock.

e. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (the "Act")
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to
such Act or subsequent provisions). The proxy or information statement
shall contain on the first page thereof, in a prominent place, any
statement as to the advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of them, may choose to
make and, if deemed advisable by a majority of the Continuing Directors,
the opinion of an investment banking firm selected by a majority of the
Continuing Directors as to the fairness (or not) of the terms of the
Business Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates, such investment banking firm to be paid
a reasonable fee for its services by the Corporation.

f. Such Interested Stockholder shall not have made any major change
in the Corporation's business or equity capital structure without the
approval of a majority of the Continuing Directors.

C. The following definitions shall apply with respect to this article NINTH:

1. The term "Business Combination" shall mean:

a. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder or (ii) any
other company (whether or not itself an Interested Stockholder) which is,
or after such merger or consolidation would be, an Affiliate or Associate
of an Interested Stockholder; or

b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase or sell, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder involving any assets, securities or commitments of the
Corporation, any Subsidiary or any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder which (except for
any arrangement, whether as employee or consultant or otherwise, other
than as director, pursuant to which any Interested Stockholder or any
Affiliate or Associate thereof shall, directly or indirectly, have any
control over or responsibility for the management of any aspect of the
business or affairs of the Corporation, with respect to which arrangement
the value test set forth below shall not apply), together with all other
such arrangements (including all contemplated future events), has an
aggregate Fair Market Value and/or involves aggregate commitments of
$100,000,000 or more or constitutes more than 5 percent of the book value
of the total assets (in the case of transactions involving assets or
commitments other than capital stock) or 5 percent of the stockholders'
equity (in the case of transactions in capital stock) of the entity in
question (the "Substantial Part"), as reflected in the most recent fiscal
year-end consolidated balance sheet of such entity existing at the time
the stockholders of the Corporation would be required to approve or
authorize the Business Combination involving the assets, securities
and/or commitments constituting any Substantial Part; provided, that if
stockholders' equity is negative, the fair

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market value of the outstanding Capital Stock at the date of such balance
sheet shall be used in lieu thereof in determining if a transaction
involves a Substantial Part; or

c. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the Corporation's
Bylaws; or

d. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Stockholder or any affiliate or Associate of any Interested
Stockholder; or

e. any agreement, contract or other arrangement providing for any one
or more of the actions specified in the foregoing clauses (a) to (d).

2. The term "Voting Stock" shall mean all Capital Stock which by its
terms may be voted on all matters submitted to stockholders of the
Corporation generally.

3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person
has any agreement, arrangement or understanding, directly or indirectly, for
the purpose of acquiring, holding, voting or disposing of Capital Stock.

4. The term "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation
or any Subsidiary or any trustee of or fiduciary with respect to any such
plan when acting in such capacity) who (a) is, or has announced or publicly
disclosed a plan or intention to become, the beneficial owner of Voting
Stock representing ten percent or more of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent or more of the votes entitled
to be cast by the holders of all the then outstanding shares of Voting
Stock.

5. A person shall be a "beneficial owner" of any Capital Stock (a) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement
or understanding; or (c) which is beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock; provided that: (x) no director or officer of the Corporation
(nor any Affiliate or Associate of any such director or officer) shall,
solely by reason of any or all of such directors or officers acting in their
capacities as such, be deemed the "beneficial owner" of any shares of
Capital Stock that are beneficially owned by any other such director or
officer; (y) in the case of any employee stock ownership or similar plan of
the Corporation or of any Subsidiary in which the beneficiaries thereof
possess the right to vote the shares of Voting Stock held by such plan, no
such plan nor any trustee with respect thereto (nor any Affiliate or
Associate of such trustee), solely by reason of such capacity of such
trustee, shall be deemed the "beneficial owner" of the shares of Voting
Stock held under such plan; and (z) no person shall be deemed the
"beneficial owner" of any shares of Voting Stock held in any voting trust,
employee stock ownership plan or any similar plan or trust if such

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person does not possess the right to vote such shares. For the purposes of
determining whether a person is an Interested Stockholder pursuant to
Paragraph 4 of this section C, the number of shares of Capital Stock deemed
to be outstanding shall include shares deemed beneficially owned by such
person through application of this Paragraph 5 of Section C, but shall not
include any other shares of Capital Stock that may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.

6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on
the date that Article NINTH is approved by the Board (the term "registrant"
in said Rule 12b-2 meaning in this case the Corporation).

7. The term "Subsidiary" means any company of which a majority of any
class of equity security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder
set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean
only a company of which a majority of each class of equity security is
beneficially owned by the Corporation.

8. The term "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board of Directors"), while such person
is a member of the Board of Directors, who is not an Affiliate or Associate
or representative of the Interested Stockholder and was a member of the
Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and any successor of a Continuing Director while
such successor is a member of the Board of Directors, who is not an
affiliate or associate or representative of the Interested Stockholder and
is recommended or elected to succeed the Continuing director by a majority
of the Continuing Directors.

9. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock the highest closing sales
price during the 30-day period immediately preceding the date in question of
a share of such stock on the Composite Tape for New York Stock
Exchange--Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange registered
under the Act on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing sales price or bid quotation with
respect to a share of such stock during the 30-day period preceding the date
in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any similar system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Continuing Directors
in good faith; and (c) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined in
good faith by a majority of the Continuing Directors.

10. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2.a and 2.b of Section B of this Article NINTH shall include
the shares of Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.

D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action (as hereinafter defined) is
with, or proposed by, or on behalf of, an Interested Stockholder or an Affiliate
or Associate of an Interested Stockholder, (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $100,000,000
or more, and (f) whether the assets or securities that are the subject of any

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Business Combination constitute a Substantial Part. Any such determination made
in good faith shall be binding and conclusive on all parties.

E. Nothing contained in this Article NINTH shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.

F. The fact that any Business Combination complies with the provisions of
Section B of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.

G. For the purpose of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article NINTH (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or a person who thereafter would become such if (1) after the
Interested Stockholder became such, the Proposed Action is proposed following
the election of any director of the Corporation who with respect to such
Interested Stockholder, would not qualify to serve as a Continuing Director or
(2) such Interested Stockholder, Affiliate, Associate or person votes for or
consents to the adoption of any such Proposed Action, unless as to such
Interested Stockholder, Affiliate, Associate or person, a majority of the
Continuing Directors makes a good faith determination that such Proposed Action
is not proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person, based on information known to them after reasonable
inquiry.

H. Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any proposal to amend, repeal
or adopt any provision of this Certificate of Incorporation inconsistent with
this Article NINTH which is proposed by or on behalf of an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder shall
require the affirmative vote of (i) the holders of not less than 75% of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock, voting together as a single class, and (ii) the holders of not
less than a majority of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock, voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Stockholder,
provided, however, that this Section H shall not apply to, and such vote shall
not be required for, any amendment, repeal or adoption unanimously recommended
by the Board of Directors if all of such directors are persons who would be
eligible to serve as Continuing Directors within the meaning of Section C,
Paragraph 8 of this Article NINTH.

TENTH: A. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
Corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.

II-A-11
<PAGE>
B. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

C. Any indemnification under this Article TENTH (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section A or Section B of this Article TENTH, as the case
may be. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the extent,
however, that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section A or Section B of this Article TENTH, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.

D. For purposes of any determination under Section C of this Article TENTH,
a person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section D of Article TENTH shall mean any other
corporation or any partnership, joint venture, trust or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section D shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Sections A or B of this Article TENTH as the case may be.

E. Notwithstanding any contrary determination in the specific case under
Section C of this Article TENTH, and notwithstanding the absence of any
determination thereunder, any director, officer, employee or agent may apply to
any court of competent jurisdiction in the State of Delaware for indemnification
to the extent otherwise permissible under Sections A and B of this Article
TENTH. The basis of such indemnification by a court shall be a determination by
such court that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections A or B of this Article TENTH, as the case may be.
Notice of any application for indemnification pursuant to this Section E of
Article TENTH shall be given to the Corporation promptly upon the filing of such
application.

II-A-12
<PAGE>
F. Expenses incurred in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article TENTH.

G. The indemnification and advancement of expenses provided by this Article
TENTH shall not be deemed exclusive of any other rights to which any person
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of, and advancement of expenses to, the persons
specified in Sections A and B of this Article TENTH shall be made to the fullest
extent permitted by law. The provisions of this Article TENTH shall not be
deemed to preclude the indemnification of, and advancement of expenses to, any
person who is not specified in Sections A or B of this Article TENTH but whom
the Corporation has the power or obligation to indemnify under the provisions of
the General Corporation Law of the State of Delaware, or otherwise. The
indemnification provided by this Article TENTH shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.

H. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article TENTH.

I. For purposes of this Article TENTH, reference to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article TENTH with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.

II-A-13
<PAGE>
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or thereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

THIRTEENTH: No director of this Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
GCL is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of each
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the GCL as so amended from time to time.

IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Ralph B. Lake, its Senior Vice President and attested by H. Nadine
Greenwood, its Assistant Secretary, the day of , 1995.

By:
..................................
Ralph B. Lake
Senior Vice President

ATTEST:

.....................................
H. Nadine Greenwood
Assistant Secretary

II-A-14
<PAGE>
ANNEX II-B

RESTATED BYLAWS

PROMUS HOTEL CORPORATION

ARTICLE I

OFFICES

SECTION 1. Registered Office. The registered office of Promus Hotel
Corporation (the "Corporation") shall be at The Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware.

SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.

SECTION 2. Annual Meetings. The annual meeting of stockholders shall be held
on the last Wednesday in April in each year or on such other date and at such
time as may be fixed by the Board of Directors and stated in the notice of the
meeting, for the purpose of electing directors and for the transaction of only
such other business as is properly brought before the meeting in accordance with
these Bylaws.

Written notice of an annual meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.

To be properly brought before the annual meeting, business must be either
(i) specified in the notice of annual meeting (or any supplement or amendment
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
brought before the annual meeting by or at the direction of the Board of
Directors, or (iii) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than seventy (70) days notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders,

II-B-1
<PAGE>
notice by a stockholder, to be timely, must be received no later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary shall set forth
(a) as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, and (ii) any material interest of the stockholder in such business, and
(b) as to the stockholder giving the notice (i) the name and record address of
the stockholder and (ii) the class, series and number of shares of capital stock
of the Corporation which are beneficially owned by the stockholder.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedures set
forth in this Article II, Section 2. The officer of the Corporation presiding at
an annual meeting shall, if the facts warrant, determine and declare to the
annual meeting that business was not properly brought before the annual meeting
in accordance with the provisions of this Article II, Section 2, and if such
officer should so determine, such officer shall so declare to the annual meeting
and any such business not properly brought before the meeting shall not be
transacted.

SECTION 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, special meetings of stockholders, for any purpose
or purposes, may only be called by a majority of the entire Board of Directors
or by the Chairman or the President.

Written notice of a special meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.

SECTION 4. Quorum. Except as otherwise provided by law or by the Certificate
of Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote thereat, present
in person or represented by proxy may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented by proxy. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder entitled to vote at the meeting.

SECTION 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder, unless
otherwise provided by the Certificate of Incorporation. Such votes may be cast
in person or by proxy but no proxy shall be voted after three years from its
date, unless such proxy provides for a longer period. The Board of Directors, in
its discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.

SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be

II-B-2
<PAGE>
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.

SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.

ARTICLE III

DIRECTORS

SECTION 1. Nomination of Directors. Nominations of persons for election to
the Board of Directors of the Corporation at the annual meeting may be made at
such meeting by or at the direction of the Board of Directors, by any committee
or persons appointed by the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Article III, Section 1.
Such nominations by any stockholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the meeting; provided however, that in the event that less
than seventy (70) days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder, to be
timely, must be received no later than that the close of business on the tenth
(10th) day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made, whichever first occurs. Such
stockholder's notice to the Secretary shall set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a director,
(a) the name, age, business address and residence address of the person, (b) the
principal occupation or employment of the person, (c) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person, and (d) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
the Rules and Regulations of the Securities and Exchange Commission under
Section 14 of the Securities Exchange Act of 1934, as amended; and (ii) as to
the stockholder giving the notice (a) the name and record address of the
stockholder and (b) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder. The Corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the Corporation to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth herein. The officer of the Corporation presiding
at an annual meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded. The directors shall be elected at
the annual meeting of the stockholders, except as provided in the Certificate of
Incorporation, and each director elected shall hold office until his successor
is elected and qualified; provided, however, that unless otherwise restricted by
the Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the Board of
Directors at any meeting of stockholders by a majority of the stock represented
and entitled to vote thereat.

SECTION 2. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the

II-B-3
<PAGE>
Chairman of the Board or the President or a majority of the entire Board of
Directors. Notice thereof stating the place, date and hour of the meeting shall
be given to each director either by mail not less than forty-eight (48) hours
before the date of the meeting, by telephone or telegram on twenty-four (24)
hours notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances.

SECTION 3. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these Bylaws, at all meetings of the Board
of Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, a majority of the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.

SECTION 4. Actions of Board of Directors. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

SECTION 5. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 5 of Article III shall
constitute presence in person at such meeting.

SECTION 6. Committees. The Board of Directors may, by resolution passed by a
majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.

SECTION 7. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

SECTION 8. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or

II-B-4
<PAGE>
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or their relationship or interest
and as to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the shareholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the shareholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.

ARTICLE IV

OFFICERS

SECTION 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director) and one or more Vice Presidents, Assistant
Secretaries, Assisant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law, the Certificate
of Incorporation or these Bylaws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.

SECTION 2. Election. The Board of Directors at its first meeting held after
each annual meeting of stockholders shall elect the officers of the Corporation
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers who are directors of the Corporation
shall be fixed by the Board of Directors.

SECTION 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President and any such
officer may, in the name and on behalf of the Corporation, take all such action
as any such officer may deem advisable to vote in person or by proxy at any
meeting of security holders of any corporation in which the Corporation may own
securities and at any such meeting shall possess and may exercise any and all
rights and power incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have exercised and possessed if present.
The Board of Directors may, by resolution, from time to time confer like powers
upon any other person or persons.

