PROMUS HOTEL CORP, DEF 14A, 1996-03-08

PROMUS HOTEL CORP
DEF 14A, 1996-03-08

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[Promus Logo]

PROMUS HOTEL CORPORATION
755 CROSSOVER LANE
MEMPHIS, TN 38117

March 15, 1996

To Our Stockholders:

You are cordially invited to attend the Promus Hotel Corporation Annual
Meeting of Stockholders which will be held on Wednesday, April 24, 1996 at 11:00
a.m. at the Embassy Hall, Embassy Suites hotel, 1022 South Shady Grove Road,
Memphis, Tennessee. All stockholders of record as of March 1, 1996 are entitled
to vote at the Annual Meeting.

The meeting will be held to elect three Class I directors and ratify the
appointment of the Company's independent public accountants for the 1996
calendar year.

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 and desire to vote your
shares personally, your form of proxy will be withheld from voting upon your
request prior to the meeting. You may vote in person even if you have sent in
your proxy card.

Sincerely,

/s/ Michael D. Rose
Michael D. Rose
Chairman of the Board

<PAGE>

PROMUS HOTEL CORPORATION

NOTICE OF MEETING

The Annual Meeting of Stockholders of Promus Hotel Corporation will be held
at Embassy Hall, Embassy Suites hotel, 1022 South Shady Grove Road, Memphis,
Tennessee, on Wednesday, April 24, 1996, at 11:00 a.m., local time, to:

1. elect three Class I directors;

2. ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the 1996 calendar year; and

3. transact such other business as may properly be brought before the
meeting or any adjournments thereof.

Stockholders of record at the close of business on March 1, 1996 are
entitled to vote. The list of stockholders will be available for examination for
the ten days prior to the meeting at Promus Hotel Corporation, Corporate
Secretary's Office, 755 Crossover Lane, Memphis, Tennessee 38117.

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

Ralph B. Lake
Secretary

March 15, 1996

<PAGE>

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Promus Hotel Corporation ("Promus" or the
"Company") for use at the Annual Meeting of Stockholders to be held on April 24,
1996 at 11:00 a.m., local time, at Embassy Hall, Embassy Suites hotel, 1022
South Shady Grove Road, Memphis, Tennessee, and at any adjournment thereof (the
"Annual Meeting").

The Company's principal executive offices are located at 755 Crossover Lane,
Memphis, Tennessee 38117. A copy of the Company's 1995 Annual Report to
Stockholders, this Proxy Statement and accompanying proxy card will be first
mailed to stockholders on approximately March 21, 1996.

VOTING PROCEDURES

At the Annual Meeting, you will be asked to consider and vote upon (a) the
election of Debra J. Fields, C. Warren Neel, and David C. Sullivan as Class I
directors on the Company's Board of Directors and (b) the ratification of the
appointment of Arthur Andersen LLP as independent auditors of the Company.

A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to sign, date and return the proxy card in the accompanying
envelope, which is postage paid if mailed in the United States.

You have three choices on each of the matters to be voted upon at the Annual
Meeting. As to the election of directors, 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 ratification
of the Company's independent accountants for 1996, you may, (a) vote "For" the
item; (b) vote "Against" the item; or (c) "Abstain" from voting on the item. As
discussed below, if you "Abstain" from voting, it will have the effect of a vote
"Against" the item if a quorum is present.

Stockholders may vote by either completing and returning the enclosed proxy
card prior to the meeting, voting in person at the meeting, or submitting a
signed proxy card at the meeting.

YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.

You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering a written notice of revocation to the Secretary of
the Company, by submitting a later dated proxy, or by attending the meeting and
voting in person. Attendance at the meeting will not, by itself, constitute
revocation of the proxy. You may also be represented by another person present
at the meeting by executing a form of proxy designating such person to act on
your behalf.

Each unrevoked proxy card properly signed and received prior to the close of
the meeting will be voted as indicated. Unless otherwise specified on the proxy,
the shares represented by a signed proxy card will be voted FOR the election of
all director nominees and FOR the approval of the ratification of Arthur
Andersen LLP as the Company's independent public accountants for 1996.

If a proxy card indicates an abstention or a broker non-vote on a particular
matter, then the shares represented by such proxy will be counted for quorum
purposes. If a quorum is present, an abstention will have the effect of a vote
against the matter.

<PAGE>

The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of Promus common stock ("Common Stock") outstanding on March 1, 1996
will constitute a quorum.

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

The Company's transfer agent, Continental Transfer and Trust Company, will
tabulate the votes. A representative of the transfer agent will be appointed as
inspector at the Annual Meeting to count all votes and ballots and perform the
other duties required of an inspector.

SHARES ENTITLED TO VOTE AND REQUIRED VOTE

Stockholders of record at the close of business on March 1, 1996 are
entitled to vote at the meeting. At that date, 51,380,405 shares of Common Stock
were outstanding. The affirmative vote of the holders of a majority of the
shares of Common Stock that are represented in person or by proxy at the meeting
and entitled to vote is required to approve each matter to be voted on at the
meeting. Each share of Common Stock is entitled to one vote.

BOARD OF DIRECTORS

GENERAL INFORMATION--ELECTION OF DIRECTORS

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides for a Board of Directors of not less
than three and not more than 17 directors and authorizes the Board to determine
the number within that range from time to time by the affirmative vote of a
majority of the directors then in office. The current Board of Directors
consists of 11 directors.

In accordance with the Certificate of Incorporation, the Company's Board of
Directors is divided into three classes with staggered three-year terms. Three
Class I directors are to be elected at the 1996 Annual Meeting for a three-year
term ending in 1999. Upon recommendation of the Human Resources Committee of the
Board of Directors (the "Human Resources Committee"), Debra J. Fields, C. Warren
Neel and David C. Sullivan have been nominated by the Board of Directors for
election to these Class I positions.

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

OWNERSHIP OF THE CAPITAL STOCK OF THE COMPANY

Set forth in the following table is the beneficial ownership of Promus
Common Stock as of March 6, 1996 for all current directors of the Company,
including all nominees to the Board of Directors, the five executive officers of
the Company named on page 14, all directors and executive officers as a group,
and to the best of the Company's knowledge, beneficial owners of 5% or more of
Promus Common Stock.

