Document:

Exhibit
10.38

 

AMENDMENT AND RESTATEMENT
OF

THE HARRAH’S
ENTERTAINMENT, INC.

EXECUTIVE SUPPLEMENTAL
SAVINGS PLAN II

 

AMENDMENT AND RESTATEMENT
OF

THE HARRAH’S ENTERTAINMENT, INC.

EXECUTIVE SUPPLEMENTAL SAVINGS PLAN II

TABLE
OF CONTENTS

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE ONE PREAMBLE

  	
   

  	
  1

  
	
  ARTICLE TWO DEFINITIONS

  	
   

  	
  1

  
	
   

  	
  2.1

  	
  “Account” or “Accounts”

  	
   

  	
  1

  
	
   

  	
  2.2

  	
  “Affiliate”

  	
   

  	
  1

  
	
   

  	
  2.3

  	
  “Beneficiary”

  	
   

  	
  2

  
	
   

  	
  2.4

  	
  “Board”

  	
   

  	
  2

  
	
   

  	
  2.5

  	
  “Bonus”

  	
   

  	
  2

  
	
   

  	
  2.5A

  	
  “Caesars Company Contribution Account”

  	
   

  	
  2

  
	
   

  	
  2.5B

  	
  “Caesars Participant”

  	
   

  	
  2

  
	
   

  	
  2.5C

  	
  “Caesars Plan”

  	
   

  	
  2

  
	
   

  	
  2.5D

  	
  “Caesars Plan Transfer Date”

  	
   

  	
  2

  
	
   

  	
  2.6

  	
  “Change of Control”

  	
   

  	
  2

  
	
   

  	
  2.7

  	
  “Code”

  	
   

  	
  4

  
	
   

  	
  2.8

  	
  “Company”

  	
   

  	
  4

  
	
   

  	
  2.9

  	
  “Compensation”

  	
   

  	
  4

  
	
   

  	
  2.10

  	
  “Deferral Contribution”

  	
   

  	
  4

  
	
   

  	
  2.11

  	
  “Deferral Contribution Account”

  	
   

  	
  4

  
	
   

  	
  2.12

  	
  “Deferral Period”

  	
   

  	
  4

  
	
   

  	
  2.13

  	
  “Disability”

  	
   

  	
  5

  
	
   

  	
  2.14

  	
  “Discretionary Contribution”

  	
   

  	
  5

  
	
   

  	
  2.15

  	
  “Discretionary Contribution Account”

  	
   

  	
  5

  
	
   

  	
  2.16

  	
  “Distribution Year”

  	
   

  	
  5

  
	
   

  	
  2.17

  	
  “EDCP Committee”

  	
   

  	
  5

  
	
   

  	
  2.18

  	
  “EDCP Investment Committee”

  	
   

  	
  5

  
	
   

  	
  2.19

  	
  “Effective Date”

  	
   

  	
  5

  
	
   

  	
  2.20

  	
  “Employee”

  	
   

  	
  5

  
	
   

  	
  2.21

  	
  “Employer”

  	
   

  	
  5

  
	
   

  	
  2.22

  	
  “ERISA”

  	
   

  	
  5

  
							

 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  2.23

  	
  “401(k) Compensation”

  	
   

  	
  5

  
	
   

  	
  2.24

  	
  “401(k) Contributions”

  	
   

  	
  6

  
	
   

  	
  2.25

  	
  “401(k) Matchable Deferrals”

  	
   

  	
  6

  
	
   

  	
  2.26

  	
  “401(k) Matching Contributions”

  	
   

  	
  6

  
	
   

  	
  2.26A

  	
  “Harrah’s ESSP”

  	
   

  	
  6

  
	
   

  	
  2.26B

  	
  “Harrah’s ESSP Participant”

  	
   

  	
  6

  
	
   

  	
  2.26C

  	
  “Harrah’s ESSP First Transfer Date”

  	
   

  	
  6

  
	
   

  	
  2.26D

  	
  “Harrah’s Second Transfer Date”

  	
   

  	
  6

  
	
   

  	
  2.27

  	
  “HRC”

  	
   

  	
  6

  
	
   

  	
  2.28

  	
  “Investment Fund”

  	
   

  	
  6

  
	
   

  	
  2.29

  	
  “Matching Contribution”

  	
   

  	
  6

  
	
   

  	
  2.30

  	
  “Matching Contribution Account”

  	
   

  	
  6

  
	
   

  	
  2.31

  	
  “Matching Formula”

  	
   

  	
  7

  
	
   

  	
  2.32

  	
  “Matching Limit”

  	
   

  	
  7

  
	
   

  	
  2.33

  	
  “Participant”

  	
   

  	
  7

  
	
   

  	
  2.34

  	
  “Participation Agreement”

  	
   

  	
  7

  
	
   

  	
  2.35

  	
  “Plan”

  	
   

  	
  7

  
	
   

  	
  2.36

  	
  “Salary”

  	
   

  	
  7

  
	
   

  	
  2.37

  	
  “Savings and Retirement Plan”

  	
   

  	
  7

  
	
   

  	
  2.38

  	
  “Separation from Service”

  	
   

  	
  8

  
	
   

  	
  2.39

  	
  “Specified Employee”

  	
   

  	
  8

  
	
   

  	
  2.39A

  	
  “Transferred Caesars Accounts”

  	
   

  	
  8

  
	
   

  	
  2.39B

  	
  “Transferred Caesars Company Contribution Account”

  	
   

  	
  8

  
	
   

  	
  2.39C

  	
  “Transferred Caesars Deferral Account”

  	
   

  	
  8

  
	
   

  	
  2.39D

  	
  “Transferred Harah’s ESSP Accounts”

  	
   

  	
  8

  
	
   

  	
  2.39E

  	
  “Transferred Harrah’s ESSP Deferral Contribution
  Account”

  	
   

  	
  8

  
	
   

  	
  2.39F

  	
  “Transferred Harrah’s ESSP Matching Contribution
  Account”

  	
   

  	
  9

  

 

 ii
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  2.40

  	
  “Trust”

  	
   

  	
  9

  
	
   

  	
  2.41

  	
  “Trust Agreement”

  	
   

  	
  9

  
	
   

  	
  2.42

  	
  “Trust Fund”

  	
   

  	
  9

  
	
   

  	
  2.43

  	
  “Trustee”

  	
   

  	
  9

  
	
   

  	
  2.44

  	
  “Valuation Date”

  	
   

  	
  9

  
	
   

  	
  2.45

  	
  “Years of Vesting Service”

  	
   

  	
  9

  
	
  ARTICLE THREE ELIGIBILITY

  	
   

  	
  9

  
	
   

  	
  3.1

  	
  Selection of Participants

  	
   

  	
  9

  
	
   

  	
  3.2

  	
  Participation Agreement

  	
   

  	
  12

  
	
   

  	
  3.3

  	
  Discontinuance of Participation

  	
   

  	
  13

  
	
   

  	
  3.4

  	
  Reemployment

  	
   

  	
  14

  
	
   

  	
  3.5

  	
  Adoption by Affiliates

  	
   

  	
  14

  
	
  ARTICLE FOUR CONTRIBUTIONS

  	
   

  	
  14

  
	
   

  	
  4.1

  	
  Participant Contributions.

