<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1999.
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
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to 240.14a-11(c) or 240.14a-12
HARRAH'S ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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/ / Fee paid with preliminary materials.
/ / Check box if any of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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(1) Amount previously paid:
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<PAGE>
[LOGO]
Harrah's Entertainment, Inc.
The Premier Name in Casino
Entertainment
1023 Cherry Road
Memphis, TN 38117 USA
March 26, 1999
To Our Stockholders:
You are cordially invited to attend the Harrah's Entertainment, Inc. Annual
Meeting of Stockholders which will be held on May 7, 1999, at 11:00 a.m. in the
Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue, Memphis,
Tennessee. All stockholders of record as of March 12, 1999, are entitled to vote
at the Annual Meeting.
The meeting will be held to: (a) elect three Class III directors and (b)
ratify the appointment of independent public accountants for 1999.
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/ Philip G. Satre
Philip G. Satre
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
NOTICE OF MEETING
The Annual Meeting of Stockholders of Harrah's Entertainment, Inc. will be
held in the Winegardner Auditorium--Dixon Gallery and Gardens, 4339 Park Avenue,
Memphis, Tennessee, on Friday, May 7, 1999, at 11:00 a.m. to:
1. elect three Class III directors;
2. ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the 1999 calendar year; and
3. transact such other business as may properly be brought before the
meeting or any adjournments or postponements thereof.
Stockholders of record at the close of business on March 12, 1999, are
entitled to vote. The list of stockholders will be available for examination for
the ten days prior to the meeting at the office of the Corporate Secretary,
Harrah's Entertainment, Inc., 1023 Cherry Road, Memphis, Tennessee 38117.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
/s/ Rebecca W. Ballou
Rebecca W. Ballou
SECRETARY
March 26, 1999
<PAGE>
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Harrah's Entertainment, Inc. ("Harrah's
Entertainment" or the "Company") from the holders of record of Harrah's
Entertainment common stock ("Common Stock") as of the close of business on March
12, 1999. The proxies are for use at the Annual Meeting of Stockholders to be
held on May 7, 1999, at 11:00 a.m. in the Winegardner Auditorium--Dixon Gallery
and Gardens, 4339 Park Avenue, Memphis, Tennessee, and at any adjournment or
postponement thereof (the "Annual Meeting").
The principal executive offices of Harrah's Entertainment are located at
1023 Cherry Road, Memphis, Tennessee 38117. A copy of the Company's 1998 Annual
Report to Stockholders, this Proxy Statement and accompanying proxy card are
first being mailed to stockholders on or about March 30, 1999.
VOTING RIGHTS AND PROXY INFORMATION
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to complete, sign, date and return the proxy card in the
accompanying envelope, which is postage paid if mailed in the United States. You
have three choices on each of the matters to be voted upon at the Annual
Meeting. Concerning the election of directors, by checking the appropriate box
on your proxy card, you may: (a) vote for all of the director nominees as a
group; (b) withhold authority to vote for all director nominees as a group; or
(c) vote for all director nominees as a group except those nominees you identify
on the appropriate line. Concerning the other matter to be voted upon, by
checking the appropriate box you may: (a) vote "For" the proposal; (b) vote
"Against" the proposal; or (c) "Abstain" from voting on the proposal.
Stockholders may vote by either completing and returning the enclosed proxy
card prior to the meeting, voting in person at the meeting, or submitting a
signed proxy card at the meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
You may revoke your proxy at any time before it is voted at the Annual
Meeting by (i) filing with the Corporate Secretary of Harrah's Entertainment, at
or before the Annual Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a subsequent proxy relating to the same
shares of Common Stock and delivering it to the Corporate Secretary of Harrah's
Entertainment at or before the Annual Meeting, or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy). You may also be
represented by another person present at the meeting by executing a form of
proxy designating such person to act on your behalf. Any written notice revoking
a proxy should be sent to the Corporate Secretary of Harrah's Entertainment at
1023 Cherry Road, Memphis, Tennessee 38117.
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. Unless otherwise specified on the proxy, the shares
represented by a signed proxy card will be voted FOR the proposals on the proxy
card and will be voted in the discretion of the persons named as proxies on
other business that may properly come before the meeting.
Under the Company's Bylaws and Delaware law, shares represented by proxies
that reflect either abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee which are represented at the Annual Meeting, but with respect
to which such broker or nominee is not empowered to vote on a particular
proposal) will be counted as shares that are present and entitled to vote for
purposes of
<PAGE>
determining the presence of a quorum. Under the Company's Bylaws, abstentions
will not be counted as votes for or against the proposals to be voted upon at
the Annual Meeting.
For participants in the Company's Employee Stock Ownership Plan, an
appointed Plan Trustee will vote any shares held for a participant's account in
accordance with the confidential voting instructions returned by the
participant. If the instructions are not returned by the participant, shares
held by the Company's Employee Stock Ownership Plan for such participant may be
voted by the Plan Trustees pursuant to the Plan document and applicable law.
SHARES ENTITLED TO VOTE AND REQUIRED TO VOTE
Only holders of record of shares of Common Stock as of the close of business
on March 12, 1999 (the "Annual Meeting Record Date") will be entitled to notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
At that date, there were 127,645,664 shares of Common Stock outstanding and
entitled to vote at the meeting. Such holders of shares of Common Stock are
entitled to one vote per share on any matter which may properly come before the
Annual Meeting.
The presence, either in person or by properly executed proxy, of a majority
of the shares of Common Stock outstanding on the Annual Meeting Record Date will
constitute a quorum and such quorum is necessary to permit action to be taken by
the stockholders at such meeting. The affirmative vote of the holders of at
least a majority of the outstanding shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote, excluding
abstentions, is required to approve each proposal. In the event that a quorum is
not present at the time the Annual Meeting is convened, or if for any other
reason the Company believes that additional time should be allowed for the
solicitation of proxies, the Company may adjourn the Annual Meeting with or
without a vote of the stockholders. If the Company proposes to adjourn the
Annual Meeting by a vote of the stockholders, the persons named in the enclosed
proxy will vote all shares of Common Stock for which they have voting authority
in favor of such adjournment.
BOARD OF DIRECTORS
GENERAL INFORMATION--ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of Directors
of not less than three nor more than seventeen directors and authorizes the
Board to determine the number within that range from time to time by the
affirmative vote of a majority of the directors then in office. The number of
directors currently determined to constitute the Board is twelve; the current
Board of Directors consists of eleven directors.
In accordance with the Certificate of Incorporation, the Company's Board of
Directors is divided into three classes with staggered terms. Each class of
directors is elected for a term of three years. Three Class III directors are to
be elected at the 1999 Annual Meeting for a three-year term ending in 2002.
The number of Class III directors is currently set at four. The Board has
named three nominees for election to Class III rather than four due to the fact
that no other individuals have been currently selected and are available for
election at this time. Proxies cannot be voted for a greater number of persons
than the number of nominees named.
2
<PAGE>
J. Kell Houssels, III was appointed by the Board in July 1998 to fill a
vacancy in Class II as described in "Directors: Class II, Term Expires 2001" on
page 6. Colin V. Reed, the Company's Chief Financial Officer and member of the
Office of the President, was appointed by the Board in December 1998 to fill a
vacancy in Class I.
NOMINEES
Upon recommendation of the Human Resources Committee of the Board of
Directors (the "Human Resources Committee"), the following individuals have been
nominated by the Board of Directors for re-election to Class III positions with
their term in office expiring in 2002: Susan Clark-Johnson, James B. Farley and
Walter J. Salmon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
FOREGOING NOMINEES AS DIRECTORS OF HARRAH'S ENTERTAINMENT.
In the event any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxy will be voted for any substitute nominee
selected by the current Board of Directors. Management has no reason to believe,
as of the date of this Proxy Statement, that the persons named will be unable or
will decline to serve if elected, and each nominee has informed the Company that
he or she consents to serve and will serve if elected.
OWNERSHIP OF HARRAH'S ENTERTAINMENT SECURITIES
Set forth in the following table is the beneficial ownership of Common Stock
as of January 31, 1999, for all current directors, including all nominees to the
Board of Directors, the five executive officers of the Company named in the
Summary Compensation Table on page 9, and all directors and executive officers
as a group.
<TABLE>
<CAPTION>
% OF SHARES
SHARES OF COMMON OUTSTANDING (NET OF
STOCK BENEFICIALLY TREASURY SHARES) AS
OWNED ON JANUARY 31, OF
NAME 1999(A)(B) JANUARY 31, 1999
- ---------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Susan Clark-Johnson................................................... 8,690 *
James B. Farley....................................................... 24,282 *
Joe M. Henson......................................................... 81,942 *
Ralph Horn............................................................ 26,210 *
J. Kell Houssels, III................................................. 1,000 *
Gary W. Loveman....................................................... 113,000 *
R. Brad Martin........................................................ 25,926 *
Ben C. Peternell...................................................... 413,342 *
Colin V. Reed......................................................... 436,805 *
E. O. Robinson, Jr.................................................... 190,705 *
Walter J. Salmon...................................................... 20,597 *
Philip G. Satre....................................................... 1,008,551 *
Boake A. Sells........................................................ 24,142 *
Eddie N. Williams..................................................... 15,099 *
All directors and executive officers as a group....................... 2,524,142 2.0%
</TABLE>
- ------------------------
* Indicates less than 1%
3
<PAGE>
(a) Shares listed in the table include shares allocated to accounts under the
Company's Savings and Retirement Plan as of December 31, 1998. The amounts
shown also include the following shares that may be acquired within 60 days
pursuant to outstanding stock options: Mr. Loveman, 33,500 shares; Mr.