<PAGE>

<TABLE>
<CAPTION>
% OF SHARES
OUTSTANDING (NET OF
TREASURY SHARES) AS
NAME AMOUNT OF SHARES (A) OF MARCH 6, 1996
- ----------------------------------------------- -------------------- -------------------
<S> <C> <C>
U. Bertram Ellis, Jr........................... 1,000 *
Debra J. Fields................................ 1,000 *
Christopher W. Hart............................ 3,100 *
C. Warren Neel................................. 1,600 *
Ben C. Peternell............................... 126,089(b) *
Michael D. Rose................................ 837,305(c)(d) 1.6%
Michael I. Roth................................ 6,005 *
Raymond E. Schultz............................. 173,711 *
Jay Stein...................................... 51,000 *
David C. Sullivan.............................. 54,717 *
Ronald Terry................................... 49,793(e) *
All directors and executive
officers as a group.......................... 1,437,667 2.8%
Massachusetts Financial Services Company....... 6,441,216(f) 12.5%
500 Boylston Street
Boston, MA 02116
The Prudential Insurance Company of America.... 5,272,740(g) 10.3%
Prudential Plaza
Newark, NJ 07102-3777
</TABLE>

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

<TABLE>
<C> <S>
(a) The amounts shown include the following shares that may be acquired within 60 days
pursuant to outstanding stock options: Mr. Rose, 126,048 shares; Mr. Schultz, 103,513
shares; Mr. Sullivan 44,280 shares; all directors and executive officers as a group,
349,714 shares. Shares listed also include shares allocated to accounts under the
Company's Savings and Retirement Plan as of February 28, 1996.
(b) Included in the shares for Mr. Peternell are 325 shares owned by a member of his
family, in which shares he disclaims any beneficial interest.
(c) Includes 46,850 shares held by a charitable foundation of which Mr. Rose serves as a
director. Mr. Rose has shared voting and investment power over these shares, but
disclaims any other beneficial interest.
(d) Included in the shares for Mr. Rose are 8,646 shares owned by members of his family, in
which he disclaims any beneficial interest.
(e) Included in the shares for Mr. Terry are 33,793 shares owned by members of his family,
in which shares he disclaims any beneficial interest.
(f) Massachusetts Financial Services Company ("MFS") is a registered investment adviser and
has reported beneficial ownership of the shares listed, which shares are also
beneficially owned by certain other non-reporting entities as well as MFS. MFS has sole
voting power as to 6,364,841 of the shares listed and no power to vote 76,375 of the
shares listed. MFS has sole dispositive power as to the 6,441,216 shares listed. The
source of this information is a Schedule 13G filed by MFS with the Securities and
Exchange Commission and dated February 12, 1996. Ownership (number of shares and
percent of shares outstanding) is reported as of December 31, 1995.
(g) The Prudential Insurance Company of America ("Prudential") is an insurance company and
registered investment adviser. Of the shares listed, an aggregate of 5,131,575 (97.3%)
are beneficially owned by Jennison Associates Capital Corp., a wholly-owned subsidiary
of Prudential ("Jennison"). Prudential has sole voting power as to 508,525 shares,
shared voting power as to 4,095,515 shares, sole dispositive power as to 508,525 and
shared dispositive power as to 4,764,215 shares. The source of this information is a
Schedule 13G filed by Prudential with the Securities and Exchange Commission and dated
February 14, 1996 and a Schedule 13G filed by Jennison with the Securities and Exchange
Commission and dated February 7, 1996. Ownership is reported as of December 31, 1995.
</TABLE>

<PAGE>

ELECTION OF DIRECTORS
NOMINEES: CLASS I, TERM EXPIRES 1999

[Picture] DEBRA J. FIELDS
Ms. Fields, 39, has served as Chairman of the Board of Mrs. Fields,
Inc. since 1992 and was President and Chief Executive Officer of
that Company from 1991 to 1993. She has been a director of Outback
Steakhouse, Inc. since January 1996. Ms. Fields has been a Promus
director since June 1995 and serves on the Audit Committee.

[Picture] C. WARREN NEEL
Mr. Neel, 57, has acted as the Dean of the College of Business
Administration at The University of Tennessee, Knoxville since 1977.
He also is a director of Clayton Homes, Inc., O'Charley's, Inc.,
American HealthCorp., Inc. and Proffitt's, Inc. He has been a Promus
director since June 1995 and is a member of the Audit Committee and
the Strategic Planning Committee.

[Picture] DAVID C. SULLIVAN
Mr. Sullivan, 56, has been Director, Executive Vice President and
Chief Operating Officer of Promus since April 1995. From 1993 to
1995, he served as Executive Vice President and Chief Operating
Officer of the Hotel Division of The Promus Companies Incorporated.
He was Senior Vice President of Development and Operations of
Hampton Inn/Homewood Suites Hotel Division from 1991 to 1993. He has
been a Promus director since June 1995.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
FOR DIRECTOR NAMED ABOVE.

<PAGE>

DIRECTORS: CLASS II, TERM EXPIRES 1997

[Picture] U. BERTRAM ELLIS, JR.
Mr. Ellis, 42, has served as President, Chief Executive Officer and
Director of Ellis Communications, Inc., an owner-operator of
television and radio stations since 1993. During the period from
1992 to 1993, Mr. Ellis was President and Chief Executive Officer of
American Innovations, Inc., a manufacturer of hairbows which filed a
petition under Chapter 11 of the U.S. Bankruptcy Code in 1993. He
was President and Chief Executive Officer of Act III Broadcasting, a
media consulting firm, from 1986 to 1992. He has been a director of
Promus since June 1995 and is a member of the Audit Committee and
the Strategic Planning Committee.

[Picture] MICHAEL I. ROTH
Mr. Roth, 50, has served as Chairman and Chief Executive Officer of
Mutual of New York since 1994 and as a trustee of that company since
1991. He was President and Chief Operating Officer of Mutual of New
York from 1991 to 1993. Mr. Roth has served as a director of Pitney
Bowes, Inc. since December 1995. He has been a director of Promus
since June 1995 and is Chairman of the Audit Committee.

[Picture] MICHAEL D. ROSE
Mr. Rose, 54, has served as Chairman of the Board of the Company
since April 1995. He previously served as Chairman of the Board of
The Promus Companies Incorporated from November 1989 to March 1995
and Chief Executive Officer from November 1989 to April 1994. Mr.
Rose also serves as Chairman of the Board of Harrah's Entertainment,
Inc. as well as a director of Ashland, Inc., First Tennessee
National Corporation, General Mills, Inc. and Darden Restaurants,
Inc. He is Chairman of the Executive Committee.