  	
   

  	
  14

  
	
   

  	
  4.2

  	
  Matching Contributions.

  	
   

  	
  15

  
	
   

  	
  4.3

  	
  Change or Suspension of Contributions

  	
   

  	
  18

  
	
   

  	
  4.4

  	
  Discretionary Contributions

  	
   

  	
  19

  
	
   

  	
  4.5

  	
  2005 Contributions under the Caesars Plan.

  	
   

  	
  20

  
	
   

  	
  4.6

  	
  Second Enhancement Contributions

  	
   

  	
  20

  
	
   

  	
  4.7

  	
  Transfers from Caesars Plan.

  	
   

  	
  21

  
	
   

  	
  4.8

  	
  Transfers from Harrah’s ESSP.

  	
   

  	
  22

  
	
  ARTICLE FIVE WITHDRAWALS UPON UNFORESEEABLE
  EMERGENCY

  	
   

  	
  24

  
	
   

  	
  5.1

  	
  Unforeseeable Emergency Withdrawals.

  	
   

  	
  24

  
	
   

  	
  5.2

  	
  Account Adjustments

  	
   

  	
  25

  
	
  ARTICLE SIX CREDITING OF CONTRIBUTIONS AND INCOME

  	
   

  	
  25

  
	
   

  	
  6.1

  	
  Account Allocations

  	
   

  	
  25

  
	
   

  	
  6.2

  	
  Subaccounts

  	
   

  	
  25

  

 

 iii
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  6.3

  	
  Hypothetical Investment Funds

  	
   

  	
  25

  
	
   

  	
  6.4

  	
  Investment Direction

  	
   

  	
  25

  
	
   

  	
  6.5

  	
  Rate of Return

  	
   

  	
  26

  
	
   

  	
  6.6

  	
  Application to Beneficiaries

  	
   

  	
  26

  
	
   

  	
  6.7

  	
  EDCP Investment Committee

  	
   

  	
  26

  
	
  ARTICLE SEVEN VESTING

  	
   

  	
  27

  
	
   

  	
  7.1

  	
  Vesting of Accounts

  	
   

  	
  27

  
	
   

  	
  7.2

  	
  Changes in Vesting Schedule

  	
   

  	
  31

  
	
  ARTICLE EIGHT DISTRIBUTION ELECTIONS; PAYMENT OF
  BENEFITS

  	
   

  	
  31

  
	
   

  	
  8.1

  	
  Distribution Elections

  	
   

  	
  31

  
	
   

  	
  8.2

  	
  Changes of Distribution Year Election

  	
   

  	
  34

  
	
   

  	
  8.3

  	
  Time of Payment

  	
   

  	
  36

  
	
   

  	
  8.4

  	
  Form of Payments

  	
   

  	
  37

  
	
   

  	
  8.5

  	
  Beneficiary Designations

  	
   

  	
  38

  
	
   

  	
  8.6

  	
  Prohibition on Acceleration of Distributions

  	
   

  	
  39

  
	
   

  	
  8.7

  	
  Withholding and Payroll Taxes

  	
   

  	
  39

  
	
  ARTICLE NINE ADMINISTRATION OF THE PLAN

  	
   

  	
  39

  
	
   

  	
  9.1

  	
  Adoption of Trust

  	
   

  	
  39

  
	
   

  	
  9.2

  	
  Powers of the EDCP Committee

  	
   

  	
  40

  
	
   

  	
  9.3

  	
  Creation of Committee

  	
   

  	
  40

  
	
   

  	
  9.4

  	
  Appointment of Agents

  	
   

  	
  40

  
	
   

  	
  9.5

  	
  Majority Vote and Execution of Instruments

  	
   

  	
  41

  
	
   

  	
  9.6

  	
  Allocation of Responsibilities

  	
   

  	
  41

  
	
   

  	
  9.7

  	
  Conflict of Interest

  	
   

  	
  41

  
	
   

  	
  9.8

  	
  Indemnification

  	
   

  	
  41

  
	
   

  	
  9.9

  	
  Action Taken by Employer

  	
   

  	
  41

  
	
   

  	
  9.10

  	
  Discretionary Authority

  	
   

  	
  41

  

 

 iv
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  9.11

  	
  Participant Statements

  	
   

  	
  41

  
	
   

  	
  9.12

  	
  Compliance with Section 409A of the Code

  	
   

  	
  41

  
	
  ARTICLE TEN CLAIMS REVIEW PROCEDURE

  	
   

  	
  42

  
	
   

  	
  10.1

  	
  General

  	
   

  	
  42

  
	
   

  	
  10.2

  	
  Benefit Determination

  	
   

  	
  42

  
	
   

  	
  10.3

  	
  Appeals

  	
   

  	
  43

  
	
   

  	
  10.4

  	
  Notice of Denials

  	
   

  	
  44

  
	
  ARTICLE ELEVEN
  LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY INCOMPETENT DISTRIBUTEE

  	
   

  	
  44

  
	
   

  	
  11.1

  	
  Anti-Alienation Clause

  	
   

  	
  44

  
	
   

  	
  11.2

  	
  Permitted Arrangements

  	
   

  	
  44

  
	
   

  	
  11.3

  	
  Payment to Minor or Incompetent

  	
   

  	
  44

  
	
  ARTICLE TWELVE AMENDMENT, MERGER AND TERMINATION

  	
   

  	
  45

  
	
   

  	
  12.1

  	
  Amendment

  	
   

  	
  45

  
	
   

  	
  12.2

  	
  Merger or Consolidation of Company

  	
   

  	
  45

  
	
   

  	
  12.3

  	
  Termination of Plan or Discontinuance of
  Contributions

  	
   

  	
  46

  
	
   

  	
  12.4

  	
  Continuation of Plan following a Change of Control

  	
   

  	
  46

  
	
   

  	
  12.5

  	
  Limitation of Company’s Liability

  	
   

  	
  46

  
	
   

  	
  12.6

  	
  Limitation on Distributions

  	
   

  	
  46

  
	
  ARTICLE THIRTEEN GENERAL PROVISIONS

  	
   

  	
  47

  
	
   

  	
  13.1

  	
  Limitation of Rights

  	
   

  	
  47

  
	
   

  	
  13.2

  	
  Construction

  	
   

  	
  47

  
	
   

  	
  13.3

  	
  Status of Participants as Unsecured Creditors

  	
   

  	
  47

  
	
   

  	
  13.4

  	
  Status of Trust Fund

  	
   

  	
  47

  
	
   

  	
  13.5

  	
  Funding upon a Change of Control

  	
   

  	
  47

  
	
   

  	
  13.6

  	
  Uniform Administration

  	
   

  	
  47

  
	
   

  	
  13.7

  	
  Heirs and Successors

  	
   

  	
  48

  
	
   

  	
  13.8

  	
  Elecronic Administration

  	
   

  	
  48

  

 

 v

 

AMENDMENT AND
RESTATEMENT OF

THE HARRAH’S ENTERTAINMENT, INC.

EXECUTIVE SUPPLEMENTAL SAVINGS PLAN II

ARTICLE ONE

PREAMBLE

HARRAH’S ENTERTAINMENT, INC., a Delaware corporation
(the “Company”), previously adopted this Harrah’s Entertainment, Inc. Executive
Supplemental Savings Plan II (the “Plan”), effective as of January 1, 2005, in
order to provide key executives and senior management employees with an
opportunity and incentive to save for retirement and other purposes.