Peternell, 145,175 shares; Mr. Reed, 256,262 shares; Mr. Robinson, 99,623
shares; Mr. Satre, 528,537 shares; all directors and executive officers as a
group, 1,235,523 shares.
(b) The amounts shown include the following rights to shares pursuant to the
Non-Management Directors Stock Incentive Plan and deferred at the election
of the directors: Ms. Clark-Johnson, 6,540 shares; Mr. Farley, 6,464 shares;
Mr. Henson, 6,942 shares; Mr. Horn, 6,110 shares; Mr. Martin, 5,726 shares;
Mr. Salmon, 5,996 shares; Mr. Sells, 6,142 shares; Mr. Williams, 3,049
shares.
NOMINEES: CLASS III, TERM EXPIRES 2002
<TABLE>
<S> <C>
SUSAN CLARK-JOHNSON
[LOGO] Ms. Clark-Johnson, 52, has been Senior Group President, Pacific Newspaper
Group, Gannett Co., Inc. since July 1994. She has been publisher of the
Reno Gazette-Journal since 1985. She was President of Gannett West
Newspaper Group from 1985 to 1994. She has been a director of the Company
since July 1994. She is Chairperson of the Audit Committee of the Board of
Directors.
JAMES B. FARLEY
[LOGO] Mr. Farley, 68, has been a director of The MONY Group, formerly Mutual Of
New York, since October 1988. He was Chairman of the Board of Mutual Of New
York from April 1989 to July 1993, and was Chief Executive Officer of that
company from April 1989 to January 1993. Mr. Farley is also a director of
Ashland, Inc. and The MONY Group. Mr. Farley has been a director of the
Company since February 1990. He is a member of the Executive and Human
Resources Committees of the Board of Directors.
WALTER J. SALMON
[LOGO] Mr. Salmon, 68, is Professor of Retailing, Emeritus at Harvard University.
He was the Stanley Roth, Sr. Professor of Retailing, Harvard University
from 1980 to June 1997. Mr. Salmon is also a director of Hannaford Brothers
Company, Luby's Cafeterias, Inc., The Neiman Marcus Group, The Quaker Oats
Company, Circuit City Stores, Inc., Cole National Corporation and PetsMart,
Inc. He has been a director of the Company since February 1990. He is a
member of the Audit Committee of the Board of Directors.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
DIRECTORS: CLASS I, TERM EXPIRES 2000
JOE M. HENSON
[LOGO] Mr. Henson, 65, a private investor, was a director and Chairman of the
Board of LEGENT Corporation from October 1989 until February 1995 and was a
director of that company and Chairman of its Executive Committee from
January 1995 to May 1995. He was Chief Executive Officer of LEGENT
Corporation from October 1989 to April 1992. He is also a director of
Marcam Solutions, Inc. He has been a director of the Company since April
1991. He is Chairman of the Human Resources Committee of the Board of
Directors.
R. BRAD MARTIN
[LOGO] Mr. Martin, 47, has been Chairman of the Board and Chief Executive Officer
of Saks Incorporated (formerly Proffitt's, Inc.) since 1989. He is also a
director of First Tennessee National Corporation. Mr. Martin has been a
director of the Company since July 1996. He is a member of the Executive
and Human Resources Committees of the Board of Directors.
COLIN V. REED
[LOGO] Mr. Reed, 51, has been a director of the Company and a member of the three-
executive Office of the President since December 1998. He has been the
Chief Financial Officer of the Company since April 1997 and Executive Vice
President of the Company since September 1995 and has served in several
other management positions with the Company since 1987. He was a member of
the Executive Committee of Harrah's Jazz Company and was a director, Senior
Vice President and Secretary of Harrah's Jazz Finance Corp., both of which
filed petitions under Chapter 11 of the United States Bankruptcy Code in
November 1995; on October 30, 1998, the Plan of Reorganization for both
companies was consummated. Mr. Reed is also a director of Sodak Gaming,
Inc., National Airlines, Inc. and JCC Holding Company. He is a member of
the Executive Committee of the Board of Directors.
EDDIE N. WILLIAMS
[LOGO] Mr. Williams, 66, has been President and Chief Executive Officer of the
Joint Center for Political and Economic Studies in Washington, D.C. since
1972. He is also a director of Riggs National Corporation of Washington,
D.C., and of JCC Holding Company (for which he has applied for approval by
the Louisiana Gaming Control Board). Mr. Williams has been a director of
the Company since October 1992. He is a member of the Audit Committee of
the Board of Directors. He was a member of the Executive Committee of
Harrah's Jazz Company and a director of Harrah's Jazz Finance Corp., both
of which filed petitions under Chapter 11 of the United States Bankruptcy
Code in November 1995; on October 30, 1998, the Plan of Reorganization for
both companies was consummated.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
DIRECTORS: CLASS II, TERM EXPIRES 2001
RALPH HORN
[LOGO] Mr. Horn, 58, has been Chairman of the Board of First Tennessee National
Corporation since January 1996 and Chief Executive Officer since April
1994. He has been a director and President of that company since July 1991,
and was Chief Operating Officer from 1991 to 1994. He has been a director
of Harrah's Entertainment since July 1995. He is also a director of
Mid-America Apartment Communities, Inc. He is a member of the Executive and
Audit Committees of the Board of Directors.
J. KELL HOUSSELS, III
[LOGO] Mr. Houssels, 49, has been a member of the Board of the Company since July
1998, when he was appointed to the Board to fill a vacancy in Class II
pursuant to his Employment Agreement with the Company dated as of June 1,
1998, and the Agreement and Plan of Merger dated as of December 18, 1997
among the Company, HEI Acquisition Corp. and Showboat, Inc. He was
President of the Company's Showboat Division from June 1998 through
December 1998. Mr. Houssels was a director of Showboat, Inc. from October
1983 through June 1998 and was President and Chief Executive Officer of
Showboat, Inc. from June 1994 through June 1998, when Showboat, Inc. merged
with a subsidiary of the Company. Mr. Houssels is also a director of Star
City Holdings Ltd. He is a member of the Executive and Audit Committees of
the Board of Directors.
PHILIP G. SATRE
[LOGO] Mr. Satre, 49, has been Chairman of the Board of the Company since January
1997, Chief Executive Officer since April 1994, and President since April
1991. He was President of the Company's Gaming Group from 1984 to August
1995. He has been a director of the Company since November 1989. He is the
Chairman of the Executive Committee of the Board. Mr. Satre is also a
director of Star City Holdings Ltd. He was Chairman of the Executive
Committee of Harrah's Jazz Company and a director and President of Harrah's
Jazz Finance Corp., both of which filed petitions under Chapter 11 of the
United States Bankruptcy Code in November 1995; on October 30, 1998, the
Plan of Reorganization for both companies was consummated.
BOAKE A. SELLS
[LOGO] Mr. Sells, 61, a private investor, was Chairman of the Board and Chief
Executive Officer of Revco D.S., Inc. from September 1987 to October 1992
and was President of that company from April 1988 to June 1992. He is also
a director of NCS Healthcare. He has been a director of the Company since
February 1990. He is a member of the Executive and Human Resources
Committees of the Board of Directors.
</TABLE>
6
<PAGE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met eight times during 1998. During the year, overall
attendance by incumbent directors averaged 91% at Board meetings and 92% at
Committee meetings.
The Harrah's Entertainment Board has three standing committees: (i)
Executive, (ii) Audit, and (iii) Human Resources.
During the intervals between meetings of the Board of Directors, the
Executive Committee, subject to specified limitations, may act on behalf of the
Board. Action taken by the Executive Committee is reported to the Board of
Directors at the Board's first meeting following such action. Without specific
delegated authority, the Executive Committee may not declare dividends except
current quarterly dividends not in excess of those last declared by the Board of
Directors and may not increase or decrease the number of directors or appoint
new directors. Unless within an overall plan previously approved by the Board of
Directors, action taken by the Executive Committee approving a transaction in
excess of $75 million is subject to revision or rescission by the Board of
Directors at the Board's first meeting following such action. The Executive
Committee met twice during 1998.
The Audit Committee, which met five times in 1998, (1) recommends annually
to the Board of Directors the independent public accountants for the Company and
for its direct or indirect subsidiaries; (2) meets with the independent public
accountants concerning their audit, their evaluation of the Company's financial
statements, accounting developments that may affect the Company and their
nonaudit services; (3) meets with the Company's management and the internal
auditors concerning similar matters; (4) reviews the Company's compliance
policies and performance; and (5) makes recommendations to all of the aforesaid
groups that it deems appropriate.