[Picture] RONALD TERRY
Mr. Terry, 65, served as Chairman of the Board of First Tennessee
National Corporation from 1973 until his retirement as of December
31, 1995. He was Chief Executive Officer of that company from 1973
to April 1994 and President from 1988 to August 1991. He will
continue to serve as a director of First Tennessee National
Corporation until April 16, 1996. He is currently a director of
BellSouth Corporation and AutoZone, Inc. Mr. Terry has been a Promus
director since June 1995. He is Chairman of the Human Resources
Committee and is a member of the Executive Committee and the
Strategic Planning Committee.

<PAGE>

DIRECTORS: CLASS III, TERM EXPIRES 1998

[Picture] CHRISTOPHER W. HART
Mr. Hart, 45, has served as President of Spire Group, Ltd., a
management consulting and executive education firm, since March
1990. He has been a Promus director since June 1995 and is a member
of the Human Resources Committee.

[Picture] BEN C. PETERNELL
Mr. Peternell, 50, is Senior Vice President of Human Resources and
Communications of Harrah's Entertainment, Inc. and previously served
in that position with The Promus Companies Incorporated beginning in
1989. He has been a director of Promus since June 1995 and is a
member of the Executive Committee.

[Picture] JAY STEIN
Mr. Stein, 50, has served as Chairman of the Board, Chief Executive
Officer and Director of Stein Mart, Inc. since 1990. Mr. Stein is
also a director of Barnett Bank of Jacksonville and American
Heritage Life Insurance Company. He has been a member of the Board
of Directors of Promus since June 1995. He is Chairman of the
Strategic Planning Committee and a member of the Human Resources
Committee.

[Picture] RAYMOND E. SCHULTZ
Mr. Schultz, 62, has been President, Chief Executive Officer and
Director of Promus since April 1995. From 1993 to 1995 he served as
President and Chief Executive Officer of the Hotel Division of The
Promus Companies Incorporated. He was the President and Chief
Executive Officer of Hampton Inn/Homewood Suites Hotel Division from
1991 to 1993. He is a member of the Executive Committee.

6
<PAGE>
COMPENSATION OF DIRECTORS

Directors who are not employees of the Company are paid an annual retainer
fee of $25,000 plus $1,500 for each Board meeting and $1,200 for each committee
meeting they attend. Committee chairmen are paid an additional $800 for each
committee meeting attended. Effective May 1, 1996, the Company's 1996
Non-Management Directors Stock Incentive Plan ("Stock Plan") requires that one-
half of all amounts received as directors' fees be paid in the form of stock of
the Company. The Stock Plan also provides that directors may elect to have the
other one-half of their directors' fees paid in the form of Company stock and
may elect to defer issuance of all shares under the Stock Plan until termination
of service as a director. The deferred shares may be taken in a lump sum or in
up to ten annual installments.

Until the Stock Plan becomes effective or in the event a non-management
director elects to receive a portion of his or her director's fee in cash, a
director may elect to defer receipt of fees pursuant to the Company's Deferred
Compensation Plan. Amounts deferred earn interest at a rate equal to the average
daily balance multiplied by the average of the prime rates announced by
Citibank, N.A. on the first business day of each calendar quarter during the
year.

Management directors may defer the receipt of a portion of their
compensation pursuant to the Executive Deferred Compensation Plan ("EDCP"),
whereby amounts, while deferred, earn interest at a termination rate or at a
retirement rate, both of which rates are approved annually by the Human
Resources Committee. The termination rate for 1995 was 8.5% and the retirement
rate was 15.5%. For 1996, the termination rate is 8.5% or the prime rate in
effect at Citibank N.A., whichever is higher, and the retirement rate has been
decreased to 13%. The retirement rate is intended to encourage long-term
service. Therefore, only those participants who meet the service requirements of
the EDCP will receive interest at the retirement rate. A director generally will
receive the retirement rate when he or she retires from the Board.

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

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 in the Company's standard group health, dental and vision care
insurance plans. During 1995, the total cost to the Company for these insurance
benefits was $2,478 for three directors who elected to participate in the plans.

In June 1995 each non-management director was awarded 1,000 shares of
restricted stock under the Company's 1995 Restricted Stock Plan, which shares
will vest in annual 200 share installments over a five year period.

MEETINGS

The Board of Directors met three times during 1995. During the year,
attendance at Board meetings averaged 96% and attendance at Committee meetings
averaged 93%. In 1995, all incumbent directors attended at least 75% of the
meetings of the Board of Directors and the committees thereof on

<PAGE>

which they served, except Mr. Roth who attended two meetings of the Board of
Directors and one meeting of the Audit Committee.

AUDIT COMMITTEE

The Audit Committee, which met two times in 1995, (1) recommends annually to
the Board of Directors the independent public accountants for the Company and
its direct or indirect subsidiaries; (2) meets with the independent public
accountants concerning their audit, their evaluation of the Company's financial
statements, accounting developments that may affect the Company and their
nonaudit services; (3) meets with management and the internal auditors
concerning similar matters; and (4) makes recommendations to all of the
aforesaid groups that it deems appropriate.

HUMAN RESOURCES COMMITTEE

The Human Resources Committee acts as the nominating committee of the Board
of Directors. The Committee, which met two times during 1995, 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.

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

EXECUTIVE COMMITTEE

During the intervals between meetings of the Board of Directors, the
Executive Committee, subject to specified limitations, may act on behalf of the
Board. Action taken by the Executive Committee is reported to the Board of
Directors at its first meeting following such action. Without specific delegated
authority, the Executive Committee may not declare dividends, except current
quarterly dividends not in excess of those last declared by the Board of
Directors and may not increase or decrease the number of directors or appoint
new directors. Unless within an overall plan previously approved by the Board of
Directors, action taken by the Executive Committee approving a transaction in
excess of $50,000,000 is subject to revision or rescission by the Board of
Directors at the Board's first meeting following such action. The Executive
Committee did not meet during 1995.

STRATEGIC PLANNING COMMITTEE

The Strategic Planning Committee was established in order to evaluate,
review with the Company's management and advise the Board of Directors on any
proposals related to the strategic direction of the Company. This committee did
not meet during 1995.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Terry, Stein and Hart, all of whom are non-management directors,
served as members of the Company's Human Resources Committee, which is the
Company's compensation committee, during all of 1995. Mr. Rose, Chairman of the
Board of the Company, is a director of First Tennessee National Corporation. Mr.
Terry, a Committee member, was Chairman of the Board of First Tennessee National
Corporation during 1995 and retired from that position on December 31, 1995.