SECTION 4. Chairman of the Board of Directors. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these Bylaws or by the Board of Directors.

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<PAGE>
SECTION 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these Bylaws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
Bylaws or by the Board of Directors.

SECTION 6. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.

SECTION 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.

SECTION 8. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.

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<PAGE>
SECTION 9. Assistant Secretaries. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.

SECTION 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.

SECTION 11. Controller. The Controller shall establish and maintain the
accounting records of the Corporation in accordance with generally accepted
accounting principles applied on a consistent basis, maintain proper internal
control of the assets of the Corporation and shall perform such other duties as
the Board of Directors, the President or any Vice President of the Corporation
may prescribe.

SECTION 12. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.

ARTICLE V

STOCK

SECTION 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the President or a Vice President
and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.

SECTION 2. Signatures. Any or all of the signatures on the certificate may
be a facsimile, including, but not limited to, signatures of officers of the
Corporation and countersignatures of a transfer agent or registrar. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.

SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as

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<PAGE>
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.

SECTION 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these Bylaws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.

SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

SECTION 6. Beneficial Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.

ARTICLE VI

NOTICES

SECTION 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.

SECTION 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for

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<PAGE>
dividends such sum or sums as the Board of Directors from time to time, in its
absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.

SECTION 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

SECTION 3. Fiscal Year. The fiscal year of the Corporation shall end on
December 31, unless the fiscal year is otherwise changed by affirmative
resolution of the entire Board of Directors.

SECTION 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.

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<PAGE>
ANNEX III-A

PROMUS HOTEL CORPORATION
1995 STOCK OPTION PLAN

A. PURPOSE

The purpose of the Promus Hotel Corporation 1995 Stock Option Plan (the
"Plan") is to attract and retain outstanding key employees and to provide an
incentive to, and encourage stock ownership in Promus Hotel Corporation, a
Delaware corporation (the "Company"), by those employees responsible for the
policies and operations of the Company or its Subsidiaries. As used herein,
"Subsidiary" means any domestic or foreign corporation, at least 50% of the
outstanding voting stock or voting power of which is beneficially owned,
directly or indirectly, by the Company.

B. ADMINISTRATION

1. This Plan shall be administered by the Human Resources Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall consist of not less than three members of the Board of
Directors. No person shall be appointed to the Committee (i) who is (or has been
during the one-year period prior to such appointment) eligible to receive an
award under the Plan or any other stock, stock option or stock appreciation
right plan of the Company, a Subsidiary or a Parent Company other than a plan or
provision of a plan specifically developed for, or made available to, members of
the Board who are not employees and which otherwise complies with subsection
(b)(1)(iii) of Rule 16b-3 ("Rule 16b-3") under Section 16 ("Section 16") of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor provision; or (ii) who has received options under the Plan if at the
time of such appointment, the options have not been exercised. In addition, each
member of the Committee must be an "outside director" for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") ("Section
162(m)"). As used herein, "Parent Company" means any domestic or foreign
corporation that beneficially owns, directly or indirectly, at least 50% of the
outstanding voting stock or voting power of the Company.

2. The Committee shall have full authority and discretion to determine,
consistent with the provisions of this Plan: (1) the employees who should be
granted options; (2) whether the option or options shall be an incentive stock
option or a non-qualified stock option; (3) the times at which options shall be
granted; (4) subject to Section F, the option price of the shares subject to
each option; (5) the number of shares subject to each option; (6) subject to
Section I, the period during which each option becomes exercisable; (7) other
terms and conditions of each option; and (8) whether an option or stock
appreciation right is intended to qualify as performance-based compensation
under Section 162(m).

3. Subject to Section N5, the Committee shall further have discretion at any
time and from time to time to accelerate the date or dates when outstanding
options become exercisable and to decrease the option price of outstanding
options. The Committee may in its discretion change any incentive stock option
to a non-qualified stock option without liability to any employee who has
received options under this Plan (an "Optionee"). Subject to Section N5, the
Committee shall also have full authority and discretion to adopt such rules,
regulations and procedures as it shall deem necessary for the administration of
the Plan and to interpret, amend or revoke any such rules, regulations or
procedures.

4. The Committee may in its discretion provide in the terms of any stock
option that the number of Shares subject to such option will be decreased if the
participant's grade level is reduced by the Company, any Subsidiary or any
Parent Company, for performance, by reason of change in job functions or
responsibilities, or by reason of transfer to a different position during the
term of the option. Options that become exercisable prior to the reduction in
the option award shall not be affected.

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<PAGE>
5. The Committee's interpretation and construction of any provisions of this
Plan or any option granted hereunder shall be final, conclusive and binding upon
all Optionees, the Company and all other interested parties.

6. In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan
except with respect to matters which under Rule 16b-3, Section 16 or Section
162(m) are required to be determined in the absolute discretion of the
Committee.

C. ELIGIBILITY

1. The Committee shall from time to time determine the key management
employees of the Company and any of its Subsidiaries who shall be granted
options under the Plan. No incentive stock option shall be granted to any
director of the Company who is not an employee of the Company, any of its
Subsidiaries or any of its Parent Companies. An employee who has been granted an
option may be granted an additional option or options under this Plan if the
Committee shall so determine. The granting of an option under this Plan shall
not affect any outstanding stock option previously granted to an Optionee under
this Plan or any other plan of the Company, a Subsidiary or a Parent Company.

D. SHARES OF STOCK SUBJECT TO THIS PLAN

1. The number of shares which may be issued pursuant to the options granted
by the Committee under this Plan shall not exceed 3,600,000 shares of Common
Stock. Such shares may be authorized and issued shares or shares previously
acquired or to be acquired by the Company and held in treasury. Any shares
subject to an option which expires for any reason, is forfeited, or is
terminated unexercised as to such shares may again be subject to an option under
this Plan. To the extent that a stock appreciation right shall have been
exercised and paid in cash, the number of shares subject to the related option,
or portion thereof, may again be subject to an option under this Plan.

2. The maximum number of shares with respect to which options or stock
appreciation rights may be granted in any year to any one employee shall be
250,000 (the "Award Limit"); provided that the Award Limit shall be
appropriately adjusted by the Committee in accordance with Section N hereof. To
the extent required by Section 162(m), options which are canceled continue to be
counted against the Award Limit and if, after grant of an option, the price of
shares subject to such option is reduced, the transaction will be treated as a
cancellation of the option and a grant of a new option and both the option
deemed to be canceled and the option deemed to be granted will be counted
against the Award Limit. To the extent required by Section 162(m), if after the
grant of a stock appreciation right, the price of shares subject to the related
underlying option is reduced, the transaction is treated as a cancellation of
the stock appreciation right and a grant of a new stock appreciation right and
both the stock appreciation right deemed to be cancelled and the stock
appreciation right deemed to be granted are counted against the Award Limit.

E. ISSUANCE AND TERMS OF OPTION CERTIFICATES

Each key management employee to whom an option is granted under this Plan
shall be entitled to receive an appropriate certificate evidencing his option
and referring to the terms and conditions of this Plan.

F. OPTION PRICE

1. Each option shall state the number of shares to which it pertains and
shall state the option price. Subject to the foregoing, the price of an option
or stock appreciation right intended to qualify as performance-based
compensation under Section 162(m) and incentive stock options shall not be less
than 100% (110% in the case of an incentive stock option granted to an
individual owning (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes

III-A-2
<PAGE>
of stock of the Company, any Subsidiary or any Parent Company) of the Fair
Market Value of the Common Stock on the date the option is granted. The option
price of any option under the Plan regardless of the date of the option shall
not be less than the par value per share of the Common Stock as provided in the
Company's Certificate of Incorporation, provided, that non-qualified options
shall not be issued under this Plan at less than the average of the high and low
prices of the Company's Common Stock on the principal exchange or system where
the Common Stock is traded on the date that the option is granted or, if such
date is not a trading day, the preceding trading day. "Fair Market Value" of a
share of Common Stock as of a given date shall be: (i) the closing price of a
share of Common Stock on the principal exchange on which shares of Common Stock
are then trading, if any, on the day previous to such date, or if shares were
not traded on the day previous to such dates, then on the next preceding trading
day during which a sale occurred; or (ii) if such stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, (1) the last
sales price (if the stock is then listed as a National Market Issue under the
NASD National Market System) or (2) the mean between the closing representative
bid and asked prices (in all other cases) for the stock on the day previous to
such date as reported by NASDAQ or such successor quotation system; or (iii) if
such stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the stock, on the day previous to such date, as determined in good faith by
the Committee; or (iv) if Common Stock is not publicly traded, the fair market
value established by the Committee acting in good faith; provided that if there
has been no sale of Common Stock during the 30-day period prior to the date of
the calculation provided for in this sentence, then such stock shall not be
considered to be trading on an exchange or quoted on the NASDAQ or successor
quotation system.

2. The option price shall be payable in United States dollars upon the
exercise of the option and may be paid in cash, by check, or in shares of Common
Stock having a total Fair Market Value on the date of exercise equal to the
option price. The Company may also permit the option price incurred by reason of
the exercise of an option to be satisfied by withholding shares (that would
otherwise be obtained upon such exercise) having a Fair Market Value equal to
the aggregate option price of the exercised option. The Company may permit
Optionees to use cashless exercise methods that are permitted by law and in
connection therewith the Company may establish a cashless exercise program
including a program where the commissions on the sale of stock subject to an
exercised option are paid by the Company.

3. The proceeds received by the Company from the sale of Common Stock
subject to option are to be added to the general funds of the Company and used
for its corporate purposes.

G. TREATMENT OF CERTAIN OPTIONS; CERTAIN LIMITATIONS ON GRANT

1. Subject to the provisions of this Section G, the Committee may grant
under this Plan both incentive stock options under Section 422 of the Code and
non-qualified stock options not subject to Section 422 of the Code.

2. To the extent that the aggregate Fair Market Value (determined at the
time the option is granted) of the stock with respect to which incentive stock
options (within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first time by an Optionee
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, any Subsidiary and any Parent Company) shall exceed
$100,000, such options shall be taxed as non-qualified options. The rule set
forth in the preceding sentence shall be applied by taking options into account
in the order in which they are granted.

3. Incentive stock options granted hereunder shall at the time of grant
qualify as "incentive stock options" under Section 422 of the Code.

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<PAGE>
H. STOCK APPRECIATION RIGHTS

1. At the discretion of the Committee, any option granted under this Plan
may include a stock appreciation right. The Committee may impose conditions upon
the grant or exercise of the stock appreciation right which conditions may
include a condition that the stock appreciation right may only be exercised in
accordance with rules and regulations adopted by the Committee from time to
time. Such rules and regulations may govern the right to exercise the stock
appreciation right granted prior to the adoption or amendment of such rules and
regulations as well as stock appreciation rights granted thereafter. The
Committee may amend any outstanding option or options to grant stock
appreciation rights with respect to the shares covered by any such option or
options if the original option or options did not contain such rights.

2. A "stock appreciation right" is the right of an Optionee, without payment
to the Company (except for applicable withholding taxes), to receive the excess
of the Fair Market Value over the option price per share as provided in the
related underlying option. A stock appreciation right shall pertain to, and be
granted only in conjunction with, a related underlying option granted under this
Plan and shall be exercisable and exercised only to the extent that the related
option is exercisable. The number of shares of Common Stock subject to the stock
appreciation right shall be all or part of the shares subject to the related
option, as determined by the Committee. The stock appreciation right shall
either become all or partially non-exercisable and shall be all or partially
forfeited if the exercisable portion, or any part thereof, of the related option
is exercised and vice versa. A stock appreciation right may only be exercised if
the Fair Market Value per share of the Common Stock on the exercise date exceeds
the option price per share under the related underlying option.

3. Subject to any restrictions or conditions imposed by the Committee, a
stock appreciation right may be exercised by the Optionee as to a number of
shares of the Common Stock under its related option only upon the surrender of
exercise rights with respect to a like number of shares of the Common Stock
available to the exercisable portion of the related option. Upon the exercise of
a stock appreciation right and the surrender of the exercisable portion of the
related option, the Optionee shall be awarded cash, shares of the Common Stock
or a combination of shares and cash at the discretion of the Committee. The
award shall have a total value equal to the product obtained by multiplying (i)
the excess of the Fair Market Value per share on the date on which the stock
appreciation right is exercised over the option price per share by (ii) the
number of shares subject to the exercisable portion of the related option so
surrendered.

4. The portion of the stock appreciation right which may be awarded in cash
shall be determined by the Committee from time to time. The number of shares
awardable to an Optionee with respect to the non-cash portion of a stock
appreciation right shall be determined by dividing such non-cash portion by the
Fair Market Value per share on the exercisable date. No fractional shares shall
be issued.

I. TERM AND EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS

Each option and stock appreciation right granted under this Plan shall be
exercisable on the dates and for the number of shares as shall be provided in
the option certificate evidencing the option granted by the Committee and the
terms thereof. An Optionee may exercise his option only by delivering to the
Company written notice of intent to exercise and by complying with all terms of
such option. No stock option shall be exercisable after the expiration of ten
years and one day (ten years in the case of an incentive stock option) from the
date of grant of the option or, in the case of an incentive stock option granted
to an Optionee owning (within the meaning of Section 424(d) of the Code), at the
time the option was granted, more than 10% of the total combined voting power of
all classes of stock of the Company, any Subsidiary or any Parent Company, the
expiration of five years from the date of grant of the option. Provided,
however, that where death, retirement for age or determination of disability
occurs during the one year period ending ten years and one day from the date of
grant of the option, no option that is not an incentive stock option shall be
exercisable after the expiration of eleven years and one day

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<PAGE>
from the date of grant of the option. With respect to persons subject to the
provisions of Section 16(b): (i) except in the case of death or disability
(within the meaning of Section 22(e)(3) of the Code) of the Optionee, no stock
appreciation right related to any stock option shall be exercisable earlier than
six months from the date of grant of the stock appreciation right, (ii) where an
outstanding option is subsequently amended to include the grant of a stock
appreciation right, no such stock appreciation right shall be exercisable
earlier than six months from the date of grant of such right and (iii) a stock
appreciation right may only be exercised during the period beginning on the
third business day following the date of the Company's release of its quarterly
or annual summary statements of sales and earnings and ending on the twelfth
business day following such date.