The Human Resources Committee met five times during 1998. The Human
Resources Committee acts as the nominating committee of the Board of Directors.
It considers and makes recommendations to the Board of Directors concerning the
size and composition of the Board, the number of non-management directors, the
qualifications of members and potential nominees for membership, the
compensation of directors, membership of committees of the Board and certain
administrative matters. The Human Resources Committee considers nominees
recommended by stockholders. Detailed resumes of business experience and
personal data of potential nominees may be submitted to the Corporate Secretary
at the address shown on the front page of this Proxy Statement.
The Human Resources Committee also approves the annual compensation of
corporate officers who are members of the Board of Directors and administers the
Company's bonus, restricted stock, stock option and other incentive compensation
plans. The Committee also makes various decisions and policy determinations in
connection with the Company's Savings and Retirement Plan and Employee Stock
Ownership Plan.
COMPENSATION OF DIRECTORS
Directors who are not employees of Harrah's Entertainment or its direct or
indirect subsidiaries earn a monthly fee of $3,167 plus $1,600 for each Board
meeting and $1,300 for each committee meeting they attend. Committee
chairpersons are paid an additional $900 for each committee meeting attended.
These fees are reviewed every three years by the Human Resources Committee of
the Board to determine if they are competitive.
7
<PAGE>
Under the provisions of the Company's Non-Management Directors Stock
Incentive Plan, a director automatically receives 50% of his or her director
fees in Common Stock in lieu of cash fees. Under the plan, which has a five-year
term that began May 1, 1996, each director had the right to make a one-time
election to receive the remaining 50% of his or her director fees in Common
Stock in lieu of cash fees for the duration of the plan. All current
participants except two made this election.
Grants of stock under the plan are made every three months for an amount of
stock, valued on the grant date, equal in value to 50% of the fees that the
director earned during the previous three-month grant period (or 100% of the
fees if the director elected to receive the remaining 50% of fees in stock).
Shares that are granted cannot be disposed of for six months after the grant. A
director may make an annual election to defer, until retirement, the grant of
shares to be made the ensuing plan year. Deferred shares are then granted upon
the director's retirement in a lump sum or in up to ten annual installments, as
may be elected by the director. These elections are made prior to each plan
year. However, a director may modify his or her choice as to a lump sum or
installments by submitting a request to change the election at least one full
fiscal year before retirement. This request is subject to approval of the Human
Resources Committee. The Company has created a trust to assure the payment of
benefits under the Non-Management Directors Stock Incentive Plan.
Directors may defer the receipt of all or a portion of their directors' fees
payable in cash pursuant to the provisions of the Company's Deferred
Compensation Plan, an unfunded compensation deferral program. Amounts deferred
may be paid in a lump sum or in installments, as selected by the director when
making the deferral election. Under this plan, amounts, while deferred, earn
interest at a rate based on a calculated average prime interest rate.
Until May 1, 1996, directors were eligible to participate in the Company's
other unfunded compensation deferral program, the Executive Deferred
Compensation Plan. Seven current non-management directors deferred part of their
cash fees under the Executive Deferred Compensation Plan prior to May 1, 1996
and currently have account balances under the Plan. See "Certain Employment
Arrangements" on page 12 for more information about the Executive Deferred
Compensation Plan.
Each non-management director is also provided with travel accident insurance
of $500,000 while traveling on behalf of the Company and the opportunity to
participate, while serving as a director, in the Company's standard group health
insurance plans. During 1998 the total premium cost for these insurance benefits
was approximately $3,599 per director participating in the plans. Each director
receiving these benefits incurred taxable income equal to the premium cost of
the group insurance.
In February 1990, each non-management director in office at that time was
granted 1,000 shares of restricted stock under the Company's Restricted Stock
Plan which replaced 1,000 shares of Holiday Corporation ("Holiday") restricted
stock awarded in April 1989. Each non-management director elected thereafter has
also been granted an award of 1,000 shares of restricted stock upon his or her
election. The foregoing awards, which have been adjusted for stock splits
occurring after the grant date, vest in equal installments over ten years. Upon
election to the Board of Directors, any new non-management director receives an
award of 1,000 restricted shares vesting in equal installments over ten years.
8
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The Summary Compensation Table below sets forth certain compensation
information concerning the Company's Chief Executive Officer and the four
additional most highly compensated executive officers.
HARRAH'S ENTERTAINMENT, INC.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- -----------------------
($)(1) ($)(2) (#)(3) ($)(4)
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARD(S) OPTIONS COMPENSATION
- -------------------------------------------- ---- ----------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip G. Satre............................. 1998 $ 823,723 $313,000 $100,766 $ 350,000 $339,242
Chairman and Chief Executive Officer; 1997 797,577 350,934 75,336 2,050,000 238,130 205,395
Office of the President 1996 511,500 6,478 350,271 189,406
Gary W. Loveman............................. 1998 326,923(5) 150,000 6,907 1,950,000 350,000
Chief Operating Officer; Office of the
President
Colin V. Reed............................... 1998 474,135 175,400 8,866 646,875 350,000 119,773
Chief Financial Officer; Office of the 1997 381,019 200,000 8,614 1,025,000 100,000 70,634
President 1996 330,625 3,366 152,484 65,300
Ben C. Peternell............................ 1998 265,651 85,000 4,551 224,005 48,070 322,951
Senior Vice President, Human Resources and 1997 254,948 92,000 7,255 202,188 50,000 210,700
Communications 1996 242,500 3,617 512,500 98,121 194,291
E. O. Robinson, Jr.......................... 1998 264,630 83,100 3,455 208,004 46,952 76,847
Senior Vice President and General Counsel 1997 255,937 80,000 5,598 202,188 50,000 78,953
1996 241,375 2,580 410,000 90,159 60,217
</TABLE>
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(1) Other Annual Compensation for Messrs. Reed, Peternell, Robinson and Satre in
1996 consists of earnings in excess of market rates on deferred compensation
payable during the current year but deferred at the election of the
executives. Other Annual Compensation for Mr. Satre includes (a) earnings in
excess of market rates on deferred compensation paid during the current year
but deferred at the election of Mr. Satre, (b) a rollover amount on deferred
compensation, and (c) an allocated amount for aircraft usage. Such amounts
were, respectively, as follows: for 1998, $19,893, $52,800 and $14,041; for
1997, $16,167, $38,455 and $14,420. Other Annual Compensation for Mr.
Loveman consists of amounts reimbursed for taxes. Other Annual Compensation
for perquisites for each other individual named above and for Mr. Satre for
1996 aggregated less than (a) 10% of the total annual salary and bonus for
each individual or (b) $50,000, whichever is lower. Accordingly, no such
amounts are included. The Company does not provide a fixed benefit pension
plan for its executives. The amounts set forth above for deferred
compensation earnings are retirement benefits
9
<PAGE>
which are a function of deferred income voluntarily contributed by the
executives based on an interest rate approved by the Human Resources
Committee.
(2) Awards of restricted stock were granted to the executives in 1996, 1997 and
1998 under a Time Accelerated Restricted Stock Award Program. The numbers of
shares awarded to Messrs. Loveman and Reed in 1998 were 75,000 and 25,000,
respectively. The numbers of shares awarded to Messrs. Peternell and
Robinson in 1997 were 10,000, and 10,000, respectively. The numbers of
shares awarded to Messrs. Satre, Reed, Peternell and Robinson in 1996 were
100,000, 50,000, 25,000 and 20,000, respectively. The shares will vest on
January 1, 2002, provided the executive continues in active employment with
the Company, and are eligible for earlier annual vesting beginning March 1,
1999, if the Company achieves certain financial performance targets. See
"Report of the Human Resources Committee on Executive Compensation." The
number of unvested shares held by Messrs. Satre, Loveman, Reed, Peternell
and Robinson as of December 31, 1998 was 100,000, 75,000, 75,000, 50,651 and
44,533, respectively. The market value of the unvested restricted stock
awards granted to Messrs. Satre, Loveman, Reed, Peternell and Robinson as of
December 31, 1998 was $1,586,750, $1,176,563, $1,176,563, $794,588 and
$698,611, respectively. Dividends are paid on restricted stock in the same
manner and to the same extent as dividends are paid on other shares of
Common Stock.
(3) The numbers shown are net of the cancellation of stock options in November
1996.
(4) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation other than such compensation paid during the current
year, and (b) matching contributions to the Company's Savings and Retirement
Plan. Such amounts, respectively, were as follows: For 1998: Mr. Satre,
$329,642 and $9,600; Mr. Reed, $110,173 and $9,600; Mr. Peternell, $313,351
and $9,600; and Mr. Robinson, $67,247 and $9,600; For 1997: Mr. Satre,
$195,895 and $9,500; Mr. Reed, $61,134 and $9,500; Mr. Peternell, $201,200
and $9,500; and Mr. Robinson, $36,706 and $9,500; For 1996: Mr. Satre,
$180,406 and $9,000; Mr. Reed, $56,300 and $9,000; Mr. Peternell, $185,291
and $9,000; and Mr. Robinson, $33,804 and $9,000. For Mr. Robinson such
compensation also includes reimbursements outside the Company's group
insurance plan in the amount of $32,747 in 1997 and $17,413 in 1996. As
stated in note (1) above, the Company does not provide a fixed benefit
pension plan for its executives, and the amounts set forth above are
retirement benefits which are a function of deferred income voluntarily
contributed by the executives based on an interest rate approved by the
Human Resources Committee.