<PAGE>

REPORT OF THE HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION

HUMAN RESOURCES COMMITTEE

The Human Resources Committee (referred to in this section of the Proxy
Statement as the "Committee") is composed entirely of independent outside
directors. The Committee is responsible for approving the compensation of the
management directors (Mr. Rose, Mr. Schultz and Mr. Sullivan), reviewing the
compensation of other executive officers, including the executive officers named
in the Summary Compensation Table on page 14, and approving stock awards,
including stock options, 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:

. Salaries are linked to competitive factors and salary increases are
based on merit.

. The annual bonus program is competitively-based and provides incentive
compensation based on the Company's annual performance. It also
provides stretch bonus opportunities for performance above aggressive
targets.

. Long-term compensation is tied solely and directly to performance of
the Company's stock over periods of four to five years.

These three elements of compensation are intended to deliver substantially
above average total compensation to long-term employees if long-term performance
is well above average.

In summary, the Company's executive compensation policy is performance
based, with a large portion of executive compensation at risk. This policy not
only extends to executive officers but also to key managers and professional
staff. There are 218 key employees who currently 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

The Company's objective is to provide cash compensation opportunities for
executive officers (salary and annual bonus) that are targeted at the median
range of the competitive market. The Company, based on its status as a
publicly-traded company effective as of July 1, 1995, is in the process of
determining the competitive status of the salaries of its executive officers.
The Committee will review the competitiveness of the executive officer salaries
as a part of total compensation during 1996 and determine what adjustments, if
any, are needed. The Committee plans to approve a comparator group of similar
companies primarily in service and related industries. The comparator group will
not be identical to the peer group included in the performance comparison graph
on page 13, although some companies in the peer group may be included in the
comparator group. The Company will use the comparator group for comparison
purposes in regard to total compensation because the Committee believes that the
Company competes for executive talent across the country with a broad range of
companies.

<PAGE>

SALARY

Salaries are reviewed each year and merit increases are based primarily on
(1) an executive's achievement of performance objectives and (2) the current
salary of the executive within the salary range for his or her grade level.
Greater weight is normally given to the achievement of objectives rather 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. Salary can
be substantially increased if an executive 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 an in-depth and skilled
organizational structure to operate and develop the Company's business,
positioning the Company for significant growth and achieving the Company's
annual business plan and its various financial goals. The Committee's assessment
of the Chief Executive Officer's performance is based on a subjective review of
such officer's performance against these objectives. Specific weights are not
assigned to any particular objective.

The objectives of the other executive officers are approved by the Chief
Executive Officer. These objectives relate to achieving functional goals and
financial objectives within the executive'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 Chief Operating Officer and other executive officers is
based on a subjective review of each executive's performance. Specific weights
are not given to each objective in this assessment.

The Committee approves merit salary increases for the Chairman, the Chief
Executive Officer and the Chief Operating Officer. The Chief Executive Officer
or the Chief Operating Officer approves merit salary increases for the other
executive officers and such increases are reviewed by the Committee. In April
1995, Mr. Schultz was promoted to Chief Executive Officer of the Company, and
his salary was increased to $310,000. The Committee approved Mr. Schultz's
salary as part of his employment agreement. The Chief Executive Officer and the
Chairman determined that the Company's excellent performance as well as
competitive factors warranted significant merit increases for the other
executive officers at the time the Company became a publicly-traded company and
many senior executives took on additional responsibilities.

ANNUAL INCENTIVE BONUS

Each year the Committee assigns corporate bonus objectives for the Company's
executive officers that are (1) a targeted level of pre-tax earnings for the
Company, (2) a targeted level of development (construction starts) for all of
the Company's hotel brands and (3) a targeted percentage of guest satisfaction
for all hotel brands of the Company. The current operating income target is the
target contained in the Company's annual plan approved by the Board. The target
is calculated before interest expense, extraordinary items, property
transactions and minority interests.

A target bonus is established for each executive officer that will result in
the payment of a specified percentage of the officer's salary if the bonus
objectives are achieved. This percentage of salary increases or decreases on a
matrix (the "bonus matrix") in relation to the target objectives. If 100% of the
objectives are achieved, the target bonus for the Chairman and Chief Executive
Officer is 60% of base salary. For performance above 100% of the operating
income objective, additional bonus amounts, up to a maximum of 120% of such
executive officer's base salary, can be awarded. For the other executive

<PAGE>

officers, the target bonus for achieving 100% of the operating income target
ranges from 30% to 50% of their base salary. This bonus is increased on a
graduated scale to a maximum of 45% to 100% of their base salary.

After the end of the plan year, the Committee determines the extent to which
the targeted objectives have been achieved. A bonus pool for all corporate
management employees in the bonus plan is then established by multiplying (1) an
amount equal to the specific percentage of salary hypothetically payable to each
individual in the plan based on the objectives achieved by (2) each individual's
salary. These amounts are then combined to create a corporate bonus pool. If the
Committee determines that a minimum operating income target was not achieved,
then no bonus pool is established and no bonuses are payable unless an exception
were to be approved by the Committee because of unusual circumstances. If an
exception were approved, it would be a subjective decision by the Committee. In
February 1996, the Committee approved the Company's operating income and
performance objectives for the year which included discretionary adjustments in
accordance with the provisions of the plan.

The bonuses payable to the Chief Executive Officer and the Chairman from the
bonus pool is the percentage of salary that is payable based solely on the
result achieved under the bonus matrix. The bonuses of the other executive
officers depend on the percentage of salary payable on the bonus matrix (company
performance) as well as an assessment of their achievement of personal
objectives (personal performance). The personal objectives for bonuses are the
same objectives that are evaluated for purposes of merit salary increases as
discussed above. The assessment of personal objectives is a subjective
evaluation by the Chief Executive Officer or the Chief Operating Officer. As a
result of the assessment of personal objectives, the bonuses of an executive
officer (other than the Chairman and the Chief Executive Officer) may be higher
or lower than shown on the bonus matrix. However, the total bonus pool
established for all corporate employees eligible for the plan cannot be
exceeded.

For 1995, the Committee determined that the Company exceeded each of its
performance objectives and thus the bonuses for 1995 performance that were paid
to all executive officers were greater than target bonuses. The Chief Executive
Officer's bonus was 120% of his salary for 1995.