The purpose of this Plan is to provide a select group
of management or highly compensated employees of the Company and certain of its
affiliates with the opportunity to defer a portion of their compensation and to
receive contributions from their employers. 
As a result, the Plan is intended to be a “top hat plan,” exempt from
certain requirements of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA.  This Plan is not intended to
qualify for favorable tax treatment pursuant to Section 401(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), or any successor section or
statute.  This Plan is intended to comply
with the requirements of Section 409A(a)(2), (3) and (4) of the Code.

The Plan was subsequently amended by the First and
Second Amendments to the Plan.  The
Company has adopted this Amendment and Restatement of the Plan, effective as of
January 1, 2005 (except as otherwise provided in Exhibit A attached
hereto).  This Amendment and Restatement
of the Plan incorporates the Plan and the First and Second Amendments to the
Plan and constitutes a complete amendment, restatement and continuation of the
Plan.

ARTICLE TWO

DEFINITIONS

When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not begin a sentence,
the word or phrase shall generally be a term defined in this Article Two or in
the Preamble.  The following words and
phrases used in the Plan with the initial letter capitalized shall have the
meanings set forth in this Article Two, unless a clearly different meaning is
required by the context in which the word or phrase is used:

2.1          “Account” or “Accounts”
means the accounts which may be maintained by the EDCP Committee to reflect the
interest of a Participant or the Beneficiary of a deceased Participant under
the Plan.

2.2          “Affiliate”
means:  (a) a corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as is the Company, (b) any other trade or business
(whether or not incorporated) controlling, controlled by, or under common
control (within the meaning of Section 414(c) of the Code) with the Company,
and (c) any other corporation, partnership, or other organization which is a
member of an affiliated 

 

 

service group (within the meaning of Section 414(m) of
the Code) with the Company or which is otherwise required to be aggregated with
the Company pursuant to Section 414(o) of the Code.

2.3          “Beneficiary”
means the person or trust that a Participant, in his or her
most recent written designation filed with the EDCP Committee, shall have
designated to receive his or her benefit under the Plan in the event of his or
her death or, if applicable, the person or entity determined in accordance with
Section 8.5 (Beneficiary Designations).

2.4          “Board”
means the Board of Directors of the Company.

2.5          “Bonus”
means the incentive payment or payments earned by a Participant during a
Deferral Period pursuant to the Company’s Annual Management Bonus Plan, the
Company’s Senior Executive Incentive Plan, the Company’s Player Development
Bonus Program and/or the Horseshoe Gaming Holding Corp. 2004 Annual Bonus
Incentive Plan, as such plans may be amended from time to time, and those
short-term cash incentive plans that are approved by the EDCP Committee or its
delegate, the Senior Vice President of Human Resources of the Company.

2.5A       “Caesars
Company Contribution Account” means the Account
maintained to record the amounts that otherwise would be credited to a Caesars
Participant’s “Company Contribution Account” under the Caesars Plan, determined
in accordance with Section 4.5(c) (Caesars Matching Contributions), on
behalf of such Caesars Participant, as adjusted to reflect the rate of return
on the hypothetical Investment Funds selected by the Caesars Participant in
accordance with Section 6.4 (Investment Direction) and other credits or
charges in accordance with this Plan.  A
Caesars Participant’s Caesars Company Contribution Account shall be divided
into subaccounts as determined by the EDCP Committee.

2.5B       “Caesars Participant” means:

(a)           an Employee who is
a “Participant” (as defined in the Caesars Plan) and becomes a Participant in
accordance with Section 3.1(e)(1), or

(b)           any other “Participant”
(as defined in the Caesars Plan) or former “Participant” who has an “Account”
(as defined in the Caesars Plan) or “Accounts” under the Caesars Plan,
effective as of the Caesars Plan Transfer Date.

2.5C       “Caesars Plan” means the Park Place
Entertainment Corporation Executive Deferred Compensation Plan, as amended.

2.5D       “Caesars
Plan Transfer Date” means August 1, 2006.

2.6          “Change
of Control” means and includes each of the following
events or transactions described in subsection (a), (b), (c) or (d):

(a)           the acquisition,
directly or indirectly, by any “person” or “group” (as those terms are defined
in Sections 3(a)(9), 13(d) and 14(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) and the rules thereunder) of “beneficial ownership” (as
determined pursuant to Rule 13d-3 under the Exchange Act) of securities
entitled to vote 

 2
 

 

 

generally in the election
of directors (“voting securities”) of the Company that represent twenty-five
percent (25%) or more of the combined voting power of the Company’s then
outstanding voting securities, other than

(1)           an acquisition by a
trustee or other fiduciary holding securities under any employee benefit plan
(or related trust) sponsored or maintained by the Company or any person
controlled by the Company or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any person controlled by the Company,
or

(2)           an acquisition of
voting securities by the Company or a corporation owned, directly or indirectly
by the stockholders of the Company in substantially the same proportions as
their ownership of the stock of the Company, or

(3)           an acquisition of
voting securities pursuant to a transaction described in subsection (c) below
that would not be a Change of Control under subsection (c);

Notwithstanding the
foregoing, neither of the following events shall constitute an “acquisition” by
any person or group for purposes of this subsection (a):  an acquisition of the Company’s securities by
the Company which causes the Company’s voting securities beneficially owned by
a person or group to represent twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding voting securities;
provided, however, that if a person or group shall become the beneficial owner
of twenty-five percent (25%) or more of the combined voting power of the
Company’s then outstanding voting securities by reason of share acquisitions by
the Company as described above and shall, after such share acquisitions by the
Company, become the beneficial owner of any additional voting securities of the
Company, then such acquisition shall constitute a Change of Control; or

(b)           during any period
of two consecutive years, individuals who, at the beginning of such period,
constitute the Board together with any new director(s) (other than a director
designated by a person who shall have entered into an agreement with the
Company to effect a transaction described in subsection (a) or (c)) whose
election by the Board or nomination for election by the Company’s stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two year period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or

(c)           the consummation by
the Company (whether directly involving the Company or indirectly involving the
Company through one or more intermediaries) of a merger, consolidation,
reorganization, or business combination, or a sale or other disposition of all
or substantially all of the Company’s assets, or the acquisition of assets or
stock of another entity, in each case other than a transaction

(1)           which results in
the Company’s voting securities outstanding immediately before the transaction
continuing to represent (either by remaining 

 3
 

 

 

outstanding or by being
converted into voting securities of the Company or the person that, as a result
of the transaction, controls, directly or indirectly, the Company or owns,
directly or indirectly, all or substantially all of the Company’s assets or
otherwise succeeds to the business of the Company (the Company or such person,
the “Successor Entity”)) directly or indirectly, at least a majority of the
combined voting power of the Successor Entity’s outstanding voting securities
immediately after the transaction, and

(2)           after which no
person or group beneficially owns voting securities representing twenty-five
percent (25%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated
for purposes of this paragraph (2) as beneficially owning twenty-five percent
(25%) or more of combined voting power of the Successor Entity solely as a
result of the voting power held in the Company prior to the consummation of the
transaction; or

(d)           the Company’s
stockholders approve a liquidation or dissolution of the Company.