J. NONTRANSFERABILITY

No option, stock appreciation right or interest or right therein or part
thereof shall be subject to liability for the debts, contracts or engagements of
the Optionee or his successors in interest or shall be subject to liability for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section J shall
prevent transfers by will or by the applicable laws of descent and distribution.

K. REQUIREMENTS OF LAW

The granting of options and the issuance of shares of Common Stock upon the
exercise of an option or of a stock appreciation right or the awarding of cash
upon the exercise of a stock appreciation right shall be subject to all
applicable laws, rules and regulations and shares shall not be issued except
upon approval of proper government agencies or stock exchanges as may be
required.

L. TERMINATION OF EMPLOYMENT

If an Optionee shall cease to be employed by the Company or its Subsidiaries
as a result of retirement for age or disability, he may (subject to Section I),
but only within a period of ninety days (one year in the case of options that
are not incentive stock options) beginning the day following the date of such
termination of employment (or the date of determination of disability for
options that are not incentive stock options), exercise his option or his stock
appreciation right, to the extent that he was entitled to exercise it at the
date of such termination of employment (or the date of determination of
disability for options that are not incentive stock options). Termination for
any other reason (other than death) shall result in cancellation of the option
or stock appreciation right as of the close of business on the date of such
termination. For purposes of this Plan, termination of employment means removal
from the Company's payroll unless otherwise agreed by the Company and the
Optionee.

M. DEATH OF OPTIONEE

In the event of the death of an Optionee while in the employ of the Company,
its Subsidiaries or its Parent Companies, the option or stock appreciation right
theretofore granted to him shall be exercisable within a period of one year
after the date of death and then only if and to the extent that he was entitled
to exercise it at the date of his death including any option that may have been
accelerated by reason of his death. Such exercise shall be made only by the
executor or administrator of his estate (upon presenting proper proof of
appointment and authority to act) or by the person or persons to whom his rights
under the option shall have passed by his will or by the applicable laws of
descent and distribution subject to the Company being properly assured and
legally advised of the rights of such beneficiaries.

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<PAGE>
Notwithstanding the provisions of Sections I, L and M herein or any other
provisions of the Plan, an Optionee with ten years of service shall have a two
year period, and an Optionee with twenty years of service shall have a three
year period, after retirement for age, death or determination of disability to
exercise any option to the extent it was exercisable on the date of such event,
provided that (1) for incentive stock options this two or three year period will
not extend beyond the normal term of the option, and (2) for non-incentive stock
options, the normal term of the option will be extended up to a maximum term of
thirteen years and one day to accommodate the two or three year extension in
cases where retirement, death or determination of disability occurs within the
three years prior to the end of the normal term of the option.

N. ADJUSTMENTS

1. Subject to Section N5 but notwithstanding any other term of this Plan, in
the event that the Committee determines that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee's sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an option or stock appreciation
right, then the Committee shall, in such manner as it may deem equitable, adjust
any or all of

(a) the number and type of shares of Common Stock (or other securities
or property) with respect to which options and stock appreciation rights may
be granted under the plan (including, but not limited to, adjustments of the
limitations in Section D or the maximum number and kind of shares which may
be issued and adjustments of the Award Limit),

(b) the number and type of shares of Common Stock (or other securities
or property) subject to outstanding options and stock appreciation rights,
and

2. Subject to Section N5 but notwithstanding any other term of this Plan, in
the event of any corporate transaction or other event described in Section N1
which results in shares of Common Stock being exchanged for or converted into
cash, securities (including securities of another corporation) or other
property, the Committee will have the right to terminate this Plan as of the
date of the event or transaction, in which case all options and stock
appreciation rights granted under this Plan shall become the right to receive
such cash, securities or other property, net of any applicable exercise price.

3. Subject to Section N5 but notwithstanding any other term of this Plan, in
the event of any corporate transaction or other event described in Section N1 or
any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take any one
or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option or stock appreciation right, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:

(a) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either automatically or upon the
optionee's request, for either the purchase of any such option or stock
appreciation right for an amount of cash equal to the amount that could have
been attained upon the exercise of such option or stock appreciation right
or realization of the optionee's rights had such option or stock
appreciation right been currently exercisable or payable

III-A-6
<PAGE>
or the replacement of such option or stock appreciation right with other
rights or property selected by the Committee in its sole discretion;

(b) In its discretion, the Committee may provide, either by the terms of
such option or stock appreciation right or by a resolution adopted prior to
the occurrence of such transaction or event that it cannot be exercised
after such event;

(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such option
or stock appreciation right or by a resolution adopted prior to the
occurrence of such transaction or event, that, for a specified period of
time prior to such transaction or event, such option or stock appreciation
right shall be exercisable as to all shares covered thereby;

(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such option
or stock appreciation right or by a resolution adopted prior to the
occurrence of such transaction or event, that upon such event, such option
or stock appreciation right be assumed by the successor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices; and

(e) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject to
outstanding options and stock appreciaiton rights, and/or in the terms and
conditions of, (including the grant or exercise price), and the criteria
included in, outstanding options and stock appreciation rights and options
and stock appreciation rights which may be granted in the future.

4. Subject to Section N5 but notwithstanding any other term of this Plan,
the Committee may, in its discretion, include such further provisions and
limitations in any option or stock appreciation right agreement or certificate,
as it may deem equitable and in the best interests of the Company.

5. With respect to incentive stock options and options and stock
appreciation rights intended to qualify as performance-based compensation under
Section 162(m), no adjustment or action described in this Section N or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option or stock appreciation right to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would violate Section 16 or Rule 16b-3. The
number of shares of Common Stock subject to any option or stock appreciation
right shall always be rounded to the next whole number.

6. Any decision of the Committee pursuant to the terms of this Section N
shall be final, binding and conclusive upon the participants, the Company and
all other interested parties.

O. CLAIM TO STOCK OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS

No employee or other person shall have any claim or right to be granted
options or stock appreciation rights under this Plan. No Optionee, prior to
issuance of the stock, shall be entitled to voting rights, dividends or other
rights of stockholders except as otherwise provided in this Plan or except as
may be approved by the Committee subject to applicable law. Neither this Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained in the employ of the Company, a Subsidiary or a Parent
Company, and any such employee may be terminated at any time, with or without
cause.

III-A-7
<PAGE>
P. UNSECURED OBLIGATION

Optionees under this Plan shall not have any interest in any fund or
specific asset of the Company by reason of this Plan. No trust shall be created
in connection with this Plan or any award thereunder, and there shall be no
required funding of amounts which may become payable to any Optionee.

Q. TAX WITHHOLDING

The Company, a Subsidiary or a Parent Company, as appropriate, shall have
the right to deduct or withhold from all payments or distributions amounts
sufficient to cover any federal, state or local taxes required by law to be
withheld or paid with respect to such payments or distributions and, in the case
of stock appreciation rights for which the Optionee receives Common Stock as
payment, the participant or other person receiving such Common Stock may be
required to pay to the Company, a Subsidiary or a Parent Company, as
appropriate, the amount of any such taxes which the Company, Subsidiary or
Parent Company is required to withhold with respect to such Common Stock. In the
event the cash portion of a stock appreciation right is insufficient to cover
the required withholding, the Optionee may be required to pay to the Company the
amount of such taxes. In the case of non-qualified options, the Company may
require that required withholding taxes be paid to the Company at the time the
option is exercised. The Company may also permit any withholding tax obligations
incurred by reason of the exercise of any stock option to be satisfied by
withholding shares (that would otherwise be obtained upon such exercise) having
a Fair Market Value equal to the aggregate amount of taxes which are to be
withheld. In the case of persons subject to Section 16(b) of the Exchange Act,
such withholding shall be on terms consistent with Rule 16b-3.

R. EXPENSES OF PLAN

The expenses of administering the Plan shall be borne by the Company, its
Subsidiaries and its Parent Companies.

S. RELIANCE ON REPORTS

Each member of the Committee and each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company, its Subsidiaries and its Parent
Companies and upon any other information furnished in connection with the Plan
by any person or persons other than himself. In no event shall any person who is
or shall have been a member of the Committee or of the Board be liable for any
determination made or other action taken or any omission to act in reliance upon
any report or information or for any action, including the furnishing of
information taken or failure to act, in good faith.

T. INDEMNIFICATION

Each person who is or shall have been a member of the Committee or of the
Board or any other persons involved in the administration of this Plan shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit or proceeding to which
he may be a party or in which he may be involved by reason of any such action
taken or failure to act under the Plan and against and from any and all amounts
paid by him in settlement thereof, with the Company's approval, or paid by him
in satisfaction of judgment in any such action, suit or proceeding against him
provided he shall give the Company an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such person may be entitled under the
Company's articles of incorporation or bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify such person or hold him
harmless.

III-A-8
<PAGE>
U. AMENDMENT AND TERMINATION

The Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Committee. However, no
action of the Committee may (except as provided in Section N) modify the Award
Limit, modify the eligibility requirements of Section C, reduce the minimum
option and stock appreciation rights price requirements of Section F or
otherwise amend the Plan in a manner requiring stockholder approval as a matter
of Section 162(m), Rule 16b-3 or Section 16 of the Exchange Act or other
applicable law, regulation or rule without approval of the Company's
shareholders given within 12 months before or after the action by the Committee.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the option or stock appreciation right, impair any
rights or obligations under any option or stock appreciation right theretofore
granted. No option or stock appreciation right may be granted during any period
of suspension nor after termination of the Plan, and in no event may any option
or stock appreciation right be granted under this Plan after the expiration of
ten years from the date the Plan was adopted by the Board.

V. CONSIDERATION

The consideration for the issuance of any option or stock appreciation right
under the Plan shall be the participant's past or future service with the
Company or its Subsidiaries.

W. GENDER

Any masculine terminology used in this Plan shall also include the feminine
gender.

X. EFFECTIVE DATE OF THE PLAN

This Plan was approved by the Board and the stockholders of the Company on
April 5, 1995, and is to be effective as of the date of the distribution by
special dividend of the Company's common stock to all holders of outstanding
shares of common stock of The Promus Companies Incorporated.

PROMUS HOTEL CORPORATION

By
...................................
Vice President

III-A-9
<PAGE>
ANNEX III-B

PROMUS HOTEL CORPORATION

1995 RESTRICTED STOCK PLAN

1. Purpose. The purpose of the Promus Hotel Corporation 1995 Restricted
Stock Plan (the "Plan") is to advance the interests of Promus Hotel Corporation,
a Delaware corporation ("Promus"), and its subsidiaries (the "Company") by
awarding restricted shares of the common stock of Promus, par value $1.50 per
share ("Common Stock"), to key employees of the Company who make significant
contributions to the Company. The Company intends that the Plan will closely
associate the interests of key employees with those of Promus's stockholders and
will facilitate securing, retaining and motivating key employees of high caliber
and potential.

2. Administration

(a) Committee. The Plan shall be administered by the Human Resources
Committee (the "Committee") of the Board of Directors (the "Board") of
Promus. The Committee shall consist of not less than three members of the
Board. No person shall be appointed to the Committee (i) who is (or has been
during the one-year period prior to such appointment) eligible to receive an
award under the Plan (except as specifically provided under Section 4(b)) or
any other stock, stock option or stock appreciation right plan of the
Company, other than a plan or provision of a plan specifically developed
for, or made available to, members of the Board who are not employees and
which otherwise complies with subsection (b)(l)(iii) of Rule 16b-3 ("Rule
16b-3") under Section 16 ("Section 16") of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor provision; or (ii)
who has received an award under the Plan (except for the award specifically
provided under Section 4(b)) if at the time of such appointment, any
restrictions on the transferability of the shares so awarded currently
remain in effect or remained in effect at any time during the twelve-month
period immediately prior to such person's appointment to the Committee. In
addition, each member of the Committee must be an "outside director" for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") ("Section 162(m)"). The Committee shall have full and final
authority in its discretion to interpret conclusively the provisions of the
Plan; to decide all questions of fact arising in its application; to
determine the employees to whom awards shall be made under the Plan; to
determine the awards to be made and the amount, size, terms and restrictions
of each such award; to determine the time when awards will be granted; and
to make all other determinations necessary or advisable for the
administration of the Plan, other than, in each such case, determinations
required in connection with awards granted pursuant to the terms of Section
4(b).

(b) Certain Administrative Principles. Without intending to limit the
discretion of the Committee in exercising its judgment in accordance with
Section 2(a), subject to Section 4(b) the Company currently anticipates that
awards of shares of Common Stock under the Plan will be made to persons
selected to participate by the Chief Executive Officer of Promus and
approved by the Committee in accordance with Section 4(a), based, among
other things, on individual performance both currently and over time, the
impact of the individual's position within the Company on the long-term
performance of the Company, and the individual's potential for advancement
to positions of greater responsibility.

(c) Reduction in Awards. The Committee may provide in the terms of any
award of restricted stock (other than awards under Section 4(b)) that the
award will be decreased if the participant's grade level is reduced by the
Company for performance, by reason of a change in job functions or
responsibilities, or by reason of transfer to a different position during
the term of the award. Shares that vested prior to the reduction in the
grade level shall not be affected.

III-B-1
<PAGE>
(d) Board Authority. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Section
16, Rule 16b-3 or Section 162(m) are required to be determined in the
absolute discretion of the Committee.

3. Shares Subject to Plan. The shares issued under the Plan shall not exceed
in the aggregate 400,000 shares of Common Stock. Such shares may be authorized
and unissued shares or treasury shares. Any shares which are awarded hereunder
and subsequently forfeited shall again be available under the Plan.