STOCK AWARDS

Awards of stock options and restricted stock are specifically approved by
the Committee for each executive officer and other plan participants and are
granted in the sole discretion of the Committee. Based on an assessment of
competitive factors, the Committee determines an award that is suitable for
providing an adequate incentive for both performance and retention purposes.
Awards are currently granted with a vesting period extending four to five years
from the initial grant date. In order to align the interest of senior executives
with the interest of stockholders, the Committee's current policy regarding
stock awards is to grant stock options exclusively. However, the Committee has
reserved the right to grant restricted stock as it deems appropriate.

Each executive officer is granted a stock option award that will give such
officer an estimated dollar value of stock compensation (the difference between
the option price and an estimated future market price of the stock) vesting each
year which is equal to a specific percentage of the officer's salary. This
percentage increases proportionately with the higher grade level of the officer.
The Chief Executive Officer's annual stock compensation value is currently
targeted at 200% of salary. The dollar value of the award is based on estimated
annual increases in the market value of the Common Stock in the future in order
to reach the targeted level of compensation. There is no certainty or assurance
that such increases will occur. The applicable percentage of salary, as a
measure of stock compensation, is

<PAGE>

determined for each grade level after the Committee reviews the market-level
equity incentive awards granted to comparably-ranked executives by a group of
service and related general industry companies. The Committee's practice is to
approve awards each year for executive officers. This results in stock options
being granted annually at new option prices each year. The Committee awarded two
stock option grants in 1995. The second stock option grant, given at the time
the Company became a publicly-traded company, was intended to replace the stock
option grant that would have been given in 1996.

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

POLICY CONCERNING TAX DEDUCTIBILITY OF COMPENSATION

Section 162(m) of the Internal Revenue Code limits deductibility of certain
compensation of the Chief Executive Officer and the four other highest paid
executive officers to $1,000,000 per year unless certain requirements are met.

The Committee's policy with respect to qualifying compensation paid to its
executive officers for tax deductibility purposes is that executive compensation
plans will generally be designed and implemented to ensure full tax
deductibility. However, the Committee reserves the right to approve the payment
of non-deductible compensation to its executive officers when the Committee
deems such compensation 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. A Key Executive
Officer Annual Incentive Plan was approved in 1995 and is intended to ensure
that bonuses are tax deductible to the Company.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

Mr. Schultz's base salary is based on his rights under his employment
agreement. Under his agreement, he is entitled to merit salary increases. These
merit increases are determined in accordance with the procedures and guidelines
described on page 10 in the paragraph titled "Salary." The Company had excellent
performance in 1995, exceeding each of its targeted goals established for the
Annual Incentive Bonus Plan. Mr. Schultz's bonus for 1995 was based on this
performance. Mr. Schultz was awarded stock options in 1995. These options are
described in the table on page 15 titled "Options Granted in the Last Fiscal
Year" and were awarded in accordance with the Committee's policies as described
above.

HUMAN RESOURCES COMMITTEE

RONALD TERRY (Chairman)
JAY STEIN
CHRISTOPHER W. HART

<PAGE>

PERFORMANCE OF PROMUS COMMON STOCK

Set forth below is a line graph comparing the total cumulative return of the
Company's Common Stock to (a) the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), and (b) a group of peer issuers with similar businesses. See Note
(1). The graph assumes the reinvestment of dividends.

COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN*
AMONG PROMUS HOTEL CORPORATION, THE S&P 500 INDEX
AND A PEER GROUP

[GRAPH]

PROMUS HOTEL CORP. PEER GROUP S&P 500
- ------------------ ---------- -------

6/95 $100 6/95 $100 6/95 $100
7/95 112 7/95 103 7/95 103
8/95 94 8/95 100 8/95 104
9/95 103 9/95 102 9/95 108
10/95 100 10/95 102 10/95 108
11/95 101 11/95 103 11/95 112
12/95 101 12/95 104 12/95 114
1/96 114 1/95 115 1/95 118

* $100 Invested on 6/30/95 in Stock or Index - including reinvestment of
dividends. Fiscal year ending December 31.

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

(1) The Peer Group companies consist of Host Marriott Corporation, Hilton Hotels
Corporation, La Quinta Inns, Inc., Marriott International, Inc. and
Doubletree Corporation.

<PAGE>

EXECUTIVE COMPENSATION

The Summary Compensation Table below sets forth certain compensation
information concerning the Company's Chief Executive Officer and the four other
most highly compensated officers of the Company for the year ended December 31,
1995; information for prior years is omitted in accordance with the rules of the
Securities and Exchange Commission. Compensation reflected in the following
table includes compensation to the listed individuals as employees of The Promus
Companies Incorporated from January 1, 1995 through June 30, 1995 and as
employees of the Company from July 1, 1995 through December 31, 1995 except for
Mr. Rose, for whom compensation is included as an employee of the Company from
July 1, 1995 through December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- -------------------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(2) AWARD(S)($) OPTIONS(#) COMPENSATION(3)
- --------------------- ---- --------- -------- ------------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz... 1995 $ 301,847 $345,601 130,945 $ 176,204
President and Chief
Executive Officer
Michael D. Rose(1)... 1995 125,000 150,000 123,648 99,777
Chairman of the
Board
David C. Sullivan.... 1995 227,692 224,231 78,113 38,009
Executive Vice
President, Chief
Operating Officer
Thomas L. Keltner.... 1995 194,038 186,865 61,036 16,050
Senior Vice
President, Corporate
Development
Mark C. Wells........ 1995 183,308 176,681 49,409 10,491
Senior Vice
President, Marketing
</TABLE>

- ------------
(1) Mr. Rose entered into an employment agreement with the Company effective as
of June 30, 1995, pursuant to which he spends up to 40% of his time in his
capacity as Chairman and such other duties as directed by the Board.
Accordingly, his salary reflects compensation for the period from July 1,
1995 through December 31, 1995 and his bonus is based on salary during this
period. (See "Certain Employment Arrangements")

(2) Amounts of Other Annual Compensation for each individual named above
aggregated less than (a) 10% of the total annual salary and bonus for each
individual or (b) $50,000 whichever is less. Accordingly, no such amounts
are included.