(5) The amount shown is Mr. Loveman's salary from May 3 through December 31,
1998.
10
<PAGE>
The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during 1998, including information as to the potential realizable value of such
options at assumed annual rates of stock price appreciation for the ten-year
option terms. Additional information is provided concerning this potential
realizable value for all optionees receiving option grants in 1998, and for all
Harrah's Entertainment stockholders.
HARRAH'S ENTERTAINMENT, INC.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED ANNUAL
SECURITIES TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ---------------------------------------
NAME GRANTED(#)(2) FISCAL YEAR PRICE($/SH.) DATE 0% 5% 10%
- ------------------------- ------------- --------------- ----------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip G. Satre.......... 350,000 9.0% $ 14.3125 12/11/08 $ -- $ 3,150,369 $ 7,983,654
Gary W. Loveman.......... 175,000 4.5% $ 26.0000 05/05/08 $ -- $ 2,681,471 $ 7,251,528
175,000 4.5% 14.3125 12/11/08 -- 1,575,185 3,991,827
Colin V. Reed............ 350,000 9.0% 14.3125 12/11/08 -- 3,150,369 7,983,654
Ben C. Peternell......... 48,070 1.2% 14.3125 12/11/08 -- 432,681 1,096,498
E. O. Robinson, Jr....... 46,952 1.2% 14.3125 12/11/08 -- 422,618 1,070,996
All Stockholders(3)...... n/a n/a n/a n/a -- 1,021,570,919 2,588,861,281
All Optionees............ 3,891,119 100.00% 15.94(4) various -- 39,001,598 98,837,707
All Optionees as a
percent of All
Stockholders Gain...... n/a n/a n/a n/a n/a 3.82% 3.82%
</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 Harrah's Entertainment's
stock price. In the above table, Harrah's Entertainment did not use an
alternative formula for a grant date valuation, as Harrah's Entertainment is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors. There is no
assurance that the value realized by an officer will be at or near the value
estimated above.
(2) Employees vest in the right to exercise these options over a four-year
period. Options are subject to certain conditions, including compliance with
terms and conditions of the options as approved by the Human Resources
Committee. Options are nontransferable except by will or the laws of descent
and distribution. See "Report of the Human Resources Committee on Executive
Compensation" for more information concerning stock option awards.
(3) These amounts represent the appreciated value which common stockholders
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Common Stock outstanding at or near the option grant
dates.
(4) Represents the weighted average exercise price of options granted to all
optionees.
11
<PAGE>
The following table sets forth certain information concerning stock option
exercises during 1998 by the executive officers named in the Summary
Compensation Table and information concerning option values.
HARRAH'S ENTERTAINMENT, INC.
AGGREGATED OPTION EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1998(#) AT DECEMBER 31, 1998($)(1)
ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Philip G. Satre...................... -- $ -- 360,175 862,021 $ 1,383,578 $ 481,250
Gary W. Loveman...................... -- -- 0 350,000 0 240,625
Colin V. Reed........................ -- -- 184,394 573,110 682,468 481,250
Ben C. Peternell..................... -- -- 105,287 176,518 470,236 66,096
E. O. Robinson, Jr................... -- -- 59,725 169,429 122,247 64,559
</TABLE>
- ------------------------
(1) Amount represents the difference between the aggregated option price of
unexercised options and a $15.6875 market price on December 31, 1998, which
was the closing price of the Common Stock on the last trading day of 1998.
CERTAIN EMPLOYMENT ARRANGEMENTS
In connection with the expiration of Mr. Satre's current employment
agreement at the end of 1998, in December 1998 the Board of Directors approved a
renewal of his agreement from January 1, 1999 until December 31, 2002. Under
this agreement, Mr. Satre will serve as Chairman of the Board, President and
Chief Executive Officer at an annual salary of $900,000 subject to annual merit
salary reviews by the Human Resources Committee. The agreement provides that the
appointment of another individual as President will have no effect on the
agreement. The agreement also contains the terms and conditions described below
which are similar to provisions in his previous agreement.
Mr. Satre is entitled to participate in incentive compensation programs and
other benefits accorded to senior officers, including eligibility for bonus
compensation and long-term incentive compensation in the form of stock options
and restricted stock awards as approved by the Human Resources Committee. The
Board of Directors reserves the right to terminate the employment agreement with
or without cause, and Mr. Satre has the right to resign with good reason (as
defined).
If the agreement is terminated without cause or if he resigns for good
reason, Mr. Satre will continue in employee status as a consultant and will
receive two years salary continuation. His stock options and any shares of
restricted stock will continue in force during this period of time for vesting
purposes including 100% vesting upon a change in control, except that the annual
vesting of TARSAP shares would not occur unless the Human Resources Committee in
its discretion were to approve an exception based on its review of the
circumstances at that time. He will receive any bonus accrued up to the point of
termination without cause or resignation for good reason.
If the agreement is terminated for cause, Mr. Satre's unvested options and
any shares of unvested restricted stock will be cancelled and his salary will
end.
12
<PAGE>
Mr. Satre will be entitled to the retirement rate for his account under the
Executive Deferred Compensation Plan if he is terminated without cause, if he
resigns for good reason, or upon termination of employment after the expiration
of the agreement.
After the termination of his employment with the Company, Mr. Satre will be
entitled to receive group insurance benefits at the Company's cost for his
lifetime similar to the benefits provided to other retired management directors
of the Company. He will incur annual imputed taxable income equal to the cost of
this benefit.
If a change in control were to occur during his employment agreement and his
employment terminated voluntarily or involuntarily within two years after the
change in control, Mr. Satre would be entitled to receive the severance benefits
under his severance agreement (if then in force) in lieu of the salary and
rights under his employment agreement except that any right to lifetime health
insurance coverage earned under his employment agreement would continue in
force.
The agreement provides that Mr. Satre will not compete with the Company for
a period of two years after termination of his active full time employment
(which for this purpose does not include employee status as a consultant).
The Company also entered into employment agreements with the executive
officers named in the Summary Compensation Table pursuant to which they received
specified salaries (See the Table on page 9 for 1998 salary information),
subject to merit increases as may be approved by the Company. Salary increases
have been approved for 1999 for each of these officers.
These agreements expire March 31, 2002 (Mr. Loveman's agreement expires May
3, 2001). During the term of the employment agreement, each executive is
entitled to participate in incentive compensation programs and other benefits
accorded to senior officers, including eligibility for bonus compensation and
long-term incentive compensation in the form of stock options and restricted
stock awards as approved by the Human Resources Committee. The Company reserves
the right to terminate the employment agreement immediately with cause, or
without cause upon 30 days prior written notice. The executive has the right to
voluntarily resign upon 30 days prior written notice, or upon six months prior
written notice if the executive is going to work or act in competition with the
Company.
If the agreement is terminated by the Company without cause or is not
renewed by the Company upon its expiration, the executive will receive eighteen
months' salary continuation (12 months for one executive) during which time the
executive will not compete with the Company. Stock options granted after April
1, 1998 will generally continue in force during this period of time for vesting
purposes, including 100% vesting upon a change in control. (An exception
regarding change in control vesting applies to stock options granted to Messrs.
Satre, Reed and Loveman in December 1998 and January 1999. See "Report of the
Human Resources Committee on Executive Compensation" on page 17.) Annual vesting
of other stock options and restricted stock during the salary continuation and
noncompete period would be discretionary by the Company. Annual vesting of
TARSAP shares would not occur unless the Human Resources Committee in its
discretion were to approve an exception based on the recommendation of the
Company's Chief Executive Officer. Upon a change in control during the salary
continuation and noncompete period, unvested stock options and restricted stock
including TARSAP shares would vest.
If the executive attains specified age and service requirements and his
employment then terminates other than for cause, he will be entitled to lifetime
coverage under the Company's group health insurance plan. The executive will be
required to pay 20% of the premium for this coverage. The remaining premium
13
<PAGE>
will be paid by the Company and will be imputed taxable income to the executive.
This insurance coverage terminates if the executive competes with the Company.
The executive will earn the retirement rate under the EDCP if he attains
specified age and service requirements and if his employment is terminated
without cause or if the Company elects not to renew the Agreement upon its
expiration. The executive receives service credit under the EDCP for any salary
continuation and noncompete period.
If the agreement is terminated for cause or if the executive voluntarily
resigns, the executive's unvested options and any shares of unvested restricted
stock including TARSAP shares will be cancelled and his salary and benefits will
end. With respect to vesting of stock options, an exception applies to Mr.
Loveman: The next annual vesting of a limited number of his options will vest
after his resignation if he has two or more years of active service when he
resigns and the next TARSAP vesting would be at the discretion of the Human
Resources Committee.