The HRC shall have full and final authority, which shall be exercised
in its discretion, to determine conclusively whether a “Change of Control” has
occurred pursuant to the above definition, and the date of the occurrence of
such “Change of Control” and any incidental matters relating thereto.

2.7          “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

2.8          “Company”
means Harrah’s Entertainment, Inc., a Delaware corporation.

2.9          “Compensation”
means, for each Deferral Period, the total Salary earned to the Participant and
the Bonus earned by the Participant.

2.10        “Deferral
Contribution” means a contribution by a Participant
pursuant to Section 4.1 (Participant Contributions) of this Plan.

2.11        “Deferral Contribution Account” means
the Account maintained to record the Deferral Contributions made by a
Participant pursuant to Section 4.1 (Participant Contributions) (and, in
the case of a Caesars Participant, the deferral contributions made under
Sections 4.5(a) and (b) (Caesars Base Compensation Deferral Contributions
and Caesars Bonus Deferral Contributions)) as adjusted to reflect the
rate of return on the hypothetical Investment Funds selected by the Participant
in accordance with Section 6.4 (Investment Direction) and other credits
or charges in accordance with this Plan. 
A Participant’s Deferral Contribution Account shall be divided into
subaccounts as determined by the EDCP Committee.

2.12        “Deferral Period”
means, the twelve (12) month period beginning on each January 1 and ending on
the next following December 31.  The
initial Deferral Period shall commence as of the Effective Date and shall end
on the next following December 31.

 4
 

 

 

2.13        “Disability”
means, for purposes of this Plan, that the Participant qualifies to receive
long term disability payments under the Employer’s long term disability
insurance program, as it may be amended from time to time.

2.14        “Discretionary
Contribution” means an Employer contribution determined
in accordance with Section 4.4 (Discretionary Contributions) of
this Plan, which may, in the discretion of the Employer, be transferred to the
Trust.

2.15        “Discretionary Contribution Account”
means the Account maintained to record the Discretionary Contributions
calculated in accordance with Section 4.4 (Discretionary Contributions)
on behalf of a Participant, as adjusted to reflect the rate of return on the
hypothetical Investment Funds selected by the Participant in accordance with
Section 6.4 (Investment Direction) and other credits or charges in
accordance with this Plan.  A Participant’s
Discretionary Contribution Account shall be divided into subaccounts as
determined by the EDCP Committee.

2.16        “Distribution
Year” means the calendar year selected by a Participant
for purposes of distributions from the subaccounts of such Participant’s
Accounts for a Deferral Period.

2.17        “EDCP
Committee” means the committee designated in accordance
with Section 9.3 (Creation of Committee) to carry out the
administrative responsibilities under the Plan.

2.18        “EDCP
Investment Committee” means the committee that has the
responsibility for selecting and monitoring performance of the Investment Funds.

2.19        “Effective
Date” means January 1, 2005.  With respect to each Affiliate that adopts
this Plan after January 1, 2005, the term “Effective Date” means the date
designated by the adopting Affiliate.

2.20        “Employee”
means any individual classified by an Employer as a common law employee of the
Employer.  For this purpose, the
classification that is relevant is the classification in which such individual
is placed by the Employer for purposes of this Plan and the classification of
such individual for any other purpose (e.g., employment tax or withholding
purposes) shall be irrelevant.  If an
individual is characterized as a common law employee of the Employer by a
governmental agency or court but not by the Employer, such individual shall be
treated as an employee who has not been designated for participation in this
Plan.

2.21        “Employer”
means the Company and any Affiliate that has adopted this Plan pursuant to
Section 3.5 (Adoption by Affiliates).

2.22        “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

2.23        “401(k)
Compensation” means, with respect to a Participant, such
Participant’s compensation (as defined in the Savings and Retirement Plan) for
purposes of determining the 

 5
 

 

 

Employer’s matching contribution (if any) for such
Participant under the Savings and Retirement Plan.

2.24        “401(k)
Contributions” means a Participant’s “elective
contributions,” as defined in Treasury Regulation Section 1.401(k)-1(g)(3),
made to the Savings and Retirement Plan in which such Participant is a
participant.

2.25        “401(k)
Matchable Deferrals” means, with respect to a
Participant, such Participant’s assumed 401(k) Contributions subject to the
Employer’s matching contribution under the Savings and Retirement Plan, which
shall equal:

(a)           the Matching Limit, multiplied by

(b)           such Participant’s 401(k)
Compensation.

A Participant’s “401(k) Matchable Deferrals” for a
Deferral Period shall be determined without regard to such Participant’s actual
401(k) Contributions for such Deferral Period.

2.26        “401(k)
Matching Contributions” means, with respect to a
Participant, the Employer’s matching contributions assumed to be made for such
Participant under the Savings and Retirement Plan, determined under the
Matching Formula, based on such Participant’s 401(k) Matchable Deferrals. A
Participant’s “401(k) Matching Contributions” for a Deferral Period shall be
determined without regard to the Employer’s actual matching contributions made
for such Participant for such Deferral Period.

2.26A     “Harrah’s
ESSP” means the Harrah’s Entertainment, Inc. Executive
Supplemental Savings Plan, as amended.

2.26B     “Harrah’s
ESSP Participant” means a “Participant” in the Harrah’s
ESSP.

2.26C     “Harrah’s
ESSP First Transfer Date” means January 1, 2005.

2.26D     “Harrah’s
ESSP Second Transfer Date” means January 1, 2006.

2.27        “HRC”
means the Human Resources Committee of the Board.

2.28        “Investment
Fund” means the hypothetical investment fund or funds
established by the EDCP Investment Committee pursuant to Section 6.4  (Investment Direction).

2.29        “Matching
Contribution” means an Employer contribution calculated
in accordance with Section 4.2 (Matching Contributions) of this Plan,
which may, in the discretion of the Employer, be transferred to the Trust.

2.30        “Matching
Contribution Account” means the Account maintained to
record the Matching Contributions calculated in accordance with
Section 4.2 (Matching Contributions) on behalf of a Participant, as
adjusted to reflect the rate of return on the hypothetical Investment Funds
selected by the Participant in accordance with Section 6.4 (Investment
Direction) and

 6
 

 

 

other credits or charges in accordance with this
Plan.  A Participant’s Matching
Contribution Account shall be divided into subaccounts as determined by the
EDCP Committee.

2.31        “Matching
Formula” means, with respect to a Participant, the
formula under which matching contributions in the Savings and Retirement Plan
under which such Participant is eligible to make contributions are determined
for such Participant, determined without regard to any limitations on such
matching contributions under Section 401(m) or 415 of the Code, or any
limitation of compensation taken into account in determining such matching
contributions under Section 401(a)(17) of the Code.  The “Matching Formula” for a Participant for
a Deferral Period shall be determined as of the first day of such Deferral
Period (or, if such Participant first becomes eligible to participate in the
Plan during such Deferral Period, the date as of which he or she first becomes
eligible to participate).

2.32        “Matching
Limit” means, with respect to a Participant, the maximum
designated percentage of 401(k) Compensation of such Participant that, if
contributed by such Participant to the Savings and Retirement Plan, is eligible
for a matching contribution under the Matching Formula of the Savings and
Retirement Plan under which such Participant is eligible to make contributions.