(3) All Other Compensation consists of (a) earnings in excess of market rates on
deferred compensation balances and (b) matching contributions to the Promus
Savings and Retirement Plan. Such amounts, respectively, were as follows:
Mr. Schultz, $166,964 and $9,240; Mr. Rose, $99,777 and $0; Mr. Sullivan,
$28,769 and $9,240; Mr. Keltner, $7,318 and $8,732; and Mr. Wells, $1,251
and $9,240.

The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during 1995, 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 1995 and for all
Promus stockholders.

14
<PAGE>
OPTIONS GRANTED IN THE LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR OVER OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------------
NAME GRANTED (3) FISCAL YEAR ($/SH.) DATE 0% 5% 10%
- ---------------------- ----------- ------------ ----------- ---------- --- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz.... 30,040 2.4% $ 19.4500 1/06/05 $-- $ 367,449 $ 931,189
30,040 2.4% 25.6300 6/16/05 -- 484,202 1,227,062
70,865 5.7% 24.5625 1/06/06 -- 1,094,668 3,225,575
Michael D. Rose....... 33,249 2.7% 19.4500 1/06/05 -- 406,702 1,030,662
33,249 2.7% 25.6300 6/16/05 -- 535,926 1,358,142
57,150 4.6% 24.5625 1/06/06 -- 882,809 2,601,307
David C. Sullivan..... 18,024 1.5% 19.4500 1/06/05 -- 220,470 558,713
18,024 1.5% 25.6300 6/16/05 -- 290,521 736,237
42,065 3.4% 24.5625 1/06/06 -- 649,787 1,914,680
Thomas L. Keltner..... 13,518 1.1% 19.4500 1/06/05 -- 165,352 419,035
13,518 1.1% 25.6300 6/16/05 -- 217,891 552,178
34,000 2.8% 24.5625 1/06/06 -- 525,206 1,547,584
Mark C. Wells......... 12,017 1.0% 19.4500 1/06/05 -- 146,992 372,506
12,017 1.0% 25.6300 6/16/05 -- 193,697 490,866
25,375 2.1% 24.5625 1/06/06 -- 391,973 1,154,998
All Stockholders(2)... n/a n/a n/a n/a -- 749,818,424 1,900,187,104
All Optionees......... 1,233,494 100.00% $ 23.88(4) various -- 18,524,617 46,945,018
All Optionees as a %
of All Stockholders
Gain................. n/a n/a n/a n/a n/a 2.47% 2.47%
</TABLE>

- ------------
(1) The dollar amounts under these columns are the result of calculations at
zero percent, 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 the Company's stock price. In the above
table, the Company did not use an alternative formula for a grant valuation,
as the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors.

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

(3) Employees vest in the right to exercise these options over a four-year
period. In general, major option awards are granted once a year. Options may
also be granted at other times at the discretion of the Human Resources
Committee based on promotions or similar reasons. See "Report of the Human
Resources Committee on Executive Compensation" and "Stock Awards" in this
Proxy Statement for more information concerning stock option awards.

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

The following table sets forth certain information concerning stock option
exercises during 1995 by the executive officers named in the Summary
Compensation Table.

AGGREGATED OPTION EXERCISES IN 1995 AND
DECEMBER 31, 1995 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1995 AT DECEMBER 31, 1995($)(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond E. Schultz.................. -- -- 37,496 204,130 $ 586,305 $ 901,753
Michael D. Rose..................... -- -- 63,617 243,244 991,279 1,534,274
David C. Sullivan................... -- -- 19,433 122,021 256,944 412,393
Thomas L. Keltner................... -- -- 1,723 71,459 -- 37,851
Mark C. Wells....................... -- -- 6,162 64,902 94,095 152,392
</TABLE>

- ------------
(1) Amount represents the difference between the aggregated option price of
unexercised options and a $22.25 market price on December 29, 1995, which
was the closing price of the Common Stock on the last trading day of 1995.

<PAGE>

CERTAIN EMPLOYMENT ARRANGEMENTS

The Board of Directors elected Mr. Schultz Chief Executive Officer of the
Company effective July 1, 1995. Mr. Schultz also serves as President. Pursuant
to an employment agreement with Mr. Schultz, the Company has agreed to employ
Mr. Schultz as Chief Executive Officer of the Company from July 1, 1995 until
December 31, 1999 at an annual salary of $310,000, subject to merit increases as
may be approved by the Human Resources Committee. During the term of his
employment agreement, Mr. Schultz will continue to be eligible for his current
benefits, including eligibility for bonus compensation and long-term incentive
compensation in the form of stock options and restricted stock awards as may be
approved by the Human Resources Committee. The Board reserves the right to
terminate the employment agreement with or without cause and Mr. Schultz 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. Schultz will receive two
years' salary continuation and his stock options and any shares of restricted
stock will continue in force during this period of time for vesting purposes. If
the agreement is terminated for cause or if he resigns without good reason as
such term is defined in the agreement prior to June 30, 1997, his unvested
options and any shares of restricted stock will be cancelled and his salary will
end. If Mr. Schultz retires after June 30, 1997, but prior to December 31, 1999,
any stock options and shares of restricted stock scheduled to vest during the
two years after the date of retirement shall vest immediately upon the date of
retirement. If he retires after December 31, 1999, all unvested stock options
and shares of restricted stock shall vest immediately upon the date of
retirement. He will be entitled to the retirement rate for his account under the
Executive Deferred Compensation Plan if he is terminated without cause or if he
resigns for good reason. If a change in control were to occur during his
employment agreement and his employment terminated voluntarily or involuntarily
within two years after the change in control, Mr. Schultz would be entitled to
receive the severance payments under his severance agreement (if then in force)
in lieu of the salary and rights under his employment agreement.

After the termination of his employment with the Company, Mr. Schultz will
be entitled to receive group insurance benefits at the Company's cost for his
lifetime similar to the benefits provided to any retired management directors of
the Company. Mr. Schultz's employment agreement provides for a non-competition
covenant for a period of two years following termination of employment.