If a change in control were to occur during the executive's active
employment and if the executive's severance agreement (described below) is in
force at that time, then the executive's rights under the
employment agreement would be superseded and replaced by his rights under the
severance agreement except that any right to lifetime health insurance coverage
earned by the executive under the employment agreement would continue in force.
On November 25, 1998, the Company and J. Kell Houssels, III entered into an
agreement for the termination, effective December 31, 1998, of Mr. Houssels'
employment agreement under which he served as President of the Company's
Showboat Division, and for the commencement of his one year consulting agreement
effective January 1, 1999. Pursuant to the termination provisions of his
employment agreement which fulfill severance rights that Mr. Houssels had under
his prior Showboat severance agreement, Mr. Houssels received a severance
payment of $1,100,000 on December 31, 1998, plus payment of accrued vacation and
other accrued employee benefits. Under his consulting agreement, Mr. Houssels is
required to perform services related to Showboat as assigned to him including
serving on the Board of Directors of Star City Holdings Ltd. in Australia. The
consulting agreement provides for a consulting fee of $800,000 for his services
during the term of the agreement. Mr. Houssels also serves on the Company's
Board of Directors, for which he receives, commencing January 1, 1999, the fees
of an outside director. He will receive group health, life and disability
insurance for a period of two years starting January 1, 1999.
The Company has entered into severance agreements with each of the executive
officers named in the Summary Compensation Table above. Each severance agreement
provides for a compensation payment (the "Compensation Payment") of three times
(1.5 times for one executive) the "annual compensation" (as defined in the
severance agreements) of such executive as well as a pro rata amount of the
executive's target bonus for the current bonus plan year and an accelerated
payment in cash of the value of all stock options and payment of any
compensation or awards payable to such executive under any incentive plan of the
Company (the "Accelerated Payments"), if the executive's employment is
terminated subsequent to a change in control or within six months before the
change in control under defined circumstances (collectively, the "Severance
Payments"), with certain exceptions described below. With respect to any
unvested restricted stock and stock options, such stock awards vest
automatically upon a change in control regardless of termination of the
employee.
The "annual compensation" for purposes of determining the Compensation
Payment under the severance agreement includes salary and bonus amounts but
excludes restricted stock vestings and compensation or dividends related to
restricted stock or stock options. A change in control is defined to
14
<PAGE>
occur whenever: (i) any person becomes the beneficial owner of 25% or more of
the Company's then outstanding voting securities regardless of comparative
voting power of such securities, (ii) within a two-year period, members of the
Board of Directors at the beginning of such period and approved successors no
longer constitute a majority of such board, or (iii) holders of securities
entitled to vote thereon approve a merger or consolidation (with certain
exceptions) or a plan of complete liquidation.
Mr. Satre is entitled to the Compensation Payments if, within two years
after a change in control of the Company, his employment terminates voluntarily
or involuntarily or if his employment is terminated without cause within six
months before a change in control under defined circumstances. The other
executives are entitled to the Compensation Payments after a change in control
if, within two years of the change in control, the executive's employment is
terminated involuntarily, or the executive resigns with good reason (as
defined), or if their employment is terminated without cause within six months
before a change in control under defined circumstances. Additionally, the
executives are entitled to the Compensation Payments if the executive's
employment terminates voluntarily during a 30 day period following the first
anniversary of the change in control. For the purpose of such voluntary
termination, a change in control is defined to occur whenever: (i) any person
becomes the beneficial owner of a majority of the Company's then outstanding
voting securities (rather than 25% or more) regardless of comparative voting
power of such securities, (ii) within a two-year period, members of the Board of
Directors at the beginning of such period and approved successors no longer
constitute a majority of such board, or (iii) holders of securities entitled to
vote thereon approve a merger or consolidation (with certain exceptions) or a
plan of complete liquidation.
The executives are not entitled to the Compensation Payments after a change
in control if their termination is: (i) by the Company for cause (as defined),
or, except for Mr. Satre, (ii) voluntary and not for good reason (as defined)
other than as described in the preceding paragraph.
In the event that an executive becomes entitled to Severance Payments which
are subject to a federal excise tax imposed on the executive (the "Excise Tax"),
the severance agreements provide that the Company shall pay the executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the executive after deduction of any Excise Tax on the Severance Payments and
all Excise Taxes and other taxes on the Gross-Up Payment, shall equal the
initial Severance Payments less normal taxes.
In addition, the severance agreements each provide that in the event of a
potential change in control of the Company (as defined below): (i) the Company
will deposit in escrow a sum of money sufficient to fund the Severance Payments
in the event of a change in control of the Company, and (ii) each executive will
agree to remain in the employ of the Company for a certain period of time. A
potential change in control of the Company is defined to occur whenever (i) the
Company enters into an agreement which would result in a change in control of
the Company, (ii) any person publicly announces an intention to take action
which would result in change of control of the Company, (iii) any person, other
than the trustee of an employee benefit plan of the Company, who is or becomes a
beneficial owner of 9.5% of the combined voting power of the Company's then
outstanding securities, increases his beneficial ownership of such securities by
5% or more resulting in 14.5% or more ownership, or (iv) the Board of Directors
adopts a resolution to the effect that a potential change in control of the
Company has occurred.
Each severance agreement has a term of one calendar year and is renewed
automatically each year starting January 1 unless the Company gives at least one
year prior written notice of the non-renewal. Each severance agreement provides
that if a change in control occurs during the original or extended term of the
15
<PAGE>
agreement, then the agreement will automatically continue in effect for a period
of 24 months beyond the month in which the change in control occurred.
The Compensation Payments and Accelerated Payments, respectively, that would
have been payable to the executive officers named in the Summary Compensation
Table for the Company on January 1, 1999, if a change in control occurred and if
such executives had been terminated as of that date, would have been
approximately: Mr. Satre, $3,454,710 and $3,692,153; Mr. Reed, $2,021,137 and
$2,374,656; Mr. Loveman, $750,000 and $1,521,875; Mr. Peternell, $1,159,547 and
$1,465,080; and Mr. Robinson, $1,087,834 and $1,016,105. Such Accelerated
Payments include the value of any unvested restricted stock and unexercised
stock options that would accelerate upon a change in control, based on the
market price of the Common Stock on December 31, 1998.
The Company's executive officers participate in the Executive Deferred
Compensation Plan under which amounts, while deferred, earn interest at a
termination rate (which cannot be lower than the Citibank prime rate) or at a
retirement rate (which cannot be lower than a specified formula rate), both of
which are approved annually by the Human Resources Committee. With respect to
deferrals made during 1998, the termination rate earned on these deferrals for
1998 was 8.5% and the retirement rate earned on these deferrals was 13.0%. In
October 1995, the Human Resources Committee approved a fixed retirement rate of
15.5% and a fixed termination rate of 8.5% which will accrue on account balances
under the Executive Deferred Compensation Plan as of December 31, 1995 (subject
to plan minimum rates). The interest rates on post-1995 deferrals will continue
to be approved annually by the Committee. The termination rate that will be
earned during 1999 for post-1995 deferrals has been approved at 8.5% and the
retirement rate has been approved at 13%. Both rates are subject to plan minimum
rate provisions.
The retirement rate is established as an incentive to encourage long-term
service. Therefore, only those participants meeting the plan's service
requirements will receive interest at the retirement rate.
In the event of a change in control, as defined in the Executive Deferred
Compensation Plan, a participant who is not yet entitled to the retirement rate
will receive such rate if his or her employment terminates within a 24 month
period after the change in control. Messrs. Satre, Loveman, Reed, and Peternell
are not yet entitled to the retirement rate. Consequently, if a change in
control as defined in the Executive Deferred Compensation Plan were to occur,
these executive officers will be entitled to such rate on their Executive
Deferred Compensation Plan account balances if their employment were to
terminate within 24 months after the change in control.
The Company has established an escrow fund and has deposited insurance
policies and cash proceeds received from insurance policies into the escrow
fund. This escrow fund assures the payment of benefits, as they accrue, to,
among others, the executive officers and non-management directors which will be
payable under the Executive Deferred Compensation Plan, or other deferred
compensation plans. Upon occurrence of a potential change in control of the
Company, the Company also will, upon the request of an executive, place into
this escrow fund the severance payments which become payable to the executive
only following a change in control. The Company intends to increase the escrow
fund, if necessary, to assure payment of future deferrals and also has the right
to increase the escrow fund to pay premiums on the insurance policies and
interest on policy loans. The escrow fund is subject to the claims of the
Company's creditors in the case of the Company's insolvency or bankruptcy.
16
<PAGE>
REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
The Human Resources Committee (referred to in this section as the
"Committee") is composed entirely of independent non-employee directors. The
Committee is responsible for approving the compensation of management directors,
reviewing the compensation of other executive officers, including the executive
officers named in the Summary Compensation Table, and approving stock awards,
including stock options and restricted stock, for each such officer.
