Exhibit 10.1
HARRAH’S ENTERTAINMENT,
INC.
MANAGEMENT EQUITY INCENTIVE
PLAN
Adopted February 27, 2008
(as amended on December 10, 2008)
1. Purpose of the
Plan
The purpose of the Harrah’s
Entertainment, Inc. Management Equity Incentive Plan (the “
Plan ”) is to promote the interests of the Company and
its shareholders by providing the key employees, directors, service
providers and consultants of the Company and its Affiliates with an
appropriate incentive to encourage them to continue in the employ
of the Company or Affiliate and to improve the growth and
profitability of the Company.
2.
Definitions
As used in this Plan, the following
capitalized terms shall have the following meanings:
(a) “Affiliate”
shall mean any direct or indirect subsidiary of the
Company.
(b) “Board” shall
mean the Board of Directors of the Company, or any committee
appointed by the Board to administer the Plan pursuant to
Section 3.
(c) “Cash
Proceeds” shall include all sale proceeds, distributions
and dividends in respect of the Initial Majority Stockholder Shares
that are in cash, cash equivalents or marketable securities (valued
at their Fair Market Value) and the Fair Market Value of any cash
equivalents, marketable securities and/or securities distributed by
a Majority Stockholder to its affiliates, members or partners (but
will not include transfers of Initial Majority Stockholder
Non-Voting Shares to affiliated investment entities for investment
structuring purposes, but will include the profit (if any) the
Majority Stockholders receive on any such transfers), and shall
exclude any bona fide M&A fee, transaction fee or similar such
fee, if any, received by a Majority Stockholder.
(d) “Cause ”
shall mean, when used in connection with the termination of a
Participant’s Employment, (i) if the Participant has an
effective employment agreement with the Company or any Affiliate,
the definition used in such employment agreement, or (ii) if
the Participant does not have an effective employment agreement
with the Company or any Affiliate, unless otherwise provided in the
Participant’s Option Grant Agreement, the termination of the
Participant’s Employment with the Company and all Affiliates
on account of (A) the willful failure of the Participant to
perform substantially the Participant’s duties with the
Company (as described below) or to follow a lawful reasonable
directive from the Board (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Participant
which specifically identifies the manner in which the Company
believes that the Participant has not substantially performed the
Participant’s duties or to follow a lawful reasonable
directive and the Participant is given a reasonable opportunity
(not to exceed thirty (30) days) to cure any such failure to
substantially perform, if curable; (B) (1) any willful
act of fraud, or embezzlement or theft by the Participant, in
each
case, in connection with the
Participant’s duties with the Company or its Affiliates or in
the course of the Participant’s employment with the Company
or its Affiliates or (2) the Participant’s admission in
any court, or conviction of, a felony; or (C) the Participant
being found unsuitable for or having a gaming license denied or
revoked by the gaming regulatory authorities in Arizona,
California, Illinois, Indiana, Iowa, Kansas, Louisiana,
Mississippi, Missouri, Nevada, New Jersey, New York, Pennsylvania,
United Kingdom, Ontario, South Africa, North Carolina or any other
applicable area in which the Company does business at the time of
determination. For purposes of this definition, no act or failure
to act, on the part of the Participant, shall be considered
“willful” unless it is done, or omitted to be done, by
the Participant in bad faith and without reasonable belief that the
Participant’s action or omission was in the best interests of
the Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Participant in
good faith and in the best interests of the Company.
(e) “Change in
Control” shall mean the occurrence of any of the
following events after the Closing Date: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of
the Company on a consolidated basis to any Person or group of
related persons for purposes of Section 13(d) of the Exchange
Act (a “Group” ), together with any affiliates
thereof other than to a Majority Stockholder; (ii) the
approval by the holders of the outstanding voting securities of the
Company of any plan or proposal for the liquidation or dissolution
of the Company; (iii) any Person or Group (other than a
Majority Stockholder) shall become the beneficial owner (within the
meaning of Section 13(d) of the Exchange Act), directly or
indirectly, of common stock representing more than 50% of the
combined voting power of the Company entitled to vote generally in
the election of directors; (iv) the replacement of a majority
of the Board over a two-year period of the directors who
constituted the Board at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a
majority of the Board then still in office who either were members
of such Board at the beginning of such period or whose election as
a member of such Board was previously so approved or who were
nominated by, or designees of, a Majority Stockholder; or
(v) consummation of a merger, consolidation or other
transaction involving the Company following which the Majority
Stockholder does not hold capital stock or other securities of the
surviving corporation (A) with voting power to elect a
majority of the surviving entity’s board of directors or
(B) representing at least 50% of the equity securities of the
surviving entity.