4. Participants

(a) Subject to awards required by Section 4(b) below, persons eligible
to participate in the Plan shall be limited to key employees of the Company
who are selected by the Chief Executive Officer of Promus and approved by
the Committee and who, in the judgment of the Committee, make significant
contributions to the Company. Members of the Board who are not also officers
or employees of the Company shall not be eligible for selection or awards
except as specifically provided in Section 4(b).

(b) Each non-employee member of the Board shall receive an award of
1,000 restricted shares under the following terms:

(1) Each non-employee member of the Board who is a director on the
Effective Date (as defined in Section 15) shall receive an award of 1,000
shares. Such shares shall vest in 200 share installments starting April
1, 1996 and on each April 1 thereafter until April 1, 2000, provided such
person is a member of the Board on the vesting date.

(2) Any new non-employee member of the Board who is elected or
appointed after the Effective Date and during the term of the Plan shall
receive an award of 1,000 shares upon the effective date of his or her
election or appointment Such shares shall vest in 100 share installments
on each April 1 starting the year following that person's election or
appointment to the Board provided such person is a member of the Board on
the vesting date.

(3) Unvested restricted shares granted to non-employee directors
shall be forfeited when the director's Board service terminates, except
all restricted shares shall vest upon: (a) a Change in Control (as
defined in the Plan's administrative regulations); or (b) upon such
person's death or disability (as determined by the Committee in its
discretion); provided, however, that the Board rather than the Committee
shall exercise all discretion with respect to restricted shares awarded
to each non-employee member of the Board.

(4) Except as specifically provided above, all other provisions of
the Plan shall apply to such restricted shares including but not limited
to the provisions of Section 9 of the Plan concerning adjustments that
would be made to all restricted shares in the event of corporate changes.

5. Awards. The Committee shall make awards of shares of Common Stock in
accordance with terms and conditions set forth in restricted stock agreements
("Agreements") or participation certificates ("Participation Certificates")
containing such terms and conditions (including those set forth below)
consistent with the Plan as the Committee shall determine.

(a) Restriction Period. At the time of each award, the Committee shall
determine the period during which the shares awarded shall be subject to the
risks of forfeiture and other terms and conditions in the applicable
Agreements or Participation Certificates. The Committee may at any time
accelerate the date of lapse of restrictions with respect to all or any part
of the shares awarded to a participant; provided, however, that with respect
to any award of restricted shares intended to qualify as performance-based
compensation under Section 162(m) or any successor provisions

III-B-2
<PAGE>
thereto, no such acceleration shall be authorized to the extent that such
acceleration would cause such restricted shares to fail to so qualify. The
Committee shall have authority to approve from time to time an award or
awards of shares of Common Stock, not exceeding 200 shares per individual,
to persons who are selected by the Chairman of the Board for special
recognition based on superior past performance, such shares to be issued
without risk of forfeiture.

(b) Certificates. Each stock certificate issued in respect of shares
awarded to a participant shall be deposited with Promus, or its designee,
together with a stock power executed in blank by the participant, and may
bear an appropriate legend disclosing the restrictions on transferability
imposed on such shares by the Plan and the Agreements or Participation
Certificates.

(c) Restrictions Upon Transfer. Shares awarded, and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered
during the restriction period applicable to such shares; provided that the
right to vote shares awarded pursuant to the Plan may be assigned to a
voting trust during the restriction period applicable to such shares so long
as the Committee, in its sole and absolute discretion, approves such
assignability of voting power in the grant of such shares. During the
restriction period the participant shall have all other rights of a
stockholder, including, but not limited to, the right to vote and to receive
dividends on such shares. If as a result of a stock dividend (whether in
securities of the Company or of any other company), stock split,
recapitalization, other adjustment in the stated capital of Promus, or as
the result of a merger, consolidation, reclassification or other
reorganization, or any other corporate transaction, Common Stock is
increased, reduced, or otherwise changed, and by virtue thereof the
recipient shall be entitled to new or additional or different shares, such
shares shall be subject to the same terms, conditions and restrictions as
the original shares.

(d) Lapse of Restrictions. Each Agreement or Participation Certificate
shall specify the terms and conditions upon which any restrictions upon any
shares awarded under the Plan shall lapse. Upon the lapse of such
restrictions, stock certificates evidencing such shares of Common Stock
without the foregoing restrictive legend shall be issued to the participant
or to his or her beneficiary or his or her estate as provided in Section
5(f). Each such new certificate shall bear such alternative legend, if any,
as the Committee shall specify.

(e) Termination Prior to Lapse of Restrictions. In the event of the
termination of a participant's employment or, with respect to a non-employee
director, tenure as a director, as the case may be, for any reason (except
as provided in Section 5(f) below and as may otherwise be provided in any
Agreement or Participation Certificate) prior to the lapse of restrictions,
all shares subject to unlapsed restrictions shall be forfeited by such
participant to Promus without payment of any consideration by Promus or the
Company, and neither the participant nor any successors, heirs, assigns or
personal representatives of such participant shall thereafter have any
further rights or interest in such shares or stock certificates.

(f) Death, Disability or Retirement of Participants. The Committee shall
from time to time adopt policies and procedures applicable to awards that
will govern the lapse or nonlapse of restrictions and the rights of
participants and beneficiaries in the event of death, disability or
retirement of participants. The Committee shall have authority to define
disability and retirement and other terms, and the Committee's policies and
procedures may differ with respect to awards granted at different times and
with respect to awards granted to different persons. A participant's rights
in the event of death, disability or retirement shall be set forth in the
Agreement or Participation Certificate that evidences an award to the
participant.

(g) Upon each award of restricted shares under this Plan which the
Committee intends to qualify as performance-based compensation under Section
162(m), the Committee shall indicate that such award is intended to so
qualify.

III-B-3
<PAGE>
6. Rights to Terminate Employment. Nothing in the Plan or in any Agreement
or Participation Certificate shall confer upon any participant the right to
continue in the employment of the Company or affect any right which the Company
may have to terminate at any time, with or without cause, the employment of such
participant.

7. Withholding. Whenever Promus proposes or is required to issue or transfer
shares of Common Stock under the Plan, Promus shall have the right to withhold
from sums due the recipient, or to require the recipient to remit to Promus, any
amount sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificate for such shares. Whenever
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements imposed with respect to such payments.

8. Non-Uniform Determinations. The Committee's determinations under the Plan
(including, without limitation, determinations of the persons to receive awards,
the form, amount and timing of such awards, and the terms and provisions of such
awards and the Agreements or Participation Certificates) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, regardless of whether such persons are similarly
situated.

9. Adjustments.

(a) Subject to Section 9(e) but notwithstanding any other term of this
Plan, in the event that the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole
discretion, affects the Common Stock such that an adjustment is determined
by the Committee (or the Board in the case of restricted shares to
non-employee members of the Board) to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an award or awards, then
the Committee shall, in such manner as it may deem equitable, adjust any or
all of:

(i) the number and type of shares of Common Stock (or other
securities or property) which may be granted under the Plan (including,
but not limited to, adjustments of the maximum number and kind of shares
which may be issued); and

(ii) with respect to restricted shares which remain subject to
restrictions imposed under this Plan, the number and type of shares of
Common Stock subject to such restricted stock awards.

(b) Subject to Section 9(e) but notwithstanding any other term of this
Plan, in the event of any corporate transaction or event described in
paragraph (a) which results in shares of Common Stock being exchanged for or
converted into cash, securities or other property (including securities of
another corporation), the Committee will have the right to terminate this
Plan as of the date of the transaction or event, in which case all
restricted stock awards which remain subject to restrictions imposed under
the Plan shall become the right to receive such cash, securities or other
property.

III-B-4
<PAGE>
of the following actions whenever the Committee determines that much action
is appropriate in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan or with
respect to an award or awards, to facilitate such transactions or events or
to give effect to such changes in laws, regulations or principles:

(i) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may provide, either
automatically or upon the participant's request, for either the purchase
of some or all shares which remain subject to restrictions imposed under
this Plan for an amount of cash equal to the amount that could have been
attained upon the sale of such shares or realization of the
participants's rights had the restrictions on such shares lapsed or the
replacement of some or all of such shares with other rights or property
selected by the Committee in its sole discretion;

(ii) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may provide either by the
terms of the Agreement on Participation Certificate or by a resolution
adopted prior to the occurrence of such transaction or event that at a
specified time prior to such transaction or event the restrictions
imposed under the Agreement on Participation Certificate upon some or all
shares of the restricted shares may lapse and/or that some or all shares
of such restricted shares may cease to be subject to forfeiture under
Section 5(e) after such transaction or event;

(iii) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may provide either by the
terms of the Agreement or Participation Certificate or by a resolution
adopted prior to the occurrence of such transaction or event that upon
such transaction or event, some or all shares which remain subject to
restrictions imposed under this Plan shall be substituted for by similar
shares of stock of the successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of
shares; and

(iv) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may make adjustments in the
terms and conditions of, and the criteria governing, to restricted shares
which remain subject to restrictions imposed under this Plan and/or
restricted shares which may be issued in the future.

(d) Subject to 9(e) but notwithstanding any other term of this Plan, the
Committee (or the Board in the case of restricted shares awarded to
non-employee members of the Board) may, in its discretion, include such
further provisions and limitations in any Agreement or Participation
Certificate as it may deem equitable and in the best interests of the
Company.

(e) With respect to any award of restricted shares intended to qualify
as performance-based compensation under Section 162(m), no adjustment or
action described in this Section 9 or in any other provision of this Plan
shall be authorized to the extent that such adjustment or action would cause
such restricted shares to fail to so qualify. Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment or
action would violate Section 16 or Rule 16b-3. The number of restricted
shares awarded under this Plan shall always be a whole number.

(f) Any decision of the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) pursuant to
the terms of this Section 9 shall be final, binding and conclusive upon the
participants, the Company and all other interested parties.

10. Amendment. The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Committee. Notwithstanding the foregoing, the provisions of the Plan relating to
the award of restricted shares to non-employee members of the Board

III-B-5
<PAGE>
and the terms of such restricted share awards shall not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended from time to time,
or the respective rules thereunder. Furthermore, no action of the Committee may
modify the eligibility requirements of Section 4, or otherwise amend the Plan in
a manner requiring stockholder approval as a matter of Section 16, Rule 16b-3 or
Section 162(m) or other applicable law, regulation or rule without approval of
the Company's shareholders given within 12 months before or after the action by
the Committee. Neither the amendment, suspension nor termination of the Plan
shall, without the consent of the participant, impair any rights or obligations
under any shares theretofore granted. No shares may be granted during any period
of suspension nor after termination of the Plan, and in no event may any shares
be granted under this Plan after the expiration of ten years from the date the
Plan is adopted by the Board.

11. Indemnification. Each person who is or has been a member of the
Committee or the Board or who otherwise participates in the administration or
operation of this Plan shall be indemnified by Promus against, and held harmless
from, any loss, cost, liability, or expense that may be imposed upon or incurred
by him or her in connection with or resulting from any claim, action, suit, or
proceeding in which such person may be involved by reason of any action taken or
failure to act under the Plan and shall be fully reimbursed by Promus for any
and all amounts paid by such person in satisfaction of judgment against him or
her in any such action, suit, or proceeding, provided he or she will give Promus
an opportunity, by written notice to the Committee, to defend the same at
Promus's own expense before he or she undertakes to defend it on his or her own
behalf. This right of indemnification shall not be exclusive of any other rights
of indemnification.

The Committee and the Board may rely upon any information furnished by the
Company, its public accountants and other experts. No individual will have
personal liability by reason of anything done or omitted to be done by the
Company, the Committee or the Board in connection with the Plan.

12. Consideration. The consideration for the issuance of shares of
restricted stock, in addition to payment of the purchase price if any, shall be
the participant's past or future service with the Company or its subsidiaries.

13. Effect on Other Plans. Participation in the Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Company, and any awards made pursuant to the Plan shall not be used in
determining the benefits provided under any other plan of the Company, unless
specifically provided in such other plan.

14. Duration of the Plan. The Plan shall remain in effect until all shares
awarded under the Plan are free of all restrictions imposed by the Plan and by
Agreements or Participation Certificates, but no award shall be made more than
ten years after the date the Plan is approved by the stockholders of Promus.

15. Effective Date. The Plan was originally adopted by Promus's Board of
Directors on and by the stockholders of Promus on April 5, 1995, and is to
be effective as of the date of the distribution by special dividend of the
Company's common stock to all holders of outstanding shares of common stock of
The Promus Companies Incorporated (the "Effective Date").

III-B-6
<PAGE>
ANNEX IV-A

AMENDMENT TO
THE PROMUS COMPANIES INCORPORATED
1990 STOCK OPTION PLAN

The Promus Companies Incorporated, a Delaware corporation, hereby adopts
this Amendment to the 1990 Stock Option Plan (the "Plan"), effective upon the
consummation of the spin-off of the hotel business of this corporation into a
new corporation.

1. The Plan shall be amended to change the name of the Plan to The Harrah's
Entertainment, Inc. 1990 Stock Option Plan, to change each reference to
"Company" in the Plan to mean Harrah's Entertainment, Inc., to change each
reference to "Common Stock" to mean the common stock of Harrah's Entertainment,
Inc. and to delete each reference to "Replacement Options."

2. Section B(1) shall be amended to add the following as the last sentence
of such section:

In addition, each member of the Committee must be an "outside director"
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Section 162(m)").

3. Section B(2) shall be amended to delete the word "and" before "(7)" and
to add the following to the end of such section:

and (8) whether an option or stock appreciation right is intended to
qualify as performance-based compensation under Section 162(m).

4. Section (B)3 of the Plan shall be amended to add the phrase "Subject to
Section N(6)," to the beginning of the first and last sentences of such section.

5. Section B of the Plan shall be amended to add the following as paragraph
6 thereto:

6. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under the
Plan except with respect to matters which under Rule 16b-3, Section 16 or
Section 162(m) are required to be determined in the absolute discretion of
the Committee.