The Board of Directors approved an employment agreement with Mr. Rose,
whereby the Company agreed to employ Mr. Rose as Chairman of the Board, subject
to his election to the Board of Directors, from June 30, 1995 until June 30,
2000. Mr. Rose receives an annual salary of $250,000, subject to merit increases
as may be approved by the Human Resources Committee and spends up to 40% of his
time in his capacity as Chairman and such other duties as directed by the Board.
The agreement can be extended on a year to year basis after June 30, 2000,
pursuant to mutual agreement. At any time on or after April 30, 1996, Mr. Rose
may voluntarily retire by giving the Company three months prior written notice
of the effective date of such retirement. During the term of his employment
agreement, Mr. Rose will continue to be eligible to participate in incentive
compensation programs in the form of stock options and restricted stock awards
as may be approved by the Human Resources Committee and to receive his current
employee benefits. The Board reserves the right to terminate the employment
agreement at any time with or without cause and Mr. Rose may resign for good
reason (as defined). If the agreement is terminated by the Board without cause
or if he resigns for good reason, his unvested stock options and any unvested
shares of restricted stock held by him will vest at that time and he will
continue to be employed as a consultant for two years or until June 30, 2000,
whichever first occurs. If the agreement is terminated for cause or if he
resigns without good reason, his unvested stock options

<PAGE>

and any unvested shares of restricted stock held by him will be cancelled and
his salary will end. The agreement further provides that such options will vest
if he retires on or after April 30, 1996. If a change in control were to occur
during the term of his employment agreement and his employment terminated
voluntarily or involuntarily within two years after the change in control, Mr.
Rose would be entitled to receive the severance payments under his severance
agreement (if then in force) in lieu of the salary and rights under his
employment agreement.

The Company has entered into severance agreements with certain corporate
officers including each of the executive officers named on page 14. Each
severance agreement provides for a compensation payment of 2.99 times the
average "annual compensation" paid to such officer for the five preceding
calendar years (the "Compensation Payment"), as well as accelerated payment or
accelerated vesting of any compensation or awards payable to such officer under
any incentive plan of the Company if the officer is terminated subsequent to a
change in control of the Company, as defined in the severance agreements (the
"Accelerated Payments") (collectively, the "Severance Payments"), with certain
exceptions described below. With respect to restricted stock and stock options,
such stock awards vest automatically upon a change of control. The "annual
compensation" for purposes of determining the Compensation Payment under the
severance agreement excludes restricted stock vestings and compensation or
dividends related to restricted stock or stock options. A change in control is
defined to occur whenever: (1) 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, (2) 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 (3) holders of
securities entitled to vote thereon approve a merger or consolidation (with
certain exceptions) or a plan of complete liquidation.

The officers are not entitled to the Compensation Payments subsequent to a
change in control if their termination is (1) by the Company for cause (as
defined), (2) a result of retirement or disability, or, except for Mr. Rose and
Mr. Schultz, (3) voluntarily and not for good reason (as defined). In the event
that an executive officer becomes entitled to Severance Payments, which are
subject to taxation under Section 4999 (the "Excise Tax") of the Internal
Revenue Code, the severance payments provide that the Company shall pay the
officer an additional amount (the "Gross-Up Payment") such that the net amount
retained by the officer after deduction of any Excise Tax on the Severance
Payments and all Excise Tax and other taxes on the Gross-Up Payment shall equal
the initial Severance Payments, subject to certain exceptions.

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

In addition, the severance agreements each provide that in the event of a
potential change in control of the Company (as defined below): (1) 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 (2) each executive
officer 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 (1) the Company enters into an agreement which would result in a change
in control of the Company, (2) any person publicly announces an intention to
take action that would result in a change of control of the Company, (3) any
person, other than the trustee of an employee benefit plan of the Company, who
is or becomes a

<PAGE>

beneficial owner of 9.5% of the combined voting power of the Company's then
outstanding securities, increases his beneficial ownership of such securities by
5% or more over the percentage previously owned on the date of the severance
agreement, or (4) the Board adopts a resolution to the effect that a potential
change in control of the Company has occurred.

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

The Compensation Payments and Accelerated Payments, respectively, that would
have been payable to the executive officers named on page 14 on January 1, 1996,
if a change in control occurred and if such executives had been terminated as of
that date would have been approximately: Mr. Schultz, $1,340,052 and $1,488,058;
Mr. Rose, $2,510,098 and $2,525,553; Mr. Sullivan, $958,471 and $669,337; Mr.
Keltner, $1,064,216 and $44,659; and Mr. Wells, $708,003 and $266,512. Such
Accelerated Payments include the value of any unvested restricted stock, valued
as of December 31, 1995, and any unvested stock options that would accelerate
upon a change in control.

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

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

CERTAIN TRANSACTIONS

Mr. Rose, Chairman of the Board of the Company, is also Chairman of the
Board of Harrah's Entertainment, Inc. (formerly known as The Promus Companies
Incorporated), the Company's former parent ("Parent") and Mr. Peternell is an
executive officer of Parent. The Company and Parent have entered into a series
of agreements that govern certain of the ongoing relationships between them and
provide mechanisms for an orderly transition of the Company from a wholly-owned,
indirect subsidiary of Parent to a stand-alone, publicly-traded company. The
Company believes that the agreements contain terms generally comparable to those
which would have been reached in arm's-length negotiations with unaffiliated
parties (although comparisons are difficult with respect to certain agreements
that relate to the specific circumstances of

<PAGE>

the distribution). In some cases (such as the Distribution Agreement and the Tax
Sharing Agreement, each as hereinafter defined) the agreements are comparable to
those used by other companies in similar transactions.

Prior to the Distribution Date, the Company and Parent entered into a
Distribution Agreement (the "Distribution Agreement"), that provided for, among
other things, (1) the transfer to the Company by the Parent of certain assets,
liabilities and subsidiaries relating principally to the hotel business, and (2)
the division of certain liabilities between Parent and the Company.

Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of liabilities and cross-indemnities designed to
allocate financial responsibility for the liabilities arising out of or in
connection with the hotel business to the Company and its subsidiaries, and
financial responsibility for the liabilities arising out of or in connection
with the casino business to Parent and its retained subsidiaries. The agreements
executed in connection with the Distribution Agreement also limit the Company's
ability to make certain material dispositions of its assets, engage in certain
repurchases of its capital stock or cease the active conduct of its business.

On the Distribution Date, Parent and the Company entered into an employee
benefits allocation agreement, pursuant to which the Company generally assumed
or retained, as the case may be, all liabilities under employee benefits plans
of the Parent with respect to employees of the Company or any of its
subsidiaries. The Company and Parent have also entered into a tax sharing
agreement that defines the parties' rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to the Parent's business for tax years prior to the Distribution and
with respect to certain tax attributes of Parent after the Distribution. In
addition, the Company and Parent have entered into a noncompetition agreement
and several information technology and other resource sharing agreements.