(f) “Code” shall
mean the Internal Revenue Code of 1986, as amended.
(g) “Commission”
shall mean the U.S. Securities and Exchange Commission.
(h) “Committee”
shall mean the Compensation Committee of the Board.
(i) “Company”
shall mean Harrah’s Entertainment, Inc., a Delaware
corporation.
(j) “ Competitor
” shall mean any Person engaged in the casino business (or
any hotel or resort that operates a casino business) in the United
States, Canada or Mexico or any
2
other geographic location in which
the Company or its Affiliates is engaged in the casino business at
the time the relevant Participant’s employment with the
Company and its Affiliates ends.
(k) “ Disability”
shall mean (i) Participant is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period
of not less than 12 months or (ii) Participant is, by reason
of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the
Company.
(l) “ Closing Date
” shall mean January 28, 2008.
(m) “ Effective Date
” shall mean February 27, 2008.
(n) “ Eligible
Employee” shall mean (i) any Employee who is a key
executive of the Company or an Affiliate, or (ii) certain
other Employees, directors, service providers or consultants of the
Company or any Affiliate who, in the judgment of the Committee,
should be eligible to participate in the Plan due to the services
they perform on behalf of the Company or an Affiliate.
(o) “Employment”
shall mean employment with the Company or any Affiliate and shall
include the provision of services as a director or consultant for
the Company or any Affiliate. “Employee” and
“Employed” shall have correlative
meanings.
(p) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.
(q) “Exercise
Date” shall have the meaning set forth in
Section 4.9 herein.
(r) “Exercise
Notice” shall have the meaning set forth in
Section 4.9 herein.
(s) “Exercise
Price” shall mean the price that the Participant must pay
under the Option for each Share as determined by the Committee for
each Grant and initially specified in the Stock Option Grant
Agreement, which shall be equal to the Fair Market Value of a Share
on the Grant Date, subject to any adjustment that may be made
following the Grant Date in accordance with the Plan.
(t) “Fair Market
Value” shall mean, as of any date (i) prior to the
existence of a public market for the Shares, the value per Share
determined pursuant to a valuation made in good faith by the Board
and based upon an independent third party appraisal that has been
completed within twelve (12) months of the determination date,
including an appraisal conducted on behalf of either Majority
Stockholder in connection with its regular valuation obligations
with respect to its investors; or (ii) on which a public
market for the Shares exists, (A) the closing price on such
day of a Share as reported on the principal securities exchange on
which Shares are then listed or admitted to trading or (B) if
not so reported, the average of the closing bid and ask
3
prices on such day as reported on
the National Association of Securities Dealers Automated Quotation
System or (C) if not so reported, as furnished by any member
of the National Association of Securities Dealers, Inc. (“
NASD ”) selected by the Board. The Fair Market Value
of a Share as of any such date on which the applicable exchange or
inter-dealer quotation system through which trading in the Shares
regularly occurs is closed shall be the Fair Market Value
determined pursuant to the preceding sentence as of the immediately
preceding date on which the Shares are traded, a bid and ask price
is reported or a trading price is reported by any member of NASD
selected by the Board. In the event that the price of a Share shall
not be so reported or furnished, the Fair Market Value shall be
determined by the Board in good faith to reflect the fair market
value of a Share and shall be determined in accordance with the
requirements of Section 409A of the Code.
(u) “Good Reason”
shall mean, without Participant’s express written
consent:
(i) a material diminution by the
Company in Participant’s annual base salary, as the same may
be increased from time to time, other than a reduction in base
salary that applies to a similarly situated class of employees of
the Company or its Affiliates;
(ii) with respect to a Participant
that is a member of the Senior Management Team and party to an
effective employment agreement with the Company or its Affiliates,
any material diminution in the duties or responsibilities of such
Participant as of the date of the Option Grant to such Participant;
provided that a change in control of the Company that results in
the Company becoming part of a larger organization will not, in and
of itself and unaccompanied by any material diminution in the
duties or responsibilities of Participant, constitute Good Reason;
or
(iii) with respect to a Participant
that has an effective employment agreement with the Company or its
Affiliates, (A) any breach by the Company of a material
provision of the Participant’s employment agreement or
(B) if the employment agreement allows the Participant to
terminate employment for Good Reason based on a material change in
the geographic location or locations at which the Participant is
required to perform services for the Company and its Affiliates, a
material change in such geographic location or locations or
(C) only with respect to the Chief Executive Officer of the
Company as of the Closing Date (the “ CEO ”),
(1) a material change in the geographic location at which the
CEO is required to perform services for the Company and its
Affiliates resulting from a required relocation of the CEO’s
primary residence, (2) a material diminution in the
CEO’s authority or (3) the requirement that the CEO
report to someone other than the Board.