EXECUTIVE COMPENSATION POLICY. The Company's executive compensation policy
is designed to attract and retain high caliber executives and motivate them to
superior performance for the benefit of the Company's stockholders. Under this
policy: (i) salaries are linked to competitive factors and salary increases are
based primarily on merit, (ii) the annual bonus program is competitively-based
and, subject to discretionary rights of the Committee, provides incentive
compensation based on the Company's annual financial performance, and (iii)
long-term compensation is tied to enhanced shareholder value and to the
Company's financial performance.
In summary, the Company's executive compensation policy is primarily
performance based, with a large portion of potential executive compensation at
risk. This policy not only extends to executive officers but also to key
managers and professional staff. Approximately 400 key employees participate in
the Company's Stock Option and Restricted Stock Plans.
The following discussion describes the basic components of executive
compensation in further detail.
CASH COMPENSATION COMPETITIVELY-BASED. Cash compensation for executive
officers (salary and annual bonus) is approximately comparable to the median
ranges of amounts paid to executives who are employed in similar positions in
companies primarily in service and entertainment industries with revenues
comparable to the Company's revenues. Various surveys prepared by national
compensation specialists are considered for purposes of determining company
salaries and cash bonus. There is no specific list of companies that are used to
make the comparison.
SALARY. Salaries are reviewed each year and merit increases are based
primarily on (i) an executive's accomplishment of various performance objectives
and standards and (ii) the current salary of the executive within the salary
range for his or her grade level. Greater weight is normally given to the
accomplishment of objectives and standards than to the executive's current
salary level within the range of his or her grade level, although specific
weights for each factor have not been established. In addition, salary can be
substantially increased if an executive officer is promoted to a higher position
with greater responsibilities.
The objectives of the Chief Executive Officer are approved annually by the
Committee and the full Board. These objectives vary from year to year but in
general relate to such matters as ensuring that the Company is competitively
positioned and organized to provide a high quality experience for its guests,
continuing to build Harrah's Entertainment, strategically and operationally, as
a leading company in the casino entertainment industry, achieving the Company's
annual business plan and its various financial goals, and increasing total
long-term shareholder value. The Committee's assessment of the Chief Executive
Officer's performance is based on a subjective review of performance against
these objectives. Specific weights are not assigned to any particular objective.
17
<PAGE>
In general, the objectives of the other executive officers are approved by
the Chief Executive Officer. These objectives generally relate to achieving
functional goals and financial objectives within the officer's assigned area of
responsibility. For example, an objective could relate to completion of a
project assigned to that executive's area of responsibility. The Chief Executive
Officer's assessment of the performance of the other executive officers is based
on a subjective review of each officer's performance. Specific weights are not
given to each objective in this assessment.
The Committee approves merit salary increases for the Chief Executive
Officer and the Chief Financial Officer. In general, the Chief Executive Officer
approves merit salary increases for the other executive officers and such
increases are reviewed by the Committee. Mr. Satre's salary was increased
effective January 1, 1999, when his employment contract was extended. See
"Certain Employment Arrangements" on page 12. Merit salary increases were
approved for the other executive officers during 1998.
KEY EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN. Certain senior executive
officers of the Company are eligible to participate in the Company's Key
Executive Officer Annual Incentive Plan (the "Key Executive Plan"), an annual
bonus plan designed to provide participating executive officers with incentive
compensation based upon the achievement of pre-established performance goals.
The Key Executive Plan, which has been approved by the Company's stockholders,
is designed to comply with Section 162(m) of the Internal Revenue Code which
limits the tax deductibility by the Company of compensation paid to officers
named in the compensation tables of the Proxy Statement to $1 million. Executive
officers at the corporate senior vice president level or above may be eligible
for the Key Executive Plan. Prior to, or at the time of, establishment of the
performance objectives for a calendar year, the Committee approves the specific
executive officers who will participate in the Key Executive Plan that year. No
executives participated in the Key Executive Plan for the plan year 1998, and
the Committee has determined that no executives will participate in 1999. As a
result, all executive officers participated in the Company's annual management
bonus plan during 1998, and all will do so in 1999. See "Annual Management Bonus
Plan" below.
ANNUAL MANAGEMENT BONUS PLAN. Under the Company's annual management bonus
plan (referred to in this subsection of the Proxy Statement as the "plan"), at
or near the beginning of each calendar year (a "plan year"), the Committee
approves a corporate bonus objective for the Company's executive officers (other
than those participating in the Key Executive Plan) and other participants in
the plan. This objective can pertain to operating income, pretax earnings,
return on sales, a combination of objectives, or another objective approved by
the Committee. The objective may change annually to support the business mission
of the Company. For the 1998 plan year, the objective approved by the Committee
was a specified target for operating income. This was defined as the Company's
operating income calculated before interest expense, extraordinary items,
property transactions, minority interests and variances from budgeted gaming
development and New Orleans reorganization expenses.
A Bonus Matrix, which has been approved by the Committee, has been
established for the grade levels of participating executive officers and other
plan participants that will result in the payment of a specified percentage of
the participant's salary if the target objective is achieved. This percentage of
salary increases or decreases on the Bonus Matrix in relation to bonus points
achieved. Bonus points are allocated according to a percentage of the target
objective achieved, with maximum bonus points awarded if a specified percentage
over target is achieved and no bonus points awarded if less than a specified
percentage of target is achieved. For the executive officers currently
participating in the annual bonus plan,
18
<PAGE>
the bonus for achieving target ranges from 50% to 60% of their base salary. For
performance above target, the bonus is increased on a graduated scale to a
maximum bonus of 100% to 120% of their base salary.
After the end of the plan year, the Committee determines the extent to which
the target objective has been achieved. A bonus pool for all corporate
management employees in the bonus plan is then established by multiplying (a) an
amount equal to the specific percentage of salary hypothetically payable to each
individual in the plan based on the objective achieved, by (b) each individual's
salary. These amounts are then added to create a corporate bonus pool for plan
participants.
The Committee has authority under the plan to adjust any objective or bonus
points where this is deemed necessary or appropriate relating to events at the
division or corporate level such as acquisitions or restructuring. The Chief
Executive Officer has authority to approve bonus exceptions and adjustments
relating to operating performance at the property level which exceptions and
adjustments will roll up to the division level. Any exceptions or adjustments at
the Corporate level require Committee approval. These decisions are subjective
and based generally on a review of the circumstances affecting results to
determine if any events were unusual or unforeseen.
The calculated bonuses of the executive officers participating in the plan
depend on the percentage of salary payable on the Bonus Matrix as well as an
assessment of their achievement of personal objectives (personal performance).
The personal objectives for bonuses are the same objectives that are evaluated
for purposes of merit salary increases as discussed above. The assessment of
personal objectives is a subjective evaluation by the Chief Executive Officer.
As a result of the assessment of personal objectives, the bonus of an executive
officer participating in the plan may be higher or lower than shown on the Bonus
Matrix. However, the total bonus pool established for all corporate employees
eligible for the plan cannot be exceeded.
The executive officers received bonuses for 1998 performance at less than
target level.
STOCK AWARDS. Awards of stock options and restricted stock are specifically
approved by the Committee for each executive officer and other plan participants
and are granted in the sole discretion of the Committee. Awards are currently
granted with a vesting period extending four years from the initial grant date.
The Committee may grant a combination of restricted stock and/or stock options
to officers and other key employees. Awards generally vest upon a change in
control (as defined).
Each executive officer is normally granted a stock award that will give such
officer an estimated dollar value of stock compensation vesting each year
targeted to equal a specific percentage of the officer's salary. This percentage
increases in line with the higher grade level of the officer. Based on a
subjective assessment of competitive and business factors, the Committee
determines an award that is suitable for providing an adequate incentive for
both performance and retention purposes. The dollar value of the award is based
on estimated annual increases in the market value of the Company's Common Stock
in the future to reach the targeted level of compensation. There is no certainty
or assurance that such increases will occur.
On December 12, 1998, based on the advice of an outside executive
compensation consulting firm, the Committee determined that the Company's
competitive environment relating to executive talent and the interests of the
Company's stockholders required that significantly greater equity incentives be
provided to the Company's Chief Executive Officer, Chief Financial Officer, and
Chief Operating Officer. The first step in implementing this decision were stock
option grants in December 1998. Mr. Satre received a grant
19
<PAGE>
of 350,000 options, Mr. Reed 350,000 options and Mr. Loveman 175,000 options.
These grants are included in the table on page 11. The second step in this
decision was a grant on January 4, 1999 of 350,000 stock options to Mr. Satre,
325,000 options to Mr. Loveman and 150,000 options to Mr. Reed. All of the
foregoing options vest in 25% annual installments over four years based on
continued employment including any period of salary continuation. The exercise
price of these options is the market price on the date of grant. If a change in
control were to occur within two years from the date of grant, 50% of the
unvested options would be forfeited and the remainder would become exercisable.
If a change in control were to occur more than two years after the grant date,
all the unvested options would become exercisable at that time.
The Committee has authority to oversee all aspects of stock option and
restricted stock awards and can modify the terms of grants, including change in
control provisions.