6. Section C(2) of the Plan shall be deleted in its entirety.

7. The Plan shall be amended to delete Section D(2) of the Plan in its
entirety, to redesignate Section D(3) as Section D(2), to change each reference
to such section accordingly and to amend Section D(3) (i.e. D(2) pursuant to
this amendment) to read in its entirety as follows:

3. Subject to the following paragraph, effective April 30, 1993, the
number of authorized shares which may be issued pursuant to the options and
stock appreciation rights granted by the Committee under the Plan is
increased by an additional 1,500,000 shares.

Effective , 1995, the number of shares which may be issued
upon exercise of options or stock appreciation rights granted by the
Committee under this Plan is increased by an additional 4,500,000 shares.

Effective April 29, 1994, the maximum number of shares with respect to
which options or stock appreciation rights may be granted in any year to any
one employee shall be 250,000 (the "Award Limit"); provided that the Award
Limit shall be appropriately adjusted by the Committee in accordance with
Section N hereof. To the extent required by Section 162(m), options which
are canceled continue to be counted against the Award Limit and if, after
grant of an option, the price of shares subject to such option is reduced,
the transaction will be treated as a cancellation of the option and a grant
of a new option and both the option deemed to be canceled and the option

IV-A-1
<PAGE>
deemed to be granted will be counted against the Award Limit. To the extent
required by Section 162(m), if after the grant of a stock appreciation
right, the price of shares subject to the related underlying option is
reduced, the transaction is treated as a cancellation of the stock
appreciation right and a grant of a new stock appreciation right and both
the stock appreciation right deemed to be cancelled and the stock
appreciation right deemed to be granted are counted against the Award Limit.

8. The second sentence of Section F(1) of the Plan shall be deleted in its
entirety.

9. The third sentence of Section F(1) of the Plan shall be amended to read
in its entirety as follows:

Subject to the foregoing, the price of an option or stock appreciation
right intended to qualify as performance-based compensation under Section
162(m) and incentive stock options shall not be less than 100% (110% in the
case of an incentive stock option granted to an individual owning (within
the meaning of Section 424(d) of the Code more than 10% of the total
combined voting power of all classes of stock of the Company, any Subsidiary
or any Parent Company) of the Fair Market Value of the Common Stock on the
date the option is granted.

10. Section G of the Plan shall be amended to replace each reference to
"Section 422A" with the term "Section 422."

11. Section I of the Plan shall be amended to replace the reference to
"Section 425(d)" with the term "Section 424(d)."

12. Section N of the Plan shall be amended to read in its entirety as
follows:

N--ADJUSTMENTS

1. Subject to Section N5. but notwithstanding any other term of this
Plan, in the event that the Committee determines that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company, or other similar corporate transaction
or event, in the Committee's sole discretion, affects the Common Stock such
that an adjustment is determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an option or
stock appreciation right, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of

(a) the number and type of shares of Common Stock (or other
securities or property) with respect to which options and stock
appreciation rights may be granted under the Plan (including, but not
limited to, adjustments of the limitations in Section D or the maximum
number and kind of shares which may be issued and adjustments of the
Award Limit),

(b) the number and type of shares of Common Stock (or other
securities or property) subject to outstanding options and stock
appreciation rights, and

2. Subject to Section N5. but notwithstanding any other term of this
Plan, in the event of any corporate transaction or other event described in
Section N1. which results in shares of Common Stock being exchanged for or
converted into cash, securities (including securities of another
corporation) or other property, the Committee will have the right to
terminate this Plan as of the date of the event or transaction, in which
case all options and stock appreciation rights granted under this Plan shall
become the right to receive such cash, securities or other property, net of
any applicable exercise price.

IV-A-2
<PAGE>
3. Subject to Section N5. but notwithstanding any other term of this
Plan, in the event of any corporate transaction or other event described in
Section N1., or any unusual or nonrecurring transactions or events affecting
the Company, any affiliate of the Company, or the financial statements of
the Company or any affiliate, or of changes in applicble laws, regulations,
or accounting principles, the Committee in its discretion is hereby
authorized to take any one or more of the following actions whenever the
Committee determines that such action is appropriate in order to prevent
diultion or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option or stock
appreciation right, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:

(a) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either automatically or upon the
optionee's request, for either the purchase of any such option or stock
appreciation right for an amount of cash equal to the amount that could
have been attained upon the exercise of such option or stock appreciation
right or realization of the optionee's rights had such option or stock
appreciation right been currently exercisable or payable or the
replacement of such option or stock appreciation right with other rights
or property selected by the Committee in its sole discretion;

(b) In its discretion, the Committee may provide, either by the terms
of such option or stock appreciation right or by a resolution adopted
prior to the occurrence of such transaction or event, that it cannot be
exercised after such event;

(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such
option or stock appreciation right or by a resolution adopted prior to
the occurrence of such transaction or event, that, for a specified period
of time prior to such transaction or event, such option or stock
appreciation right shall be exercisable as to all shares covered thereby;

(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such
option or stock appreciation right or by a resolution adopted prior to
the occurrence of such transaction or event, that upon such event, such
option or stock appreciation right be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the
successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;
and

(e) In its discretion, and on such terms and conditions as it deems
appreopriate, the Committee may make adjustments in the number and type
of shares of Common Stock (or other securities or property) subject to
outstanding options and stock appreciation rights, and/or in the terms
and conditions of (including the grant or exercise price), and the
criteria governing, outstanding options and stock appreciation rights and
options and stock appreciation rights which may be granted in the future.

4. Subject to Section N5. but notwithstanding any other term of this
Plan, the Committee may, in its discretion, include such further provisions
and limitations in any option or stock appreciation right agreement or
certificate, as it may deem equitable and in the best interests of the
Company.

5. With respect to incentive stock options and options and stock
appreciation rights intended to qualify as performance-based compensation
under Section 162(m), no adjustment or action described in this Section N or
in any other provision of the Plan shall be authorized to the extent that
such adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code or would cause such option or stock appreciation right to fail
to so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would violate Section 16
or Rule 16b-3.

IV-A-3
<PAGE>
The number of shares of Common Stock subject to any option or stock
appreciation right shall always be rounded to the next number.

6. Any decision of the Committee pursuant to the terms of this Section N
shall be final, binding and conclusive upon the participants, the Company
and all other interested parties.

13. Section U of the Plan shall be amended to read in its entirety as
follows:

SECTION U--AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN

The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
However, no action of the Committee may (except as provided in Section N),
modify the Award Limit modify the eligibility requirements of Section C,
reduce the minimum option and stock appreciation rights price requirements
of Section F or otherwise amend the Plan in a manner requiring stockholder
approval as a matter of Section 162(m), Rule 16b-3 or Section 16 of the
Exchange Act or other applicable law, regulation or rule without approval of
the Company's shareholders given within 12 months before or after the action
by the Committee. Neither the amendment, suspension nor termination of the
Plan shall, without the consent of the holder of the option or stock
appreciation right, impair any rights or obligations under any option or
stock appreciation right theretofore granted. No option or stock
appreciation right may be granted during any period of suspension nor after
termination of the Plan, and in no event may any option or stock
appreciation right be granted under this Plan after the expiration of ten
years from the date the Plan was adopted by the Board.

14. The Plan shall be amended to add Section X which should read in its
entirety as follows:

X. Consideration

The consideration for the issuance of any option or stock
appreciation right shall be the participant's past or future service with
Promus or its subsidiaries.

* * * *

I hereby certify that the foregoing amendment to the Plan was duly adopted
by the Board of Directors of The Promus Companies Incorporated as of April 5,
1995.

Executed on this day of , 1995.
.....................................
Secretary

IV-A-4
<PAGE>
ANNEX IV-B

AMENDMENT TO
THE PROMUS COMPANIES INCORPORATED
1990 RESTRICTED STOCK PLAN

The Promus Companies Incorporated, a Delaware corporation, hereby adopts
this Amendment to the 1990 Restricted Stock Plan (the "Plan"), effective upon
the consummation of the spin-off of the hotel business of this corporation into
a new corporation.

1. The Plan shall be amended to change the name of the Plan to The Harrah's
Entertainment, Inc. 1990 Restricted Stock Plan, to change each reference to
"Company" in the Plan to mean Harrah's Entertainment, Inc., to change each
reference to "Common Stock" to mean the common stock of Harrah's Entertainment,
Inc. and to delete each reference to "Replacement Shares."

2. Section 2(a) shall be amended to add the following as the last sentence
of such section:

The Committee shall consist of not less than three members of the Board.
In addition, each member of the Committee must be an "outside director" for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") ("Section 162(m)").

3. Section 2 of the Plan shall be amended to add the following as paragraph
2(d) thereto:

(d) Board Authority. In its absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Section
16, Rule 16b-3 or Section 162(m) are required to be determined in the
absolute discretion of the Committee.

4. Section 3 of the Plan shall be amended to add the phrase "Subject to the
last sentence of this section," to the beginning of the first sentence and to
add the following after the last sentence of such section:

Effective as of , 1995, the number of shares which may be
issued under the Plan is increased by an additional 500,000 shares of Common
Stock.

5. The Plan shall be amended to delete Section 4(b) of the Plan in its
entirety, to redesignate Section 4(c) as Section 4(b) and to change each
reference to Section 4(c) to mean Section 4(b).

6. The Plan shall be amended to delete Section 4(c)(1) of the Plan in its
entirety, to redesignate 4(c)(2) as Section 4(b)(1), to redesignate Section
4(c)(3) as Section 4(b)(2) and to redesignate Section4(c)(4) as Section 4(b)(3)
and to change each reference to such sections accordingly.

7. Section 4(c)(3) (i.e. Section 4(b)(2) pursuant to this amendment) of the
Plan shall be amended to add the following to the end of such section:

; provided, however, that the Board rather than the Committee shall
exercise all discretion with respect to restricted shares awarded to each
non-employee member of the Board.

8. Section 5(a) of the Plan shall be amended to add the following to the end
of the second sentence thereof:

; provided, however, that with respect to any award of restricted shares
intended to qualify as performance-based compensation under Section 162(m)
or any successor provisions thereto, no such acceleration shall be
authorized to the extent that such acceleration would cause such restricted
shares to fail to so qualify.

9. Section 5 shall be amended by adding the following as Section 5(g).

IV-B-1
<PAGE>
(g) Upon each award of restricted shares under this Plan which the
Committee intends to qualify as performance-based compensation under Section
162(m), the Committee shall indicate that such award is intended to so
qualify.

10. Section 9 of the Plan shall be amended to read in its entirety as
follows:

9. Adjustments

(ii) with respect to restricted shares which remain subject to
restrictions imposed under this Plan, the number and type of shares of
Common Stock subject to such restricted stock awards.

(c) Subject to Section 9(e) but notwithstanding any other term of this
Plan, in the event of any corporate transaction or other event described in
Section 9(a) or any unusual or nonrecurring transactions or events affecting
the Company, any affiliate of the Company, or the financial statements of
the Company or any affiliate, or of changes in applicable laws, regulations,
or accounting principles, the Committee (or the Board in the case of
restricted shares awarded to non-employee members of the Board) in its
discretion is hereby authorized to take any one or more of the following
actions whenever the Committee determines that such action is appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect to an
award or awards, to facilitate such transactions or events or to give effect
to such changes in laws, regulating or principles:

(i) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may provide, either
automatically or upon the participant's request, for either the purchase
of some or all shares which remain subject to restrictions imposed under
this Plan, for an amount of cash equal to the amount that could have been
attained upon the sale of such shares or realization of the
participants's rights had the restrictions on such shares lapsed or

IV-B-2
<PAGE>
the replacement of some or all of such shares with other rights or
property selected by the Committee in its sole discretion;

(iii) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may provide, either by the
terms of the Agreement or Participation Certificate or by a resolution
adopted prior to the occurrence of such transaction or event, that upon
such transaction or event, some or all shares which remain subject to
restrictions imposed under this Plan shall be substituted for by similar
shares of stock of the successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of
shares; and

(iv) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board in the case of restricted shares
awarded to non-employee members of the Board) may make adjustments in the
terms and conditions of, and the criteria governing, restricted shares
which remain subject to restrictions imposed under this Plan and/or
restricted shares which may be issued in the future.

11. Section 10 of the Plan shall be amended to read in its entirety as
follows:

10. Amendment

The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee.
Notwithstanding the foregoing, the provisions of the Plan relating to the
award of restricted shares to non-employee members of the Board and the
terms of such restricted share awards shall not be amended more than once
every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended from time to
time, or the respective rules thereunder. Furthermore, no action of the
Committee may modify the eligibility requirements of Section 4, or otherwise
amend the Plan in a manner requiring stockholder approval as a matter of
Section 16, Rule 16b-3 or Section 162(m) or other applicable law, regulation
or rule without approval of the Company's

IV-B-3
<PAGE>
shareholders given within 12 months before or after the action by the
Committee. Neither the amendment, suspension nor termination of the Plan
shall, without the consent of the participant, impair any rights or
obligations under any shares theretofore granted. No shares may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any shares be granted under this Plan after the expiration of ten
years from the date the Plan is adopted by the Board.

12. The Plan shall be amended to add Section 15 which shall read in its
entirety as follows:

15. Consideration

The consideration for the issuance of shares of restricted stock, in
addition to payment of the purchase price if any, shall be the participant's
past or future service with Promus or its subsidiaries.

* * * *

I hereby certify that the foregoing amendment to the Plan was duly adopted
by the Board of Directors of The Promus Companies Incorporated as of April 5,
1995.

Executed on this day of , 1995.

......................................
Secretary

IV-B-4
<PAGE>
ANNEX V

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

The Promus Companies Incorporated, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

"FIRST: That at a meeting of the Board of Directors of The Promus Companies
Incorporated, resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and in the best interest of the corporation and its
stockholders, and directing that the proposed amendment be considered at the
next annual meeting of the stockholders of said corporation. The resolutions
setting forth the proposed amendment are as follows:

RESOLVED, that the Board of Directors of the Company hereby approves and
sets forth the following proposed amendment (the "Proposed Amendment") to
Article FIRST of the Company's Certificate of Incorporation:

That Article FIRST of the Certificate of Incorporation of the Company be
amended to read in its entirety as follows:

"FIRST: The name of the Corporation is Harrah's Entertainment, Inc."

SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was held upon notice
in accordance with Section 222 of the General Corporation Law of the State of
Delaware, at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by E. O. Robinson, Jr., its Senior Vice President and attested by Stephen
H. Brammell, its Assistant Secretary, the day of , 1995.

By:
..................................
E. O. Robinson, Jr.
Senior Vice President

ATTEST:

.....................................
Stephen H. Brammell
Assistant Secretary

V-1
<PAGE>
ANNEX VI

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

The Promus Companies Incorporated, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of The Promus Companies
Incorporated, resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and in the best interest of the corporation and its
stockholders, and directing that the proposed amendment be considered at the
next annual meeting of the stockholders of said corporation. The resolutions
setting forth the proposed amendment are as follows:

RESOLVED, that the Board of Directors of the Company hereby approves and
sets forth the following proposed amendment (the "Proposed Amendment") to
Section E of Article FOURTH of the Company's Certificate of Incorporation:

That Section E of Article FOURTH of the Certificate of Incorporation of
the Company be amended to read in its entirety as follows:

Notwithstanding any other provision of this Certificate of Incorporation to
the contrary, but subject to the provisions of any resolutions of the Board of
Directors adopted pursuant to this Article FOURTH creating any series of
Preferred Stock, Special Stock or any other class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
outstanding shares of Common Stock, Preferred Stock, Special Stock or any other
class or series of stock of the Corporation shall always be subject to
redemption by the Corporation, by action of the Board of Directors, if, in the
judgment of the Board of Directors, any holder of such stock is determined by
any gaming regulatory agency to be unsuitable, has an application for a license
or permit rejected, or has a previously issued license or permit rescinded,
suspended, revoked or not renewed, as the case may be, whether or not any of the
foregoing is final and nonappealable, or if such action otherwise should be
taken, pursuant to Section 151(b) of the GCL or any other applicable provision
of law, to the extent necessary to avoid any regulatory sanctions against, or to
prevent the loss of or secure the reinstatement of any license, franchise or
entitlement from any governmental agency held by, the Corporation, any Affiliate
of the Corporation or any entity in which the Corporation or such Affiliate is
an owner, which license, franchise or entitlement is (i) conditioned upon some
or all of the holders of the Corporation's stock of any class or series
possessing prescribed qualifications, or (ii) needed to allow the conduct of any
portion of the business of the Corporation or any such Affiliate or other
entity. The terms and conditions of such redemption shall be as follows:

(b) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;

VI-1
<PAGE>
(d) at least 30 days' written notice of the Redemption Date shall be
given to the record holders of the shares selected to be redeemed (unless
waived in writing by any such holder), provided that the Redemption Date may
be the date on which written notice shall be given to record holders if the
cash or Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record holders and subject
to immediate withdrawal by them upon surrender of the stock certificates for
their shares to be redeemed;

(e) from and after the Redemption Date or such earlier date as mandated
by any applicable law, regulation or rule, any and all rights of whatever
nature, which may be held by the owners of shares selected for redemption
(including without limitation any rights to vote or participate in dividends
declared on stock of the same class or series as such shares), shall cease
and terminate and they shall thenceforth be entitled only to receive the
cash or Redemption Securities payable upon redemption; and

(f) such other terms and conditions as the Board of Directors shall
determine.

For purposes of this Section E of Article FOURTH:

(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the Corporation
pursuant to this Section E of Article FOURTH.

VI-2
<PAGE>
(iv) "Redemption Securities" shall mean any debt or equity securities of
the Corporation, any Subsidiary or any other corporation, or any combination
thereof, having such terms and conditions as shall be approved by the Board
of Directors and which, together with any cash to be paid as part of the
redemption price, in the opinion of any nationally recognized investment
banking firm selected by the Board of Directors (which may be a firm which
provides other investment banking, brokerage or other services to the
Corporation), has a value, at the time notice of redemption is given
pursuant to paragraph (d) of this Section E of Article FOURTH, at least
equal to the Fair Market Value of the shares to be redeemed pursuant to this
Section E of Article FOURTH (assuming, in the case of Redemption Securities
to be publicly traded, such Redemption Securities were fully distributed and
subject only to normal trading activity).

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by E.O. Robinson, Jr., its Senior Vice President and attested by Stephen
H. Brammell, its Assistant Secretary, the day of , 1995.

By:
..................................
E.O. Robinson, Jr.
Senior Vice President

ATTEST:

.....................................
Stephen H. Brammell
Assistant Secretary

VI-3
<PAGE>
ANNEX VII

PROMUS HOTEL CORPORATION

KEY EXECUTIVE OFFICER
ANNUAL INCENTIVE PLAN

INTRODUCTION AND PURPOSE

. Key executive officers can have a major impact on the overall performance
of Promus Hotel Corporation (the "Company"). The Key Executive Officer
Annual Incentive Plan (the "Plan") is designed to reward these officers
for achieving corporate performance objectives. The Plan provides for
uniform calculation procedures based on achieving specific objectives.

. The Plan is intended to provide an incentive for superior work and
motivate participating officers toward even higher achievement and
business results, to tie their goals and interests into those of the
Company and its stockholders, and to attract and retain key executive
officers.

. An important purpose of the Plan is to insure the full deductibility of
compensation payable to the Company's Chief Executive Officer and the four
highest compensated executive officers whose compensation is required to
be reported in the Company's proxy statement.

. This document describes eligibility, performance objectives, the
evaluation process, the payment of bonus awards, and administrative
matters.

ARTICLE I

ELIGIBILITY AND PARTICIPATION

1.1 Only those executive officers who are at the corporate senior vice
president level or above may be eligible for the Plan. Prior to, or at the time
of, establishment of performance objectives (as provided in Article II below)
for a Plan year (which will be the calendar year), the Human Resources Committee
of the Board of Directors (the "Committee") will approve the specific executive
officers who will participate in the Plan for that year.

ARTICLE II

PERFORMANCE OBJECTIVES

2.1 Prior to March 30 of each Plan year, the Committee will establish in
writing a performance goal including the specific target objective or
objectives.

2.2 Performance goals will be based on one or more of the following
corporate business criteria: Pre-tax income, operating income, cash flow,
earnings per share, return on equity, return on average invested capital,
construction starts, guest satisfaction ratings, or a division's operating
income or opened units. These measurements will be determined according to
generally accepted accounting principles ("GAAP") in existence on the date that
the performance goal is established and without regard to any changes in such
principles after such date and as may be determined by the Committee pursuant to
Article IV below.

VII-1
<PAGE>
ARTICLE III

INDIVIDUAL OBJECTIVES

3.1 A participant may also be assigned personal performance goals or his or
her personal performance may be otherwise reviewed by the Committee. An
evaluation of personal performance may result in the decrease or elimination of
an award that is calculated pursuant to Article IV of the Plan (if such decrease
or elimination is approved by the Committee) but it will not increase the award.

ARTICLE IV

DETERMINATION OF AWARDS

4.1 At or after the end of a Plan year, the Committee will certify the
achievement of the performance goal or goals including the specific target
objective or objectives and the satisfaction of any other material terms of the
award.

4.2 To assure that the incentive features of the Plan are maintained and to
avoid distortion in Plan operation, the Committee will not include (except as
provided in 4.3 below) minority interests and extraordinary events or
circumstances, determined in accordance with GAAP, that may occur during the
plan year in deciding performance goals and specific objectives or calculating
the achievement of the performance goals and the objectives. Extraordinary
events or circumstances will comprise the following: extraordinary items,
property transactions, changes in accounting standards, and losses or gains
arising from discontinued operations.

4.3 The Committee may for any plan year include property transactions and/or
discontinued operations (either specifically or generally or both) and may
further include or exclude any specified interest expense items, corporate
expense items, and/or development expense items when establishing the
pre-established performance goals and specific objectives. The actual results or
non-results of those property transactions and/or discontinued operations that
are included in the pre-established goals and specific objectives will then be
included, in accordance with the principles of GAAP, in the calculation of the
achievement of the goals and specific objectives, provided that if the
objective(s) approved by the Committee include operations or businesses
(including those being accounted for as discontinued operations) that are
subsequently disposed of or spun off during the Plan year, the objective(s) and
the results will be appropriately adjusted in accordance with GAAP to exclude
such operations or businesses. Any items of interest expense, corporate expense
and/or development expense included or excluded in the pre-established goals and
specific objectives will also be included or excluded, as the case may be, in
the calculation of the achievement of the goals and specific objectives.

4.4 The actual award for a participant will be determined by multiplying the
participant's eligible earnings by the specific percentage adjacent to a points
column on tables or matrices approved by the Committee prior to March 30 of the
plan year. No award will exceed 200% of an individual's eligible earnings. In
addition, no award will exceed $1,000,000. The Committee will have the
discretion to pay an award that is lower than the award calculated as provided
herein.

4.5 Eligible earnings means a participant's annual base salary in effect on
the date the performance objectives are established by the Committee.

VII-2
<PAGE>
ARTICLE V

PAYMENT OF AWARDS

5.1 Except as provided in Section 5.2(5), approved awards will be payable by
March 15 after the end of the Plan year; provided, however, that no amounts
shall be paid until the Committee has certified in writing pursuant to Section
4.1 that the relevant performance goals were satisfied.

5.2 An award that would otherwise be payable to an employee who is not
employed on the award payment date will be prorated, or the individual will be
ineligible for an award, as follows:

(1) Terminated due to disability under Prorated based on active service
long term disability plan during plan year
(2) Retirement (at age 55 or older Prorated based on active service
with ten years or more of service) during plan year
(3) Voluntary or involuntary No award
resignation or termination prior
to retirement without mutual
written agreement
(4) Resignation pursuant to mutual Prorated based on active service
written agreement during plan year if agreed to by
the Company.
(5) Leave of absence Prorated based on active service
during plan year.
(6) Death of participant Prorated based on active service
during plan year; award paid to
participant's estate.

ARTICLE VI

OTHER CONDITIONS

6.1 Payment of awards under the Plan will not be made unless and until the
material terms (within the meaning of Section 162(m)(4)(c) of the Code) of the
Plan, including the business criteria described in Section 2.2 of the Plan, are
disclosed to the Company's stockholders and are approved by the stockholders by
a majority of votes cast in person or by proxy (including abstentions to the
extent abstentions are counted as voting under applicable state law).

6.2 No person shall have any legal claim to be granted an award under the
Plan and there is no obligation for uniformity of treatment of eligible
participants. Awards may not be assigned, pledged, encumbered, or transferred.

6.3 Neither the Plan nor any action taken under the Plan shall be construed
as giving any employee the right to be retained in the employ of the Company or
any subsidiary.

6.4 The Company or any of its subsidiaries may deduct from any award any
applicable withholding taxes or any amounts owed by the employee to the Company
or a subsidiary thereof.

ARTICLE VII

ADMINISTRATION

7.1 The Committee shall have full power to administer and interpret the
provisions of the Plan and to establish substantive rules for its
administration, including taking action, as the Committee deems appropriate, to
insure the tax deductibility of payments under the Plan.

VII-3
<PAGE>
7.2 Except with respect to matters which under Section 162(m) of the Code
are required to be determined in the sole and absolute discretion of the
Committee, the Corporate Compensation Department of the Company will have full
power to administer and interpret the procedural aspects of the Plan, subject to
the Plan's terms, including adopting and enforcing rules to decide procedural
and administrative issues.

7.3 Except with respect to matters which under Section 162(m)(4)(c) of the
Code are required to be determined in the sole and absolute discretion of the
Committee, the Committee and the Corporate Compensation Department may rely on
opinions, reports or statements of officers or employees of the Company or any
subsidiary thereof and of Company counsel (inside or retained counsel), public
accountants and other professional or expert persons.

7.4 The Committee may terminate the Plan to be effective at such date as the
Committee may determine, and is further authorized to make changes to the Plan
that are not inconsistent with its purposes or that are necessary or appropriate
in light of governmental regulations or applicable laws.; provided however, to
the extent required by Section 162(m), such changes shall be approved by a
majority of the shareholders of the Company.

7.5 No member of the Committee and no employee of the Company or its
subsidiaries involved in administering the Plan or making decisions under the
Plan will have any personal liability to any person.

The undersigned certifies that this Plan was approved by the Company's Board
of Directors on April 5, 1995.

/s/
.......................................
Signature

/s/ VICE PRESIDENT, HUMAN RESOURCES
.......................................
Title

VII-4
<PAGE>
ANNEX VIII

PROMUS HOTEL CORPORATION
1996 NON-MANAGEMENT DIRECTORS STOCK INCENTIVE PLAN

1. Purpose. The purpose of the Promus Hotel Corporation 1996 Non-Management
Directors Stock Incentive Plan (the "Plan") is to attract, retain and compensate
highly-qualified individuals who are not employees of Promus Hotel Corporation,
a Delaware corporation (the "Company") or any of its subsidiaries or affiliates
for service as members of the Board of Directors ("Non-Management Directors") by
providing them with an ownership interest in the common stock of the Company
("Common Stock"). The Company intends that the Plan will benefit the Company and
its stockholders by allowing Non-Management Directors to have a personal
financial stake in the Company through an ownership interest in the Common Stock
and will closely associate the interest of Non-Management Directors with that of
the Company's stockholders.

2. Administration. The Plan shall be administered by a committee appointed
by the Board of Directors of the Company and consisting of Directors who are not
eligible to participate in the Plan (the "Committee"). Subject to the provisions
of the Plan, the Committee shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan; provided, however, that the Committee shall have no discretion with
respect to the eligibility or selection of Non-Management Directors to receive
awards under the Plan, the number of shares of stock subject to any such awards
or the time at which any such awards are to be granted; and provided further,
that the Committee shall not have the authority to take any action or make any
determination that would materially increase the benefits accruing to
participants under the Plan. The Committee's interpretation of the Plan, and all
actions taken and determinations made by the Committee pursuant to the powers
vested in it hereunder, shall be conclusive and binding upon all parties
concerned including the Company, its stockholders and persons granted awards
under the Plan.