2.33        “Participant”
means any Employee who has been selected for participation in the Plan.  The term “Participant” also shall include
former Participants whose benefits under the Plan have not been fully
distributed pursuant to the provisions of the Plan.  The term “Participant” shall also
include:  (a) with respect to Transferred
Harrah’s ESSP Accounts, a Harrah’s ESSP Participant, (b) a Caesars Participant
described in Section 2.5B(a), and (c) with respect to Transferred Caesars
Accounts, a Caesars Participant described in Section 2.5B(b).

2.34        “Participation
Agreement” means the agreement to defer Salary and/or
Bonus submitted by a Participant to the EDCP Committee in accordance with
Section 3.2 (Participation Agreement).  The term “Participation Agreement” shall also
include the agreement of a Caesars Participant in accordance with Section 3.2(b).  Such agreement shall be in written or
electronic form, as determined by the EDCP Committee.

2.35        “Plan”
means this Harrah’s Entertainment, Inc. Executive Supplemental Savings Plan II,
as it may be amended from time to time.

2.36        “Salary”
means the annual base salary earned by the Participant from the Employer during
the Deferral Period, before reduction for amounts deferred pursuant to this
Plan, the Savings and Retirement Plan, any plan maintained under Section 125 of
the Code or any other plan maintained by the Company or an Employer.  Salary does not include expense
reimbursements, salary continuation payments except as otherwise provided by an
employment agreement or separation agreement, or any form of non-cash
compensation and benefits.

2.37        “Savings
and Retirement Plan” means the Harrah’s Entertainment,
Inc. Savings and Retirement Plan, as it may be amended from time to time, the
Horseshoe Gaming Holding Corp. 401(k) Plan, as it may be amended from time to
time, and such other profit-sharing plans qualified under Sections 401(a) and
401(k) of the Code that are maintained by an Employer and designated from time
to time by the EDCP Committee.  For
purposes of the Plan, with respect to 

 7
 

 

 

any Participant, “Savings and Retirement Plan” shall
mean, for the Deferral Period or any portion thereof, the plan to which such
Participant is eligible to make elective deferral contributions during such
Deferral Period or portion thereof; provided, however, for purposes of Sections 4.2(c)(1)(C) and
4.2(c)(2)(C), the “Savings and Retirement Plan” shall mean the Harrah’s
Entertainment, Inc. Savings and Retirement Plan, as it may be amended from time
to time (without regard to whether the Caesars Participant is eligible to make
elective deferral contributions under the Harrah’s Entertainment, Inc. Savings
and Retirement Plan).

2.38        “Separation
from Service” of a Participant means his or her “separation
from service,” with respect to the Company and the Affiliates, within the
meaning of Section 409A(a)(2)(A)(i) of the Code, as determined by the Secretary
of the Treasury.  The HRC shall have full
and final authority, which shall be exercised in its discretion, to determine
conclusively whether a Participant has had a “Separation from Service,” and the
date of such “Separation from Service.”

2.39        “Specified
Employee” means, with respect to the Company and the
Affiliates, a “key employee,” as defined in Section 416(i) of the Code
(determined without regard to paragraph (5) thereof) of the corporation, if any
stock in such corporation is publicly traded on an established securities
market or otherwise, within the meaning of Section 409A(a)(2)(B)(i) of the Code
and the Treasury Regulations thereunder.

2.39A     “Transferred
Caesars Accounts” means a Caesars Participant’s
Transferred Caesars Company Contribution Account and Transferred Caesars
Deferral Account.

2.39B     “Transferred
Caesars Company Contribution Account” means the Account
maintained to record the amounts transferred from the Caesars Plan, which are
described in Section 4.7(d) and (e), as adjusted to reflect the rate of return
on the hypothetical Investment Funds selected by the Caesars Participant in
accordance with Section 6.4 (Investment Direction) and other credits or charges
in accordance with this Plan.  A Caesars
Participant’s Transferred Caesars Company Contribution Account shall be divided
into subaccounts as determined by the EDCP Committee.

2.39C     “Transferred
Caesars Deferral Account” means the Account maintained to
record the amounts transferred from the Caesars Plan, which are described in
Section 4.7(b) and (c), as adjusted to reflect the rate of return on the
hypothetical Investment Funds selected by the Caesars Participant in accordance
with Section 6.4 (Investment Direction) and other credits or charges in accordance
with accordance with this Plan.  A
Caesars Participant’s Transferred Caesars Deferral Account shall be divided
into subaccounts as determined by the EDCP Committee.

2.39D     “Transferred
Harrah’s ESSP Accounts” means a Harrah’s ESSP Participant’s
Transferred Harrah’s ESSP Deferral Contribution Account and Transferred Harrah’s
ESSP Matching Contribution Account.

2.39E      “Transferred
Harrah’s ESSP Deferral Contribution Account” means the
Account maintained to record the amounts credited pursuant to Section 4.6, and
the amounts transferred from the Harrah’s ESSP, which are described in Section
4.8(b), as adjusted to reflect 

 8
 

 

 

the rate of return on the
hypothetical Investment Funds selected by the Harrah’s ESSP Participant in
accordance with Section 6.4 (Investment Direction) and other credits or
charges in accordance with this Plan.  A
Harrah’s ESSP Participant’s Transferred ESSP Deferral Contribution Account
shall be divided into subaccounts as determined by the EDCP Committee.

2.39F      “Transferred
Harrah’s ESSP Matching Contribution Account” means the
Account maintained to record the amounts transferred from the Harrah’s ESSP,
which are described in Section 4.8(c), as adjusted to reflect the rate of
return on the hypothetical Investment Funds selected by the Harrah’s ESSP
Participant in accordance with Section 6.4 (Investment Direction) and other
credits or charges in accordance with this Plan.  A Harrah’s ESSP Participant’s Transferred
Harrah’s ESSP Matching Contribution Account shall be divided into subaccounts
as determined by the EDCP Committee.

2.40        “Trust”
means the trust established under the Trust Agreement.

2.41        “Trust
Agreement” means that certain trust agreement established
pursuant to the Plan between the Company and the Trustee or any trust agreement
hereafter established, the provisions of which are incorporated herein by
reference.

2.42        “Trust
Fund” means all assets of whatsoever kind or nature held
from time to time by the Trustee pursuant to the Trust Agreement and forming a
part of this Plan, without distinction as to income and principal and without
regard to source, i.e., Employer or Participant contributions or
earnings.

2.43        “Trustee”
means the Trustee under the Trust Agreement.

2.44        “Valuation
Date” means the date for valuing the hypothetical
Investment Funds maintained under the Plan, which shall be each business day of
the Deferral Period.

2.45        “Years
of Vesting Service” means the years of service credited
to an individual for vesting purposes under the Savings and Retirement Plan,
determined in accordance with all applicable provisions of the Savings and
Retirement Plan.