In order to invoke a termination for
Good Reason, Participant must provide written notice to the Company
of the existence of one of the conditions described in clauses
(i) through (iii) within 30 days of the initial existence
of the condition and the Company shall have 30 days (the “
Cure Period ”) during which it may remedy the
condition. If the Company has failed to remedy the condition
constituting Good Reason during the Cure Period, in order to invoke
a termination for Good Reason, the relevant Participant must
terminate employment, if at all, within 30 days following the Cure
Period.
(v) “Grant” shall
mean a grant of an Option under the Plan evidenced by a Stock
Option Grant Agreement.
4
(w) “Grant Date”
shall mean the Grant Date as defined in Section 4.2
herein.
(x) “Initial Majority
Stockholder Non-Voting Shares” shall mean the Shares and
the non-voting Preferred Stock issued to the Majority Stockholder
on or before the Closing Date, and shall include any stock,
securities or other property or interests received by the Majority
Stockholder in respect of such shares in connection with any stock
dividend or other similar distribution, stock split or combination
of shares, recapitalization, conversion, reorganization,
consolidation, split-up, spin-off, combination, repurchase, merger,
exchange of stock or other transaction or event that affects the
Company’s capital stock occurring after the date of
issuance.
(y) “Initial Public
Offering” shall be deemed to occur on the effective date
of the first registration statement (other than (i) a
registration relating to an employee benefit plan or employee stock
plan, a dividend reinvestment plan, or a merger or a consolidation
(including without limitation a registration relating to an
employee investment or rollover opportunity or participation in
this Plan), (ii) a registration incidental to an issuance of
securities under Rule 144A, (iii) a registration on Form S-4
or any successor form, or (iv) a registration on Form S-8 or
any successor form) filed to register at least 10% of the total
then-outstanding equity interests in the Company under the
Securities Act. The fact that the Company has a class of equity
securities registered under the Exchange Act from and after the
Closing Date shall not constitute an Initial Public
Offering.
(z) “Majority
Stockholder” shall mean, collectively or individually as
the context requires, TPG Capital, L.P., Apollo Global Management,
L.L.C. and/or their respective affiliates.
(aa) “Management Investor
Rights Agreement” shall mean the Management Investor
Rights Agreement, substantially in the form attached hereto as
Exhibit B, or such other Stockholders’ agreement as may be
entered into between the Company and any Participant.
(bb) “MoM” shall
mean on any date, (i) all Cash Proceeds received by any
Majority Stockholder after the Closing Date in respect of the
Initial Majority Stockholder Non-Voting Shares and any equity
securities of the Company other than the Initial Majority
Stockholder Non-Voting Shares acquired by the Majority Stockholder
after the Closing Date, divided by (ii) the aggregate
purchase price paid by the Majority Stockholder for the Initial
Majority Stockholder Non-Voting Shares plus the aggregate purchase
price paid by the Majority Stockholders following the Closing Date
for any equity securities of the Company other than the Initial
Majority Stockholder Non-Voting Shares.
(cc) “ Option”
shall mean the option to purchase Shares granted to any Participant
under the Plan.
(dd)
“Participant” shall mean an Eligible Employee to
whom a Grant of an Option under the Plan has been made, and, where
applicable, shall include Permitted Transferees.
(ee) “Performance-Based
Option” shall have the meaning set forth in
Section 4.3.2.
5
(ff) “Permitted
Transferee” shall have the meaning set forth in
Section 4.5.
(gg) “Person”
means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
(hh) “ Preferred Stock
” means the preferred stock of the Company, $.01 par value
per share.