3. Shares Subject to Plan. The shares issued under the Plan shall not exceed
in the aggregate 150,000 shares of Common Stock. Such shares may be authorized
and unissued shares or treasury shares.

4. Participants. All active members of the Company's Board of Directors who
are not as of the date of any award employees of the Company or any of its
subsidiaries or affiliates shall be eligible to participate in the Plan.

5. Awards.

(a) Grant Dates and Formula for Automatic Grants. Shares of Common Stock
shall be automatically granted on May 1, August 1, November 1 and February 1
of each plan year (each such date is hereinafter referred to as a "Grant
Date") to each eligible Non-Management Director commencing with the August
1, 1996 Grant Date. The total number of shares included in each grant under
this Section 5(a) shall be determined by dividing Fifty Percent (50%) of the
amount of meeting and retainer fees (the "50% of Fees") earned by the
Non-Management Director during the three-month period immediately preceding
the Grant Date (the "Grant Period") by the fair market value per share of
the Common Stock on the Grant Date (or the immediately preceding trading day
if the Grant Date is not a trading day). The fair market value per share
shall be the average of the high and low price of the Common Stock based
upon its consolidated trading as generally reported for the principal
securities exchange on which the Common Stock is listed. Fractions will be
rounded to the next highest share. The shares or rights to which a
participant is entitled under this Section 5(a) shall be in lieu of the
payment in cash of the 50% of Fees.

VIII-1
<PAGE>
(b) Grant Dates and Requirements for Elective Grants. Commencing with
the August 1, 1996 Grant Date, shares of Common Stock shall be automatically
granted on each Grant Date to each eligible Non-Management Director who
elects to receive shares under this Plan in lieu of the portion of the
amount of meeting and retainer fees earned by the Non-Management for any
period which is in excess of the 50% of Fees (the "Additional 50% of Fees").
Such election must be made prior to the commencement of the first Grant
Period to which such election applies and such election shall be irrevocable
with respect to all future Grant Periods. Individuals who are nominated to
become Non-Management Directors may make such election after such nomination
but prior to the time they are elected to the Board. The total number of
shares included in each grant under this Section 5(b) shall be determined by
dividing the Additional 50% of Fees earned by the Non-Management Director
during the Grant Period by the fair market value per share of the Common
Stock on the Grant Date (or the immediately preceding trading day if the
Grant Date is not a trading day). The fair market value per share shall be
the average of the high and low price of the Common Stock based upon its
consolidated trading as generally reported for the principal securities
exchange on which the Common Stock is listed. Fractions will be rounded to
the next highest share. The shares or rights to which a participant is
entitled under this Section 5(b) shall be in lieu of the payment in cash of
the Additional 50% of Fees.

(c) Restrictions Upon Transfer. Shares awarded, and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered until
at least six months after the date of the grant (the "Restriction Period").
During the Restriction Period the participant shall have all other rights of
a stockholder, including, but not limited to, the right to vote and to
receive dividends on such shares. If as a result of a stock dividend
(whether in securities of the Company or of any other company), stock split,
spin-off, recapitalization, other adjustment in the stated capital of the
Company, or as the result of a merger, consolidation, reclassification or
other reorganization, or any other corporate transaction, Common Stock is
increased, reduced, or otherwise changed, and by virtue thereof the
participant shall be entitled to new or additional or different shares or if
the participant receives new or additional or different shares pursuant to
any action by the Committee pursuant to Section 10, such shares shall be
subject to the same terms, conditions and restrictions as the original
shares.

(d) Certificates. Each stock certificate issued in respect of shares
awarded to a participant may bear an appropriate legend disclosing the
restrictions on transferability imposed on such shares by the Plan or by
law.

(e) Termination of Service During Grant Period. In the event of
termination of service on the Board by any participant during a Grant
Period, such participant's award for the Grant Period shall be determined in
accordance with Sections 5(a) and 5(b) of the Plan based upon the amount of
meeting and retainer fees earned during such Grant Period as of the date of
termination of service, provided, that the grant date shall be the date of
termination of service unless the grant has been deferred.

6. Withholding. Whenever the Company issues shares of Common Stock under the
Plan, the Company shall have the right to withhold from sums due the recipient,
or to require the recipient to remit to the Company, any amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery of any certificate for such shares.

7. Deferral. Each participant will have the right to elect, pursuant to a
written election form delivered to the Company prior to the commencement of each
plan year (i.e., each May 1 through April 30), to defer until after the
participant's termination of service the grant of the shares that would
otherwise be granted to the participant during the next ensuing plan year.
Pursuant to this election form, the participant will elect whether all of the
deferred grant will be (a) granted within 30 days after termination of service
or (b) granted in approximately equal annual installments of shares over a
period of two to ten years (as the participant may elect) after the termination
of service, each such annual

VIII-2
<PAGE>
grant to be made within 30 days after the anniversary of the termination of
service. The deferral election form signed by the executive prior to the plan
year will be irrevocable except in case of hardship (as defined in Section 8) as
determined in good faith by the Committee pursuant to Section 8. No shares of
stock will be issued until the grant date as so deferred (the "Deferred Grant
Date") at which time the Company agrees to issue the shares to the participant.
The participant will have no rights as a stockholder with respect to the
deferred rights to shares and the rights to such shares will be unsecured.

If any dividends or other rights or distributions of any kind
("Distributions") are distributed to holders of Common Stock during the period
from the applicable Grant Date until the applicable Deferred Grant Date (the
"Deferral Period") but prior to the participant's termination of service, an
amount equal to the cash value of such Distributions on their distribution date,
as such value is determined by the Committee, will be credited to a deferred
dividend account for the participant as follows: the account will be credited
with the right to shares of Common Stock equal in value to the cash value of the
Distribution with such values determined by the Committee as of the date of the
Distribution. The Company will issue shares of stock equal to the cumulative
total of rights to the shares in such account within 30 days after the
participant's termination of service. If a Distribution is distributed to
holders of Common Stock after the participant's termination of service but
during the Deferral Period, an amount equal to the cash value of such dividends
or other rights or distributions pertaining to any share rights still deferred
shall be converted into shares of Common Stock equivalent in value to the
Distribution (with such values measured as of the date of Distribution) and such
shares will be issued to the participant as soon as practical after the date of
the Distribution. No right or interest in the deferred dividend account shall be
subject to liability for the debts, contracts or engagements of the participant
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7 shall prevent transfers by
will or by the applicable laws of descent and distribution. The Committee will
have the right to adopt other regulations and procedures to govern deferral of
grants.

8. Hardship. The Committee may accelerate the distribution of all or a
portion of a participant's deferred grants on account of his Hardship, subject
to the following requirements: (i) the value of such accelerated distribution
shall not exceed the amount which is necessary to satisfy the Hardship, less the
amount which can be satisfied from other resources which are reasonably
available to the participant, (ii) the denial of the participant's request for a
Hardship acceleration would result in severe financial hardship to the
participant, and (iii) the participant has not received an accelerated
distribution on account of Hardship within the 12-month period preceding the
acceleration.

For purposes of this Plan, "Hardship" of a participant, as determined by the
Committee in its discretion on the basis of all relevant facts and circumstances
and in accordance with the following nondiscriminatory and objective standards
uniformly interpreted and consistently applied, shall mean a severe financial
hardship to the participant resulting from a sudden and unexpected illness or
accident of the participant or of his dependent, loss of the participant's
property due to casualty, or other extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the participant. A financial
need shall not constitute a Hardship unless it is for at least $1,000.00 or the
entire value of the principal amount of the participant's deferred grants.

9. Section 83(b) Election. Participants shall have the right to make an
election under Section 83(b) of the Internal Revenue Code, if applicable, with
regard to taxation of grants under the Plan.

10. Adjustments.

(a) Subject to Section 10(c) but notwithstanding any other term of this
Plan, in the event that the Committee determines that any dividend or other
distribution (whether in the form of cash,

VIII-3
<PAGE>
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole
discretion, affects the Common Stock such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to an award or awards, then the
Committee shall, in such manner as it may deem equitable, adjust the number
and type of shares of Common Stock (or other securities or property) which
may be granted under the Plan (including, but not limited to, adjustments of
the maximum number and kind of shares which may be issued).

(b) Subject to Section 10(c) but notwithstanding any other term of this
Plan, in the event of any corporate transaction or event described in
paragraph (a) which results in shares of Common Stock being exchanged for or
converted into cash, securities or other property (including securities of
another corporation), the Committee will have the right to terminate this
Plan as of the date of the transaction or event, in which case all stock
grants deferred under Section 7 shall become the right to receive such cash,
securities or other property.

(c) No adjustment or action under this Section 10 or any other provision
of this Plan shall be authorized to the extent such adjustment or action
would violate Section 16 or Rule 16b-3. The number of shares finally granted
under this Plan shall always be rounded to the next whole number.

(d) Any decision of the Committee pursuant to the terms of this Section
10 shall be final, binding and conclusive upon the participants, the Company
and all other interested parties.

11. Amendment. The Committee may terminate, modify or amend the Plan in such
respect as it shall deem advisable, without obtaining approval from the
Company's stockholders except as such approval may be required pursuant to Rule
16b-3 under the Securities Exchange Act of 1934, as amended, or Section 16 of
such act, provided that the provisions of Sections 4 and 5 of the Plan may not
be amended more than once every six months, other than to comport with changes
in the Internal Revenue Code, the Employee Retirement Income Security Act of
1974, as amended from time to time, or rules thereunder. No termination,
modification or amendment of the Plan may, without the consent of a participant,
adversely affect a participant's rights under an award granted prior thereto.

12. Indemnification. Each person who is or has been a member of the
Committee or who otherwise participates in the administration or operation of
this Plan shall be indemnified by the Company against, and held harmless from,
any loss, cost, liability, or expense that may be imposed upon or incurred by
him or her in connection with or resulting from any claim, action, suit, or
proceeding in which such person may be involved by reason of any action taken or
failure to act under the Plan and shall be fully reimbursed by the Company for
any and all amounts paid by such person in satisfaction of judgment against him
or her in any such action, suit, or proceeding, provided he or she will give the
Company an opportunity, by written notice to the Committee, to defend the same
at the Company's own expense before he or she undertakes to defend it on his or
her own behalf. This right of indemnification shall not be exclusive of any
other rights of indemnification.

13. Duration of the Plan. The Plan shall remain in effect for a period of
five (5) years from the Effective Date.

14. Expenses of the Plan. The expenses of administering the Plan shall be
borne by the Company.

VIII-4
<PAGE>
15. Effective Date. The Plan was originally adopted by Promus Hotel
Corporation's Board of Directors on April 5, 1995, and by the stockholders of
the Company on . The Plan will become effective as of the date of the
1996 annual stockholders meeting (the "Effective Date").

PROMUS HOTEL CORPORATION

By: ..................................

Its: Vice President, Human Resources
.................................

VIII-5
<PAGE>
ANNEX IX

THE PROMUS COMPANIES INCORPORATED

KEY EXECUTIVE OFFICER
ANNUAL INCENTIVE PLAN

INTRODUCTION AND PURPOSE

. Key executive officers can have a major impact on the overall performance
of The Promus Companies Incorporated (the "Company"). The Key Executive Officer
Annual Incentive Plan (the "Plan") is designed to reward these officers for
achieving corporate performance objectives. The Plan provides for uniform
calculation procedures based on achieving specific objectives.

. The Plan is intended to provide an incentive for superior work and
motivate participating officers toward even higher achievement and business
results, to tie their goals and interests into those of the Company and its
stockholders, and to attract and retain key executive officers.

. This document describes eligibility, performance objectives, the
evaluation process, the payment of bonus awards, and administrative matters.

ARTICLE I

ELIGIBILITY AND PARTICIPATION

ARTICLE II

PERFORMANCE OBJECTIVES

2.1 Prior to March 30 of each Plan year, the Committee will establish in
writing a performance goal including the specific target objective or
objectives.

2.2 Performance goals will be based on one or more of the following
corporate business criteria: Pre-tax income, operating income, cash flow,
earnings per share, return on equity, return on average invested capital, or a
division's operating income or opened units. These measurements will be
determined according to generally accepted accounting principles ("GAAP") in
existence on the date that the performance goal is established and without
regard to any changes in such principles after such date and as may be
determined by the Committee pursuant to Article IV below.

IX-1
<PAGE>
ARTICLE III

INDIVIDUAL OBJECTIVES

ARTICLE IV

DETERMINATION OF AWARDS

4.5 Eligible earnings means a participant's annual base salary in effect on
the date the performance objectives are established by the Committee.

IX-2
<PAGE>
ARTICLE V

PAYMENT OF AWARDS

5.2 An award that would otherwise be payable to an employee who is not
employed on the award payment date will be prorated, or the individual will be
ineligible for an award, as follows:

ARTICLE VI

OTHER CONDITIONS

6.3 Neither the Plan nor any action taken under the Plan shall be construed
as giving any employee the right to be retained in the employ of the Company or
any subsidiary.

6.4 The Company or any of its subsidiaries may deduct from any award any
applicable withholding taxes or any amounts owed by the employee to the Company
or a subsidiary thereof.

ARTICLE VII

ADMINISTRATION

IX-3
<PAGE>
7.2 Except with respect to matters which under Section 162(m) of the Code
are required to be determined in the sole and absolute discretion of the
Committee, the Corporate Compensation Department of the Company will have full
power to administer and interpret the procedural aspects of the Plan, subject to
the Plan's terms, including adopting and enforcing rules to decide procedural
and administrative issues.

7.5 No member of the Committee and no employee of the Company or its
subsidiaries involved in administering the Plan or making decisions under the
Plan will have any personal liability to any person.