ARTICLE THREE

ELIGIBILITY

3.1          Selection
of Participants.

(a)           General.  For purposes of Title I of ERISA, the Plan is
intended to be an unfunded plan of deferred compensation covering a select
group of management or highly compensated employees of an Employer, within the
meaning of Sections 201(1), 301(a)(3) and 401(a)(1) of ERISA.  As a result, participation in the Plan shall
be limited to Employees employed in a position classified by the Company as a
Director-level position or above, and any other Employees employed by an
Employer who are selected for participation in the Plan by the EDCP
Committee.  To further ensure compliance
with the ERISA participation requirements applicable to this Plan, the Company,
in the exercise of its discretion, may exclude from participation in the Plan
an individual who 

 9
 

 

 

otherwise meets the
requirements this Section 3.1(a) for any reason, or for no reason, as the
Company deems to be appropriate.

(b)           Eligibility Date.  An Employee who, as of the Effective Date, is
employed in a position classified by the Company as a Director-level position
or above, or has been selected for participation in the Plan by the EDCP
Committee, shall become eligible to participate in the Plan as of the Effective
Date.  Any other Employee shall become
eligible to participate in the Plan as of the first day of the Deferral Period
on or next following the date on which such Employee is employed in a position
classified by the Company as a Director level position or above (or as of such
earlier or later date as is designated by the EDCP Committee), or if such
Employee is selected for participation in the Plan by the EDCP Committee, the
date of participation designated by the EDCP Committee.  The date as of which an Employee first
becomes eligible to participate in the Plan shall be referred to as such
Employee’s “Eligibility Date.”

(c)           Entry into Plan.

(1)           Entry on Effective Date.  An Employee who is eligible to participate in
the Plan as of the Effective Date shall enter the Plan as of the Effective
Date.  If such Participant’s initial
Participation Agreement is completed and delivered to the EDCP Committee prior
to the Effective Date, the Participant’s Deferral Contributions shall be
determined with reference to Compensation earned on or after the Effective
Date.

(2)           Entry after
Effective Date.  Except as provided in paragraph (3), if a
Participant becomes eligible to participate in the Plan after the Effective
Date, such Participant may elect to begin Plan participation as of the first
day of any subsequent Deferral Period. 
Such Participant shall complete and deliver his or her Participation
Agreement in accordance with the rules and procedures adopted by the EDCP Committee
for such purpose on or before the first day of such Deferral Period, and such
Participant’s Deferral Contributions shall be determined with reference to
Compensation earned on or after the first day of such Deferral Period.

(3)           Exception
to Entry Requirement.  If
a Participant first becomes eligible to participate in the Plan after the
Effective Date, such Participant may elect to begin Plan participation during a
Deferral Period, if such Participant elects to begin Plan participation within
thirty (30) days after his or her Eligibility Date.  Such Participant shall complete and deliver
his or her Participation Agreement in accordance with the rules and procedures
adopted by the EDCP Committee for such purpose within thirty (30) days
after his or her Eligibility Date, and such Participation Agreement shall be
effective as of such date following completion and delivery as is determined by
the EDCP Committee.  Such Participation
Agreement shall apply only with respect to
such Participant’s Salary earned on or after the first day of the first full
payroll period in the Deferral Period following the effective date of such
Participation Agreement, and that portion of the Bonus earned during the
portion of the Deferral Period commencing on the effective date of such
Participation Agreement, as determined by the EDCP Committee.

 10
 

 

 

(4)           Exception for Administrative Error.

(A)          Notwithstanding Section 3.1(c)(1), in the event that an
Employee who is eligible to participate in the Plan as of the Effective Date
was not afforded an opportunity to submit a Participation Agreement prior to
the Effective Date due to administrative or clerical error, such Employee may
complete and deliver a Participation Agreement to the EDCP Committee on or
before March 15, 2005, and such Employee shall enter the Plan as of the date of
the delivery of such Participation Agreement to the EDCP Committee.  The Participant’s Deferral Contributions
shall be determined with reference to Compensation earned on or after the
Effective Date to the extent payable after the date of such Participant’s entry
into the Plan.

(B)          Notwithstanding Section 3.1(c)(1), in the event that an
Employee who is eligible to participate in the Plan as of the Effective Date
failed to provide a confirmed electronic Participation Agreement prior to the
Effective Date, such Employee may complete and deliver a Participation
Agreement to the EDCP Committee, in written or electronic form, on or before
March 15, 2005, and such Employee shall enter the Plan as of the date of the delivery
of such Participation Agreement to the EDCP Committee.  The Participant’s Deferral Contributions
shall be determined with reference to Compensation earned on or after the
Effective Date to the extent payable after the date of such Participant’s entry
into the Plan.

(d)           No Waiting Periods.  A Participant need not complete any
particular period of service in order to be eligible to make Deferral
Contributions or to receive Discretionary Contributions.  Except as otherwise provided in Section
4.2(c), in order to receive Matching Contributions for a Deferral Period,
however, a Participant also must be eligible to receive matching contributions
under the Savings and Retirement Plan for that Deferral Period, as determined
in accordance with the provisions of the Savings and Retirement Plan.

(e)           Participants in the Caesars Plan.

(1)           Eligibility Date.  An Employee who is a “Participant” in the
Caesars Plan as of the first day of the first payroll period for such Employee
beginning on or after July 1, 2005 shall become eligible to participate in the
Plan as of the first day of such payroll period.  Such an Employee shall be referred to as “Caesars
Participant.”

(2)           2005 Contributions for a Caesars
Participant.  As
provided in Section 4.5, a Caesars Participant shall be eligible to participate
in the Plan with respect to the 2005 Deferral Period solely for purposes of the
crediting of:

(A)          the
“Base Compensation” (as defined in the Caesars Plan) deferred by such Caesars
Participant under the Caesars Plan for any payroll period for such Participant
commencing on or after July 1, 2005 and before January 1, 2006,

 11
 

 

 

(B)          the
“Bonus Compensation” (as defined in the Caesars Plan) earned for services
performed during 2005, and otherwise payable on or after July 1, 2005 and deferred
by such Participant under the Caesars Plan,

(C)          the
“Base Compensation Company Contribution Amounts” (as defined in the Caesars
Plan) with respect to any payroll period for such Caesars Participant
commencing on or after July 1, 2005 and before January 1, 2006, and

(D)          the
“Bonus Compensation Company Contribution Amounts” (as defined in the Caesars
Plan), with respect to such Caesars Participant’s “Bonus Compensation” (as
defined in the Caesars Plan) earned for services performed during 2005, and otherwise
payable on or after July 1, 2005 and deferred by such Caesars Participant under
the Caesars Plan.

(3)           Other Deferrals and Matching
Contributions Prohibited. 
A Caesars Participant shall not be eligible to make Deferral
Contributions under Section 4.1 with respect to the 2005 Deferral Period, and
shall not be eligible to receive Matching Contribution credits under Section
4.2 with respect to the 2005 Deferral Period. 
A Caesars Participant shall be eligible to receive Discretionary
Contribution credits (if any) under Section 4.4 with respect to the 2005
Deferral Period, subject to such terms and conditions as are prescribed by the
Employer.

(4)           Eligibility for Subsequent Years.  A Caesars Participant shall be eligible to
make Deferral Contributions under Section 4.1, and shall be eligible for
Matching Contribution credits and Discretionary Contribution credits under
Sections 4.2 and 4.4, with respect to the 2006 Deferral Period and subsequent
Deferral Periods, subject to the terms and conditions thereof, if such Caesars
Participant satisfies the eligibility requirements of subsection (b).

3.2          Participation
Agreement.

(a)           Content of Participation Agreement.