Total net payments by the Company to Parent under the above-described
agreements for the year ended December 31, 1995 were approximately $772,000.

Mr. Terry, a director of the Company, retired as Chairman of First
Tennessee National Corporation, the parent company of First Tennessee Bank
National Association ("First Tennessee") on December 31, 1995. First Tennessee
is one of the lending banks under a loan agreement which the Company has with
several banks (the "Bank Facility"). Pursuant to the Bank Facility, First
Tennessee has committed to loan to the Company's subsidiary, Promus Hotels,
Inc., $15,000,000, representing a 4.28% share of the total commitment covered by
the Bank Facility. As of December 31, 1995, $7,735,714 had been funded and
$511,778 had been provided in the form of unfunded letters of credit. In
connection with this commitment, First Tennessee received fees of $236,175
during the period from July 1, 1995 to December 31, 1995. The total discount
received by First Tennessee in connection with credit card merchant processing
for the Company and its subsidiaries in 1995 was $4,087,345.

RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors, upon the recommendation of the Audit Committee and
subject to ratification by the stockholders, has appointed Arthur Andersen LLP
as the Company's independent public accountants for the 1996 calendar year.
Arthur Andersen LLP served as the Company's independent public accountants in
1995. A representative of Arthur Andersen LLP will be present at the meeting and
will be given an opportunity to make a statement and answer questions. If the
appointment is not ratified or if Arthur Andersen LLP becomes incapable of
serving in this capacity, or

<PAGE>

if their employment is terminated, the Board will appoint independent public
accountants whose continued employment after the Annual Meeting in 1997 shall be
subject to ratification by the stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 1996 AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR THEM UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.

OTHER INFORMATION

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

COST OF SOLICITATION

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

STOCKHOLDER PROPOSALS

For any proposal to be considered for inclusion in the Company's Proxy
Statement and form of proxy for presentation at the 1997 Annual Meeting of
Stockholders, it must be received at the Company's principal executive offices
on or before November 14, 1996.

By Direction of the Board of Directors

/s/ Ralph B. Lake
RALPH B. LAKE
Secretary

Memphis, Tennessee
March 15, 1996

<PAGE>

The following trademarks used in this document are owned by Promus Hotel
Corporation, its direct or indirect subsidiaries, or affiliates: Promus(R),
Embassy Suites(R), Hampton Inn(R), Hampton Inn(R) Suites(sm) and Homewood
Suites(R).

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[PROMUS LOGO]

[Embassy Suites Logo]
[Hampton Inn Logo]
[Hampton Inn & Suites Logo]
[Homewood Suites Logo]

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PROMUS HOTEL CORPORATION

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
ANNUAL MEETING OF STOCKHOLDERS--APRIL 24, 1996

The undersigned stockholder of Promus Hotel Corporation hereby appoints
Michael D. Rose, Raymond E. Schultz and Ralph B. Lake or any one of them, true
and lawful proxies and attorneys, with full power of substitution to each, for,
and in the name, place and stead of the undersigned, and with all the powers the
undersigned would possess if present, to vote all stock of the undersigned in
the Company at the Annual Meeting of Stockholders to be held on April 24, 1996,
and any adjournment thereof. This Proxy also constitutes confidential voting
instructions for the use of participants in the Company's Employee Stock
Ownership Plan.

THE SHARES REPRESENTED BY THIS SIGNED PROXY WILL BE VOTED IN ACCORDANCE WITH
THE CHOICES SPECIFIED ON THE REVERSE SIDE AND SUCH AUTHORITY IS HEREBY GRANTED.
IF A CHOICE IS NOT SPECIFIED, SUCH SHARES WILL BE VOTED FOR PROPOSALS 1 AND 2
AND IN ACCORDANCE WITH THE PROXY'S DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING, AND AUTHORITY IS HEREBY GRANTED TO DO SO.
MANAGEMENT RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES AND FOR APPROVAL OF
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.

The undersigned hereby acknowledges receipt of the notice for the Annual
Meeting, Proxy Statement and Annual Report to Stockholders.

(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)

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The Board of Directors recommends a vote FOR all nominees and FOR the other
matters presented.

1. Election of Directors for Class 1

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<S> <C> <C> <C>
NOMINEES: Debra J. Fields, C. Warren Neel and David C.Sullivan / / FOR / / WITHHELD / / EXCEPTIONS*
</TABLE>
*Exceptions .........................................

(Instructions: To vote your shares for all Director nominees, mark the "For"
box. To withhold your vote for all nominees, mark the "Withheld" box. To
withhold authority to vote for a particular nominee, mark the "Exceptions"
box and write the name(s) of the exception(s) in the space provided. IF
AUTHORITY TO VOTE FOR ANY NOMINEE IS NOT WITHHELD, THIS SIGNED PROXY WILL BE
DEEMED TO GRANT AUTHORITY TO VOTE FOR THE NOMINEE.
________________________________________________________________________________

2. Ratification of Arthur Andersen LLP as the Company's independent public
accountants for the 1996 calendar year.

/ / FOR / / AGAINST / / ABSTAIN

3. In their discretion, to act upon such other matters as may properly come
before the meeting or any adjournment thereof.

Please sign the Proxy as
your name appears hereon.
Address Change Comments When signing as attorney,
If you have noted either an executor, administrator,
Address Change or made trustee or guardian, please
Comments on the reverse side of give title. All joint owners
this card, mark here. should sign.
- ---------------------------- DATE _______________________
Address Change SIGNATURE __________________
and or Comments Mark Here / / ____________________________

Please mark boxes
(x) in Black or Blue ink. / /

PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

<PAGE>

PROMUS HOTEL CORPORATION

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR

ANNUAL MEETING OF STOCKHOLDERS--APRIL 24, 1996

The undersigned hereby acknowledges receipt of the notice for the Annual
Meeting, Proxy Statement and Annual Report to Stockholders.

(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)

<PAGE>

<TABLE>
<S> <C> <C> <C>
NOMINEES: Debra J. Fields, C. Warren Neel and David C.Sullivan / / FOR / / WITHHELD / / EXCEPTIONS*
</TABLE>
*Exceptions .........................................

2. Ratification of Arthur Andersen LLP as the Company's independent public
accountants for the 1996 calendar year.

/ / FOR / / AGAINST / / ABSTAIN

3. In their discretion, to act upon such other matters as may properly come
before the meeting or any adjournment thereof.

Please mark boxes
(x) in Black or Blue ink. / /

PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.