(ii) “Qualifying
Termination” shall mean, with respect to a Participant,
(i) a termination of such Participant’s Employment due
to death or Disability or (ii) by the Company without Cause or
by the Participant for Good Reason or (iii) with respect to a
Participant with an effective employment agreement with the Company
or an Affiliate of the Company, a termination of such
Participant’s Employment due to the delivery by the Company
to such Participant of a notice of non-renewal of such employment
agreement, in the case of each of clauses (i), (ii) and (iii),
within the three-year period following a Change in
Control.
(jj) “Retirement”
shall mean, when used in connection with the termination of a
Participant’s Employment, a voluntary resignation of
Employment by the Participant that occurs on or after the first
date on which the Participant has (i) attained at least the
age of 50, and when added to his number of years of continuous
service with the Company or its Affiliates (including any period of
salary continuation), his age and years of service equals or exceed
65 or (ii) the date on which the Participant attains age
65.
(kk) “ Securities
Act” shall mean the Securities Act of 1933, as
amended.
(ll) “ Senior Management
Team ” shall mean the Participants listed on Exhibit D
and such additional Participants as shall be designated by the
Board or the Committee from time to time.
(mm) “Shares”
shall mean non-voting common stock of the Company, $.01 par value
per share.
(nn)
“Stockholder” shall mean any Person that
properly holds one or more Shares, regardless of whether such
Shares were initially acquired from the Company or by assignment
from another Stockholder.
(oo) “Stock Option Grant
Agreement” shall mean an agreement, substantially in the
form which is attached hereto as Exhibit A, entered into by each
Participant and the Company evidencing the Grant of each Option
pursuant to the Plan, provided the Committee may make such changes
to the form of Stock Option Grant Agreement for any particular
Grant as the Committee may determine pursuant to its powers set
forth in Section 3.1(c) of the Plan.
(pp) “Time-Based
Option” shall have the meaning set forth in
Section 4.3.1.
(qq) “Transfer”
shall mean any transfer, sale, assignment, hedge, gift,
testamentary transfer, pledge, hypothecation or other disposition
of any interest. “Transferee” and
“Transferor” shall have correlative
meanings.
6
(rr) “ Vesting
Date” shall mean the date an Option vests as described in
Section 4 herein.
3. Administration of the
Plan
The Committee shall administer the
Plan. In the absence of a Committee, the Board shall function as
the Committee for all purposes under the Plan, and to the extent
that the Board so acts, references in the Plan to the Committee
shall refer to the Board as applicable. In addition, the Committee,
in its discretion, may delegate its authority to grant Options to
an officer or committee of officers of the Company, subject to
reasonable limits and guidelines established by the Committee at
the time of such delegation.
3.1 Powers of the
Committee. In
addition to the other powers granted to the Committee under the
Plan, the Committee shall have the power: (a) to approve those
Eligible Employees selected by management of the Company to whom
Grants shall be made; (b) to determine the time or times when
Grants shall be made and to determine the number of Shares subject
to each such Grant; (c) to prescribe the form of and terms and
conditions of any instrument evidencing a Grant, so long as such
terms and conditions are not otherwise inconsistent with the terms
of the Plan; (d) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable for the
administration of the Plan; (e) to construe and interpret in
good faith the Plan, such rules and regulations and the instruments
evidencing Grants; and (f) to make all other determinations
necessary or advisable for the administration of the
Plan.
3.2 Determinations of the
Committee. Any Grant, determination, interpretation,
prescription or other act of the Committee shall be final and
conclusively binding upon all Persons.
3.3 Indemnification of the
Committee. No member of the Committee nor any Majority
Stockholder or its employees, partners, directors or associates
shall be liable for any action or determination made in good faith
with respect to the Plan or any Grant. To the full extent permitted
by law, the Company shall indemnify and hold harmless each Person
made or threatened to be made a party to any civil or criminal
action or proceeding by reason of the fact that such Person, or
such Person’s testator or intestate, is or was a member of
the Committee or is or was a Majority Stockholder or an employee,
partner, director or associate thereof, to the extent such criminal
or civil action or proceeding relates to the Plan.
3.4 Compliance with Applicable
Law; Securities Matters; Effectiveness of Option Exercise.
The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any Shares to be issued hereunder
or to effect similar compliance under any state or non-U.S. laws.
Notwithstanding anything herein to the contrary, the Company shall
not be required to issue or deliver any certificates evidencing the
Shares pursuant to the