The undersigned certifies that this Plan was approved by the Human Resources
Committee of the Company's Board of Directors on April 5, 1995..

.......................................
Signature
Neil F. Barnhart
Vice President

IX-4
<PAGE>
ANNEX X

THE PROMUS COMPANIES INCORPORATED
1996 NON-MANAGEMENT DIRECTORS STOCK INCENTIVE PLAN

1. Purpose. The purpose of The Promus Companies Incorporated 1996
Non-Management Directors Stock Incentive Plan (the "Plan") is to attract, retain
and compensate highly-qualified individuals who are not employees of The Promus
Companies Incorporated, a Delaware corporation (the "Company") or any of its
subsidiaries or affiliates for service as members of the Board of Directors
("Non-Management Directors") by providing them with an ownership interest in the
common stock of the Company ("Common Stock"). The Company intends that the Plan
will benefit the Company and its stockholders by allowing Non-Management
Directors to have a personal financial stake in the Company through an ownership
interest in the Common Stock and will closely associate the interest of Non-
Management Directors with that of Promus's stockholders.

3. Shares Subject to Plan. The shares issued under the Plan shall not exceed
in the aggregate 150,000 shares of Common Stock. Such shares may be authorized
and unissued shares or treasury shares.

5. Awards.

X-1
<PAGE>
(b) Grant Dates and Requirements for Elective Grants. Commencing with
the August 1, 1996 Grant Date, shares of Common Stock shall be automatically
granted on each Grant Date to each eligible Non-Management Director who
elects to receive shares under this Plan in lieu of the portion of the
amount of meeting and retainer fees earned by the Non-Management for any
period which is in excess of the 50% of Fees (the "Additional 50% of Fees").
Such election must be made prior to the commencement of the first Grant
Period to which such election applies and such election shall be irrevocable
with respect to all future Grant Periods. Individuals who are nominated to
become Non-Management Directors may make such election after such nomination
but prior to the time that they are elected to the Board. The total number
of shares included in each grant under this Section 5(b) shall be determined
by dividing the Additional 50% of Fees earned by the Non-Management Director
during the Grant Period by the fair market value per share of the Common
Stock on the Grant Date (or the immediately preceding trading day if the
Grant Date is not a trading day). The fair market value per share shall be
the average of the high and low price of the Common Stock based upon its
consolidated trading as generally reported for the principal securities
exchange on which the Common Stock is listed. Fractions will be rounded to
the next highest share. The shares or rights to which a participant is
entitled under this Section 5(b) shall be in lieu of the payment in cash of
the Additional 50% of Fees.

(c) Restrictions Upon Transfer. Shares awarded, and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered until
at least six months after the date of the grant (the "Restriction Period").
During the Restriction Period the participant shall have all other rights of
a stockholder, including, but not limited to, the right to vote and to
receive dividends on such shares. If as a result of a stock dividend
(whether in securities of the Company or of any other company), stock split,
spin-off, recapitalization, other adjustment in the stated capital of the
Company, or as the result of a merger, consolidation, reclassification or
other reorganization, or any other corporate transaction, Common Stock is
increased, reduced, or otherwise changed, and by virtue thereof the
participant shall be entitled to new or additional or different shares or if
the participant receives new or additional or different shares pursuant to
any action by the Committee pursuant to Section 10, such shares shall be
subject to the same terms, conditions and restrictions as the original
shares.

X-2
<PAGE>
grant to be made within 30 days after the anniversary of the termination of
service. The deferral election form signed by the executive prior to the plan
year will be irrevocable except in case of hardship (as defined in Section 8) as
determined in good faith by the Committee pursuant to Section 8. No shares of
stock will be issued until the grant date as so deferred (the "Deferred Grant
Date") at which time the Company agrees to issue the shares to the participant.
The participant will have no rights as a stockholder with respect to the
deferred rights to shares and the rights to such shares will be unsecured.

9. Section 83(b) Election. Participants shall have the right to make an
election under Section 83(b) of the Internal Revenue Code, if applicable, with
regard to taxation of grants under the Plan.

10. Adjustments.

(a) Subject to Section 10(c) but notwithstanding any other term of this
Plan, in the event that the Committee determines that any dividend or other
distribution (whether in the form of cash,

X-3
<PAGE>
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole
discretion, affects the Common Stock such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to an award or awards, then the
Committee shall, in such manner as it may deem equitable, adjust the number
and type of shares of Common Stock (or other securities or property) which
may be granted under the Plan (including, but not limited to, adjustments of
the maximum number and kind of shares which may be issued).

(d) Any decision of the Committee pursuant to the terms of this Section
10 shall be final, binding and conclusive upon the participants, the Company
and all other interested parties.

13. Duration of the Plan. The Plan shall remain in effect for a period of
five (5) years from the Effective Date.

14. Expenses of the Plan. The expenses of administering the Plan shall be
borne by the Company.

X-4
<PAGE>
15. Effective Date. The Plan was originally adopted by Promus's Board of
Directors on April 5, 1995 and by the stockholders of Promus on , 1995.
The Plan will become effective as of the date of the 1996 annual stockholders
meeting (the "Effective Date").

THE PROMUS COMPANIES INCORPORATED

By: ..................................
Neil F. Barnhart
Vice President

X-5
<PAGE>

THE FOLLOWING TRADEMARKS USED IN THIS DOCUMENT ARE OWNED BY THE PROMUS COMPANIES
INCORPORATED, ITS DIRECT OR INDIRECT SUBSIDIARIES, OR AFFILIATES: PROMUS TM,
EMBASSY SUITES TM, HARRAH'S TM, HAMPTON INN TM, HAMPTON INN & SUITESSM AND
HOMEWOOD SUITES TM.

<PAGE>

["PROMUS COMPANIES(R)" logo]

Notice of 1995
Annual Meeting and
Proxy Statement

["Harrah's(R)" logo]
["EMBASSY SUITES(R)" logo]
["Hampton Inn(R)" logo]
["HOMEWOOD SUITES(R)" logo]
["Hampton Inn & Suites" logo]

<PAGE>
THE PROMUS COMPANIES INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1995

The undersigned hereby appoints Charles A. Ledsinger, Jr., Ben C. Peternell,
E.O. Robinson, Jr., and Philip G. Satre, and each of them, his or her attorneys
and agents, with full power of substitution to vote as proxy for the
undersigned, as herein stated, at the Annual Meeting of Stockholders of The
Promus Companies Incorporated ("Promus") to be held on May 26, 1995 at 11:00
a.m. at the Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue,
Memphis, Tennessee and at any adjournment thereof, according to the number of
votes the undersigned would be entitled to vote if personally present on the
proposals set forth below (and as more particularly set forth in the Notice of
Meeting enclosed herewith) and in accordance with their discretion on any other
matters that may properly come before the meeting or any adjournment thereof.
This proxy also constitutes confidential voting instructions for the use of
participants in Promus's Employee Stock Ownership Plan.

DISTRIBUTION PROPOSALS:

PROPOSALS ONE THROUGH NINE LISTED BELOW CONSTITUTE THE "DISTRIBUTION
PROPOSALS." THE DISTRIBUTION PROPOSALS ARE PROPOSED BY THE PROMUS BOARD OF
DIRECTORS. THE EFFECTIVENESS OF EACH OF THE DISTRIBUTION PROPOSALS IS
CONDITIONED UPON THE APPROVAL OF ALL OF THE DISTRIBUTION PROPOSALS. ACCORDINGLY,
FAILURE OF THE STOCKHOLDERS TO APPROVE ANY ONE OR MORE OF THE DISTRIBUTION
PROPOSALS WILL RESULT IN THE INEFFECTIVENESS OF ALL OF THE DISTRIBUTION
PROPOSALS.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL
OF THE DISTRIBUTION PROPOSALS.

A. (INSTRUCTION: Stockholders may vote on the Distribution Proposals either
as a group or for each Distribution Proposal separately. To vote on the
Distribution Proposals as a group, mark the appropriate box set forth
immediately below. To vote on the Distribution Proposals separately, see Box B,
below.)

<TABLE>
<S> <C> <C> <C> <C> <C>
FOR all Distribution Proposals / / AGAINST all Distribution Proposals / / ABSTAIN / /
</TABLE>

B. (INSTRUCTION: To vote on the Distribution Proposals separately, mark the
appropriate box set forth under each numbered Distribution Proposal One through
Nine. If you have elected to vote on the Distribution Proposals as a group by
checking the appropriate box set forth in Box A, above, you need not (and should
not) vote on the Distribution Proposals separately, and may proceed directly to
the section of the Proxy Card captioned "Additional Proposals." All proxies in
which a stockholder has elected to vote on the Distribution Proposals as a group
will be voted in accordance with such vote, whether or not votes are registered
for each Distribution Proposal separately.)

1. PROPOSAL ONE: Ratification of a special dividend, consisting of the
distribution (the "Distribution") to all holders of Promus's outstanding common
stock, on a one-for-two basis, of all outstanding shares of common stock of
Promus Hotel Corporation ("PHC").

FOR / / AGAINST / / ABSTAIN / /

2. PROPOSAL TWO: Approval of an amendment of the Certificate of Incorporation
of Promus, which will change the name of Promus to Harrah's Entertainment, Inc.

FOR / / AGAINST / / ABSTAIN / /

3. PROPOSAL THREE: Approval of certain amendments to the Promus 1990 Stock
Option Plan to increase by 4,500,000 the number of shares available under such
plan and to expand the rights of the Human Resources Committee of Promus's Board
of Directors (the "Promus HR Committee") to make certain adjustments in
connection with such plan upon the occurence of certain events.

FOR / / AGAINST / / ABSTAIN / /

4. PROPOSAL FOUR: Approval of certain amendments to the Promus 1990
Restricted Stock Plan to increase by 500,000 the number of shares available
under such plan and to expand the rights of the Promus HR Committee to make
certain adjustments in connection with such plan upon the occurrence of certain
events.

FOR / / AGAINST / / ABSTAIN / /

5. PROPOSAL FIVE: Approval and ratification of the adoption by PHC of the PHC
1995 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /

PLEASE SIGN AND DATE ON NEXT PAGE
<PAGE>
6. PROPOSAL SIX: Approval and ratification of the adoption by PHC of the PHC
1995 Restricted Stock Plan.

FOR / / AGAINST / / ABSTAIN / /

7. PROPOSAL SEVEN: Approval and ratification of the adoption by PHC of the
PHC Key Executive Officer Annual Incentive Plan.

FOR / / AGAINST / / ABSTAIN / /

8. PROPOSAL EIGHT: Approval and ratification of the adoption by PHC of the
PHC Nonmanagement Directors Stock Incentive Plan.

FOR / / AGAINST / / ABSTAIN / /

9. PROPOSAL NINE: Ratification of the election of the eleven directors of PHC
specified herein, who will be divided into three classes, the initial terms of
which will expire in 1996, 1997, and 1998.

FOR / / AGAINST / / ABSTAIN / /

ADDITIONAL PROPOSALS:

PROPOSALS TEN THROUGH FOURTEEN LISTED BELOW CONSTITUTE THE "ADDITIONAL
PROPOSALS." THE ADDITIONAL PROPOSALS ARE PROPOSED BY THE PROMUS BOARD OF
DIRECTORS. THE EFFECTIVENESS OF ANY ONE ADDITIONAL PROPOSAL IS NOT CONDITIONED
ON THE APPROVAL OF ANY OTHER ADDITIONAL PROPOSAL OR OF THE DISTRIBUTION
PROPOSALS.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSALS TEN, ELEVEN, TWELVE, THIRTEEN AND FOURTEEN.

10. PROPOSAL TEN: The election of Philip G. Satre, Boake A. Sells and Shirley
Young to Promus's Board of Directors as Class II directors for three-year terms
expiring at the 1998 Annual Meeting.

<TABLE>
<S> <C> <C> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary) / / to vote for all nominees listed below / /
</TABLE>

Nominees: Philip G. Satre, Boake A. Sells and Shirley Young

(INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name in the space provided below.

- - --------------------------------------------------------------------------------

11. PROPOSAL ELEVEN: Approval of an amendment to Promus's Certificate of
Incorporation permitting the redemption of Promus Common Stock in certain
circumstances.

FOR / / AGAINST / / ABSTAIN / /

12. PROPOSAL TWELVE: Approval of a Promus Key Executive Officer Annual
Incentive Plan.

FOR / / AGAINST / / ABSTAIN / /

13. PROPOSAL THIRTEEN: Approval of a Promus Nonmanagement Directors Stock
Incentive Plan.

FOR / / AGAINST / / ABSTAIN / /

14. PROPOSAL FOURTEEN: Ratification of the appointment of Arthur Andersen LLP
as independent auditors for Promus.

FOR / / AGAINST / / ABSTAIN / /

All shares of Promus Common Stock that are represented at the Annual Meeting
by properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated herein. IF NO INSTRUCTIONS FOR A PROPOSAL ARE INDICATED ON AN EXECUTED
PROXY CARD, SUCH PROXIES WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS THAT ARE SET FORTH HEREIN WITH RESPECT TO SUCH
PROPOSAL(S). ANY PROXY CARD THAT DOES NOT WITHHOLD AUTHORITY TO VOTE FOR THE
ELECTION OF ANY NOMINEE FOR PROMUS'S BOARD OF DIRECTORS SHALL BE DEEMED TO GRANT
SUCH AUTHORITY.

If you plan to attend the Annual Meeting of Shareholders, please mark the
following box and promptly return this Proxy Card. / /
PLEASE FILL IN DATE, SIGN AND
RETURN THIS PROXY IN THE
ACCOMPANYING ENVELOPE.

Dated: ,1995
Signature ____________________________________
Signature ____________________________________

Signatures of stockholders should
correspond exactly with the names
shown on the Proxy Card.
Attorneys, trustees, executors,
administrators, guardians and
others signing in a
representative capacity should
designate their full titles. All
joint owners should sign. If a
corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.