The executive officers participate in a Time Accelerated Restricted Stock
Award Plan (the "TARSAP Program") designed to motivate and retain the Company's
key executives in the Company's current competitive environment and with a view
to enhancing shareholder value. Under the TARSAP Program, certain key
executives, including all executive officers, were granted restricted stock
awards (the "Restricted Shares") under the Company's Restricted Stock Plan. The
Restricted Shares will vest 100% on January 1, 2002 provided the executive
continues in active employment with the Company.
The Restricted Shares are eligible for earlier annual performance vesting
beginning March 1, 1999 if the Company achieves financial performance targets
recommended by the Committee and approved by the Board of Directors. The
performance vesting schedule, which has been approved by the Committee and the
Board of Directors, provides for a potential cumulative vest of 20% to 40% of
the Restricted Shares by March 1, 1999; 50% to 70% by March 1, 2000; and 80% to
100% by March 1, 2001. The performance schedule can be modified upon
recommendation of the Committee and approval of the Board. The performance
targets for 1998 approved by the Committee and the Board related to earnings per
share. Performance targets for future years will be established by the Committee
and approved by the Board at later dates. No TARSAP shares vested on March 1,
1999.
The Restricted Shares will vest upon a change in control (as defined) in the
same manner as other grants under the Restricted Stock Plan.
The Committee has broad flexibility to oversee and amend the TARSAP Program
and, with Board approval, can modify performance criteria and specific financial
targets. The Committee also has the right to make exceptions based on unusual
factors or events. However, the mandatory vesting date of January 1, 2002 cannot
be extended. See Summary Compensation Table, page 9, for more information on
grants under the TARSAP Program to named executive officers.
The amount of a stock option or restricted stock award is not dependent on
past corporate performance nor on the amount of options or restricted stock
previously granted to an executive officer. The actual value of the stock
compensation vesting each year is dependent on the market value of Common Stock.
For executive officers, the Company has no other long-term incentive plans under
which future awards will be made.
POLICY CONCERNING TAX DEDUCTIBILITY. The Committee's policy with respect to
qualifying compensation paid to its executive officers for tax deductibility
purposes is that executive compensation plans will generally be designed and
implemented to ensure full tax deductibility. However, the Committee reserves
20
<PAGE>
the right to approve the payment of non-deductible compensation to its executive
officers when the Committee deems such compensation necessary for competitive
reasons or to attract or retain a key executive, or where achieving full tax
deductibility would be considered disadvantageous to the best interests of the
Company. The Company's Key Executive Plan is intended to comply with Section
162(m) of the Code so that annual bonuses will be fully tax deductible for the
Company. See "Key Executive Officer Annual Incentive Plan" above.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. Mr. Satre's base salary is based on
his performance, his responsibilities and the compensation levels for comparable
positions in other companies in the casino entertainment industry. Under his
employment agreement, he is entitled to merit salary increases and to
participate in the incentive programs provided to senior officers. Mr. Satre's
merit salary increase and his incentive awards for 1998 were determined in
accordance with the Committee's policies described in this report. The stock
options awarded to Mr. Satre in 1998 are described in the table titled "Option
Grants in the Last Fiscal Year," on page 11. The options were awarded in
accordance with the Committee's policies as described in this report.
Human Resources Committee
Joe M. Henson (Chairman)
James B. Farley
R. Brad Martin
Boake A. Sells
21
<PAGE>
PERFORMANCE OF HARRAH'S ENTERTAINMENT COMMON STOCK AND DIVIDENDS
Set forth below is a line graph comparing the total cumulative return of the
Company's Common Stock to (a) the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), and (b) the Dow Jones Casinos Index. The graph assumes reinvestment
of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG HARRAH'S ENTERTAINMENT, INC., THE S & P 500 INDEX, AND
THE DOW JONES CASINOS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
HARRAH'S ENTERTAINMENT, INC. S & P 500 DOW JONES CASINOS
12/93 100 100 100
12/94 67 101 77
12/95 75 139 102
12/96 61 171 111
12/97 58 229 98
12/98 48 294 67
</TABLE>
* $100 INVESTED ON DECEMBER 31, 1993 IN STOCK OR INDEX--INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDED DECEMBER 31.
- ------------------------------
(1) The line graph for Harrah's Entertainment, Inc. assumes that $100 was
invested in the common stock of The Promus Companies Incorporated ("Promus")
on December 31, 1993. It has been adjusted for stock splits. The line graph
also assumes reinvestment in shares of Harrah's Entertainment, Inc. of the
market value of shares of Promus Hotel Corporation which were distributed to
Promus stockholders in the form of a special dividend on June 30, 1995, in a
spin-off of Promus's hotel business, at which time Promus changed its name
to Harrah's Entertainment, Inc.
(2) The Dow Jones Casinos Index was formerly referred to as the Dow Jones
Entertainment & Leisure-Casinos Index.
22
<PAGE>
CERTAIN TRANSACTIONS
Ralph Horn, a director of Harrah's Entertainment, is Chairman, Chief
Executive Officer and President of First Tennessee National Corporation, the
parent company of First Tennessee Bank National Association ("First Tennessee").
First Tennessee is one of the lending banks under a loan agreement that Harrah's
Entertainment has with several banks (the "Bank Facility"). Pursuant to the Bank
Facility, First Tennessee has committed to loan to the Company's subsidiary,
Harrah's Operating Company, Inc., $10,844,536, representing a 0.72% share of the
total commitment covered by the Bank Facility. As of December 31, 1998,
$7,295,108 of this amount was outstanding in loans and in unfunded standby
letters of credit. In connection with this commitment, First Tennessee received
interest and fees of $585,861 during 1998. Also, the Company is party to a
Master Repurchase Agreement whereby the Company invests funds with First
Tennessee on behalf of one of the Company's joint ventures. The average amount
invested pursuant to such Agreement at the end of each month during 1998 was
$6,094,766. As of December 31, 1998, the amount was $5,373,500. Interest
received on such investment during 1998 was approximately $324,855.
Certain direct and indirect subsidiaries of the Company maintained deposit
accounts with First Tennessee during 1998. The average ledger balance during
1998 was $2,321,575. Deposit account service fees paid to First Tennessee in
excess of the earning credit assigned to these accounts were approximately
$119,059 during 1998.
First Tennessee provides ATM services to the Company's Tunica, Mississippi
casino and received net revenues of $67,000 during 1998.
After reviewing proposals from several vendors, the Company selected First
Tennessee to offer a co-branded credit card program for Harrah's customers. The
program was launched in late 1997. First Tennessee pays the Company a new card
fee for each new card issued and a portion of the ongoing revenue generated by
the credit card accounts. The Company received fees from First Tennessee of
$640,689 during 1998.
Susan Clark-Johnson, a director of Harrah's Entertainment, is Senior Group
President, Pacific Newspaper Group, Gannett Co., Inc. The Company and its
subsidiaries paid Gannett's Pacific Newspaper Group $293,050 for retail and
classified newspaper advertising during 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file with the SEC initial reports of ownership and reports of
changes in ownership of Company common stock and to furnish the Company with
copies of all forms filed. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, during the past fiscal year all Section
16(a) filing requirements applicable to the Company's officers and directors
were met.
23
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to stockholder approval, the Board of Directors, acting on the
recommendation of its Audit Committee, has appointed Arthur Andersen LLP, a firm
of independent public accountants, as auditors, to examine and report to
stockholders on the consolidated financial statements of the Company and its
subsidiaries for the year 1999. 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 Board of Directors in appointing Arthur Andersen LLP as
the Company's auditors for the year 1999 is subject to ratification by an
affirmative vote of the holders of a majority of shares of Common Stock present
in person or represented by proxy at the Annual Meeting, excluding abstentions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS FOR THE YEAR 1999.
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The table below sets forth to the best of the Company's knowledge certain
information regarding the beneficial owners of more than 5% of the Common Stock
as of December 31, 1998. (The number of outstanding shares of Common Stock
increased approximately 24% in January 1999, when the Company acquired Rio Hotel
& Casino, Inc.)
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ---------------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Trustees of the Harrah's Entertainment, Inc....................................... 6,232,157(a) 6.2%
Savings and Retirement Plan
1023 Cherry Road
Memphis, TN 38117
State Street Bank and Trust Company............................................... 8,787,389(b) 8.7%
225 Franklin Street
Boston, MA 02110
Mackay-Shields Financial Corporation.............................................. 7,090,430(c) 7.0%
9 West 57th Street
New York, NY 10019
Massachusetts Financial Services Company.......................................... 6,230,281(d) 6.1%
500 Boylston Street
Boston, MA 02116
Oppenheimer Capital............................................................... 8,364,031(e) 8.3%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Trimark Financial Corporation..................................................... 6,621,400(f) 6.5%
One First Canadian Place, Suite 5600
P. O. Box 487
Toronto, Canada M5X 1E5
</TABLE>
24
<PAGE>
- ------------------------
(a) The trustees of the Harrah's Entertainment, Inc. Savings and Retirement Plan
(the "Plan") have sole voting power of the shares listed except that each
participant in the Plan has the right, to the extent of shares of Common
Stock allocated to the participant's account in the Plan (including vested
and unvested amounts), to direct the trustees in writing as to how to
respond to a solicitation of proxies opposed by management of the Company.