(1)           Authorization of
Deferral Contributions.  A
Participant shall complete and deliver a Participation Agreement evidencing his
or her election to participate in the Plan with respect to a Deferral Period,
in the manner and at such time as the EDCP Committee shall require.  Except as otherwise provided in Section
3.1(c)(3) (Selection of Participants – Entry into Plan – Exception to Entry
Requirement), a Participant must complete and deliver his or her
Participation Agreement with respect to the Deferral Period prior to such
Deferral Period.  In the Participation
Agreement with respect to a Deferral Period, the Participant shall select the
amount or rate of his or her Deferral Contributions and authorize the reduction
of his or her Compensation in an amount equal to his or her Deferral
Contributions.  A Participant’s
Participation Agreement shall set forth such other information as the EDCP
Committee shall require.

 

 12

 

(2)           Distribution
Elections.  A Participant shall make
a Separation from Service Election, or a Distribution Year Election, in his or
her Participation Agreement in accordance with Section 8.1 (Distribution
Elections).

(3)           Subsequent
Deferral Periods.  The Participation
Agreement made by the Participant for a Deferral Period shall apply to such
Deferral Period, and shall apply to each subsequent Deferral Period, except to
the extent such Participant completes and delivers a new Participation
Agreement prior to the first day of such Deferral Period, as follows:

(A)          such
Participant’s election to defer such Participant’s Salary and Bonus under
Sections 4.1 (Participant Contributions) shall be effective for such
subsequent Deferral Period,

(B)          in
the event such Participant made a Separation from Service Election, such
Participant’s Separation from Service Election (including the form of
distribution thereunder) shall be effective for such subsequent Deferral
Period, and

(C)          in
the event such Participant made a Distribution Year Election, such Distribution
Year Election shall not be effective for such subsequent Deferral Period, and
such Participant shall be deemed to have made a Separation from Service
Election (and elected distribution in the form of a lump sum payment) for such
subsequent Deferral Period.

A Participant may, but shall not be required to,
complete and deliver a Participation Agreement for each Deferral Period.

(b)           Initial Participant Agreement for
Caesars Participants.

(1)           Distribution Elections.  A Caesars Participant shall complete and
deliver a Participation Agreement evidencing his or her distribution election
with respect to the amounts credited to his or her Accounts under Section
4.5.  A Caesars Participant must complete
and deliver his or her Participation Agreement with respect to the 2005
Deferral Period not later than June 30, 2005. 
A Caesars Participant shall make a Separation from Service Election, or
a Distribution Year Election, in his or her Participation Agreement in
accordance with Section 8.1 (Distribution Elections).  A Caesars Participant’s Participation
Agreement shall set forth such other information as the EDCP Committee shall
require.

(2)           Other Deferrals and Matching
Contributions Prohibited. 
Notwithstanding Sections 4.1 and 4.2, a Caesars Participant shall not be
eligible to elect to defer such Participant’s Salary or Bonus earned during the
2005 Deferral Period, and the Employer shall not make Matching Contributions on
behalf of a Caesars Participant with respect to the 2005 Deferral Period.

3.3          Discontinuance
of Participation. 
Once an Employee is designated as a Participant, he or she shall
continue as such for all future Deferral Periods unless and until:  (a) the Participant terminates from employment
with the Employer and all Affiliates and receives a full distribution of his
Accounts, (b) is no longer categorized as an individual entitled to participate
in the Plan pursuant to Section 3.1 (Selection of Participants)
above, or (c) the HRC

 13
 

 

specifically acts to discontinue the Participant’s
participation.  The HRC may discontinue a
Participant’s participation in the Plan at any time for any or no reason.  If a Participant’s participation is
discontinued, the Participant shall no longer be eligible to make Deferral
Contributions and shall no longer be eligible for Matching Contributions or
Discretionary Contributions.  The
Participant shall not be entitled to receive a distribution, however, until the
occurrence of one of the events listed in Article Five (Withdrawals upon Unforeseeable
Emergency) or Article Eight (Distribution Elections; Payment of Benefits).

3.4          Reemployment.  If a former Employee is rehired by an
Employer and is eligible to participate in the Plan, he or she shall reenter
the Plan on the first day of any Deferral Period commencing after the date he
or she is rehired in accordance with the provisions of Section 3.1 (Selection
of Participants).  Such Employee’s
reentry into the Plan shall have no impact on any distributions that have been
made or are being made in accordance with Article Eight (Distribution
Elections; Payment of Benefits).  Any
amounts previously forfeited from the Participant’s Accounts pursuant to
Section 7.1 (Vesting of Benefits) shall not be restored or
reinstated upon the Participant’s subsequent reentry into the Plan.

3.5          Adoption
by Affiliates.  Any
Affiliate of the Company may adopt this Plan with the approval of the EDCP
Committee.  Any Affiliate that permits an
individual to make Deferral Contributions pursuant to Section 4.1 (Participant
Contributions) shall be deemed to have adopted the Plan without any further
action.  The EDCP Committee’s acceptance
of such Deferral Contributions shall evidence the consent of the EDCP Committee
to the adoption of the Plan by the Affiliate. 
Notwithstanding the foregoing, at the request of the EDCP Committee, the
Affiliate shall evidence its adoption of the Plan by an appropriate resolution
of its Board of Directors or in such other manner as may be authorized by the
EDCP Committee.  By adopting this Plan,
the Affiliate shall be deemed to have agreed to make the contributions called
for by  Article Four (Contributions),
agreed to comply with all of the other terms and provisions of this Plan,
delegated to the EDCP Committee the power and responsibility to administer this
Plan with respect to the Affiliate’s employees, and delegated to the Company
the full power to amend or terminate this Plan with respect to the Affiliate’s
Employees.

ARTICLE FOUR

CONTRIBUTIONS

4.1          Participant
Contributions.

(a)           Salary Deferral Contributions.  Subject to subsection (d), a Participant may
elect to defer any whole percentage of such Participant’s Salary earned by him
or her during the Deferral Period up to a maximum of seventy-five percent
(75%), or such other maximum amount as may be prescribed by the EDCP Committee
as the Salary Deferral Contribution limit for all Participants or pursuant to
subsection (c).

(b)           Bonus Deferral Contributions.  A Participant may elect to defer any whole
percentage of any Bonus earned by him or her during the Deferral Period (which
may be paid during the applicable Deferral Period or after the close of the
applicable Deferral Period), up to a maximum of ninety percent (90%), or such
other maximum amount as may be prescribed by

 14
 

 

the EDCP Committee as the Bonus Deferral Contribution
limit for all Participants or pursuant to subsection (c).

(c)           Excess Deferral Contributions.  The EDCP Committee
may, in its discretion, permit an individual Participant to make Deferral
Contributions in excess of the limitations set forth in or established in
accordance with this Section 4.1, or place additional restrictions on an
individual Participant’s Deferral Contributions, prior to the first day of the
Deferral Period for which such permission or additional limitation is to be
effective.  All Deferral Contributions
under this Plan shall be made in accordance with such rules and procedures
regarding Participant deferrals as may be promulgated by the EDCP Committee
from time to time.  All Participant
elections are subject to the timing requirements set forth in Section 3.2
(Participation Agreement).