(The Plan has been amended effective June 1, 1999 to give participants in
the Company Stock Fund of the Plan the right to direct the trustees how to
vote the shares of Common Stock allocated to each participant's account in
the Plan.) The trustees do not have shared voting power, sole investment
power, or shared investment power over any of the shares listed. The
participants in the Plan have the right to direct the disposition of the
securities held in their respective accounts pursuant to the terms of the
Plan and to direct the trustees in writing as to how to respond to a tender
offer evidenced by the filing of a statement on Schedule 14D-1 or similar
transaction. No one participant has such rights with respect to more than 5%
of the Company's Common Stock. The sources of this information are official
plan documents and a Schedule 13G filed by the trustees of the Plan with the
Securities and Exchange Commission and dated February 9, 1999. Ownership
(number of shares and percent of shares outstanding) is reported as of
December 31, 1998.
(b) State Street Bank and Trust Company ("State Street") is a bank as defined in
Section 3(A)(6) of the Securities Exchange Act of 1934. Acting in various
fiduciary capacities, State Street has reported beneficial ownership of the
shares listed, including sole voting power over 1,320,223 shares, shared
voting power over 7,366,716 shares, sole dispositive power over 2,103,823
shares, and shared dispositive power over 6,683,566 shares. The source of
this information is a Schedule 13G filed by State Street with the Securities
and Exchange Commission and dated February 9, 1999. Ownership (number of
shares and percent of shares outstanding) is reported as of December 31,
1998. The shares reported by State Street include those reported as
beneficially owned by the Trustees of the Harrah's Entertainment, Inc.
Savings and Retirement Plan in a Schedule 13G dated February 9, 1999 (see
note (a) above).
(c) Mackay-Shields Financial Corporation ("Mackay-Shields") is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940.
Filing on behalf of itself and its parent, New York Life Insurance Company
("NYLIC"), Mackay-Shields has reported beneficial ownership of the shares
listed, including shared voting power and shared dispositive power with
respect to 7,087,500 shares, and sole voting power and sole dispositive
power in NYLIC with respect to 2,930 shares. Mackay-Shields has reported
that clients of the investment manager and NYLIC have the right to receive
and the ultimate power to direct the receipt of dividends from, or the
proceeds of the sale of, such shares, that no interest of any such client
relates to more than 5% of the class and that NYLIC has the power to direct
dividends or proceeds for its subsidiaries. The source of this information
is a Schedule 13G filed by Mackay-Shields with the Securities and Exchange
Commission and dated February 8, 1999. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1998.
(d) 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 6,208,181 shares and has
sole dispositive power as to the 6,230,281 shares listed. The source of this
information is a Schedule 13G filed by MFS with the Securities and Exchange
Commission and dated February 11, 1999. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1998.
25
<PAGE>
(e) Oppenheimer Capital ("Oppenheimer"), a registered investment adviser, has
reported, on behalf of itself and/or certain investment advisory clients or
discretionary accounts, collective beneficial ownership of the shares
listed, including shared voting power and shared dispositive power with
respect to all such shares. The source of this information is a Schedule 13G
filed by Oppenheimer with the Securities and Exchange Commission and dated
February 9, 1999. Ownership (number of shares and percent of shares
outstanding) is reported as of December 31, 1998.
(f) Trimark Financial Corporation ("Trimark"), a corporation incorporated under
the laws of Ontario, Canada, has reported beneficial ownership, including
sole voting power and sole dispositive power, of the shares listed. Trimark
has reported that certain Trimark mutual funds (the "Funds"), which are
trusts organized under the laws of Ontario, Canada, are owners of record of
a portion of the shares listed, and that Trimark Investment Management Inc.
("TIMI"), a corporation incorporated under the laws of Canada, is a manager
and trustee of the Funds. TIMI is qualified to act as an investment adviser
and manager of the Funds in the province of Ontario pursuant to a
registration under the Securities Act (Ontario). Trimark owns 100% of the
voting equity securities of TIMI, and conse-
quently may be deemed to be the beneficial owner of such shares. The source
of this information is a Schedule 13G filed by Trimark with the Securities
and Exchange Commission and dated February 1, 1999. Ownership (number of
shares and percent of shares outstanding) is reported as of December 31,
1998.
OTHER MATTERS AT THE MEETING
The Board of Directors does not know of any matters to be presented at the
meeting other than those mentioned in this Proxy Statement. If any other matters
are properly brought before the meeting, it is intended that the proxies will be
voted in accordance with the best judgment of the person or persons voting such
proxies.
COST OF SOLICITATION
The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid by
the Company. In addition to the use of mails, certain directors, officers or
employees of the Company and its subsidiaries, who receive no compensation for
their services other than their regular salaries, may solicit and tabulate
proxies. The Company has retained D.F. King & Co. to assist in the solicitation
of proxies with respect to shares of Common Stock held of record by brokers,
nominees and institutions. The estimated cost of the services of D.F. King & Co.
is $9,000, plus expenses.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
For any proposal to be considered for inclusion in the Company's proxy
statement and form of proxy for submission to the stockholders at the Harrah's
Entertainment 2000 Annual Meeting, it must comply with the requirements of Rule
14a-8 under the Exchange Act and be submitted in writing by notice delivered or
mailed by first-class United States mail, postage prepaid, to the Corporate
Secretary, Harrah's Entertainment, Inc., 1023 Cherry Road, Memphis, Tennessee
38117, and must be received no later than November 19, 1999. In addition, the
Company's Bylaws provide for notice procedures to recommend a person for
nomination as a director and to propose business to be considered by
stockholders at a meeting. The Company will have discretionary authority to vote
shares under proxies it solicits concerning matters
26
<PAGE>
of which it did not have notice by a certain date, and, to the extent permitted
by law, on any other business that may properly come before the Annual Meeting
and any adjournments. Pursuant to the Company's bylaws, that notice date
regarding the Company's 2000 Annual Meeting of Stockholders is currently
February 27, 2000. The chairman of the meeting may refuse to acknowledge the
introduction of any stockholder proposal not made in compliance with the
foregoing procedures.
By Direction of the Board of Directors
/s/ Rebecca W. Ballou
Rebecca W. Ballou
Secretary
Memphis, Tennessee
March 26, 1999
27
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 7, 1999
The undersigned hereby appoints Colin V. Reed, E. O. Robinson, Jr. and
Philip G. Satre, and each of them, his or her attorneys and agents, with full
power of substitution, to vote as proxy for the undersigned at the Annual
Meeting of Stockholders of Harrah's Entertainment, Inc. (the "Company") to be
held on May 7, 1999 at 11:00 a.m. in the Winegardner Auditorium - Dixon Gallery
and Gardens, 4339 Park Avenue, Memphis, Tennessee and at any adjournment or
postponement thereof, according to the number of votes the undersigned would be
entitled to vote if personally present on the proposals set forth on the reverse
side of this card (and as more particularly set forth in the Notice of Meeting
enclosed herewith) and in accordance with their discretion on any other matters
that may properly come before the meeting or any adjournment or postponement
thereof. This proxy also constitutes confidential voting instructions for the
use of participants in the Company's Employee Stock Ownership Plan.
All shares of the Company's Common Stock that are represented at the
Annual Meeting by properly executed proxies received prior to or at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions indicated on the reverse side of this card. If no instructions
for a proposal are indicated on an executed Proxy Card, such proxies will be
voted in accordance with the recommendation of the Board of Directors as set
forth herein with respect to such proposal.
PLEASE SIGN AND DATE ON REVERSE SIDE
HARRAH'S ENTERTAINMENT, INC.
P.O. BOX 11025
NEW YORK, N.Y. 10205-0025
<PAGE>
(LOGO)
Harrah's Entertainment, Inc.
Annual Meeting of Stockholders
May 7, 1999 at 11:00 a.m.
Winegardner Auditorium
Dixon Gallery and Gardens
4339 Park Avenue
Memphis, Tennessee
Detach Proxy Card Here
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR:
- --------------------------------------------------------------------------------
1. Election of Class III directors for three-year terms expiring at the 2002
Annual Meeting.
FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
nominees listed below / /
*EXCEPTIONS / /
NOMINEES: Susan Clark-Johnson, James B. Farley, and Walter J. Salmon
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below. IF AUTHORITY TO VOTE FOR ANY NOMINEE IS NOT WITHHELD, THIS
SIGNED PROXY WILL BE DEEMED TO GRANT AUTHORITY TO VOTE FOR THE NOMINEE.)
*Exceptions
----------------------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the Company for the 1999 calendar year.
FOR / / AGAINST / / ABSTAIN / /
---------------------------------------------------------------------------
If you plan to attend the Annual Meeting of Stockholders, please mark the
following box and promptly return this Proxy Card. / /
Change of Address / /
Mark Here
Signature of stockholders should correspond exactly with the
names shown on the Proxy Card. Attorneys, trustees,
executors, administrators, guardians and others signing in a
representative capacity should designate their full titles.
If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. Joint
owners should both sign.
Dated_________________________________________, 1999
Signature____________________________________________
Signature____________________________________________
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning It In the Enclosed Envelope