(d)           Mandatory Salary Deferral
Contributions.  If
a Participant is required under the terms of such Participant’s employment
agreement with the Employer to defer that portion of such Participant’s Salary
in excess of one million dollars ($1,000,000) (or such other amount as
specified in such agreement), the portion of such Participant’s Salary earned
during the Deferral Period in excess of such amount shall be deferred pursuant
to this subsection (d).  The EDCP
Committee shall determine the amount required to be deferred from such
Participant’s Salary for each pay period during the Deferral Period.  Such Participant may elect to defer the
remainder of his or her Salary in accordance with subsection (a).

4.2          Matching
Contributions.

(a)           Eligible Participants.  Subject to subsection (c), each Employer
shall make a Matching Contribution on behalf of each of its Participants who
has elected to make Salary Deferral Contributions during the Deferral Period
under Section 4.1 (Participant Contributions), and is eligible to
receive a matching contribution under the Savings and Retirement Plan, in
accordance with subsection (b).  No
Matching Contributions shall be made with respect to Bonus Deferral
Contributions.  The Matching Contribution
shall be credited to each eligible Participant’s Matching Contribution Account
as of the year-end Valuation Date or date of termination.

(b)           Matching
Contribution Formula. 
The Matching Contribution for each eligible Participant shall equal the
excess (if any) of:

(1)           the matching
contributions that would have been made for such Participant under the Savings
and Retirement Plan, determined under the Matching Formula, based on the sum of

(A)          the
Participant’s 401(k) Matchable Deferrals for the plan year of the Savings and
Retirement Plan coinciding with the Deferral Period, plus

(B)          the
Participant’s Salary Deferral Contributions in the Deferral Period,

up to the Matching
Limit as applied to the Participant’s Salary, less

 15
 

 

(2)           the Participant’s
401(k) Matching Contributions for the plan year of the Savings and Retirement
Plan coinciding with such Deferral Period.

(c)           Special
Matching Contributions for Caesars Participants.

(1)           Caesars
Participants Eligible for Matching Contributions under the Caesars Plan.  If a Caesars Participant was eligible to
receive “Base Compensation Company Contribution Amounts” (as defined in the
Caesars Plan) and “Bonus Compensation Company Contribution Amounts” (as defined
in the Caesars Plan) under the Caesars Plan effective as of June 13, 2005, an
Employer shall make special Matching Contributions on behalf of each such
Caesars Participant who has elected to make Deferral Contributions during the
2006 Deferral Period under Section 4.1 (Participant Contributions), in
accordance with this paragraph (1).  Such
special Matching Contributions shall be in lieu of the Matching Contributions
that otherwise would have been made by the Employer for such Caesars
Participant under subsections (a) and (b) for the 2006 Deferral Period.  The special Matching Contributions under
subparagraph (A) shall be credited to an eligible Caesars Participant’s Caesars
Company Contribution Account as soon as practicable after the last day of each
payroll period for such Salary, the special Matching Contribution under
subparagraph (B) shall be credited to an eligible Caesars Participant’s Caesars
Company Contribution Account as soon as practicable after the day the Bonus
otherwise would be payable, and the special Matching Contribution under
subparagraph (C) shall be credited to an eligible Caesars Participant’s
Matching Contribution Account as of the year-end Valuation Date or date of
termination.  The special Matching
Contributions with respect to a Caesars Participant for the 2006 Deferral
Period shall be determined as follows:

(A)          with respect to each payroll period
for such Caesars Participant commencing on or after January 1, 2006 and before
June 13, 2006, such Employer shall make a special Matching Contribution on
behalf of such Caesars Participant in an amount equal to 50% of the Caesars
Participant’s Salary Deferral Contributions for such payroll period,
disregarding any such Salary Deferral Contributions in excess of 10% of such
Caesars Participant’s Salary for such payroll period,

(B)            with respect to each Bonus of such
Caesars Participant earned for services performed in 2006, and payable on or
after January 1, 2006 and before June 13, 2006, such Employer shall make a
special Matching Contribution on behalf of such Caesars Participant in an
amount equal to 50% of the Caesars Participant’s Bonus Deferral Contributions,
disregarding any such Bonus Deferral Contributions in excess of 10% of such
Caesars Participant’s Bonus, and

(C)          with respect to the payroll periods
for such Caesars Participant commencing on or after June 13, 2006 and before
January 1, 2007, such Employer shall make a special Matching
Contribution on behalf of such Caesars Participant equal to the excess (if any)
of:

(I)            the matching contributions that
would have been made for such Caesars Participant under the Savings and
Retirement Plan

 16
 

 

(assuming such Caesars Participant had been a
participant therein), determined under the Matching Formula, based on the sum
of

(i)            the Caesars Participant’s 401(k)
Matchable Deferrals for the plan year of the Savings and Retirement Plan
coinciding with the 2006 Deferral Period, multiplied by the Caesars Fraction
(as defined in paragraph (3)), plus

(ii)           the total of the Caesars Participant’s
Salary Deferral Contributions that are deferred for the payroll periods of the
Caesars Participant commencing on or after June 13, 2006 and before January 1,
2007,

up to the Matching Limit as applied to the Caesars
Participant’s total Salary for the payroll periods commencing on or after June
13, 2006 and before January 1, 2007, less

(II)           the Caesars Participant’s 401(k)
Matching Contributions for the plan year of the Savings and Retirement Plan
coinciding with the 2006 Deferral Period, multiplied by the Caesars Fraction.

(2)           Caesars Participants Not Eligible
for Matching Contributions under the Caesars Plan.  If a Caesars Participant was not eligible to
receive “Base Compensation Company Contribution Amounts” (as defined in the
Caesars Plan) and “Bonus Compensation Company Contribution Amounts” (as defined
in the Caesars Plan) effective as of June 13, 2005, an Employer shall make
special Matching Contributions on behalf of each such Caesars Participant who
has elected to make Deferral Contributions during the 2006 Deferral Period
under Section 4.1 (Participant Contributions), in accordance with this
paragraph (2).  Such special Matching
Contributions shall be in lieu of the Matching Contributions that otherwise
would have been made by the Employer for such Caesars Participant under
subsections (a) and (b) for the 2006 Deferral Period.  The special Matching Contribution under
subparagraph (C) shall be credited to an eligible Caesars Participant’s
Matching Contribution Account as of the year-end Valuation Date or date of termination.  The special Matching Contributions with
respect to a Caesars Participant for the 2006 Deferral Period shall be
determined as follows:

(A)          No special Matching Contributions
shall be made for such Caesars Participant’s Salary Deferral Contributions with
respect to each payroll period for such Caesars Participant commencing on or
after January 1, 2006 and before June 13, 2006,

(B)            No special Matching Contributions
shall be made for such Caesars Participant’s Bonus earned for services
performed in 2006, and

(C)          with respect to the payroll periods
for such Caesars Participant commencing on or after June 13, 2006 and before
January 1, 2007, such

 17
 

 

Employer shall make a
special Matching Contribution on behalf of such Caesars Participant equal to
the excess (if any) of:

(I)            the matching contributions that
would have been made for such Caesars Participant under the Savings and
Retirement Plan (assuming such Caesars Participant had been a participant
therein), determined under the Matching Formula, based on the sum of

(i)            the Caesars Participant’s 401(k)
Matchable Deferrals for the plan year of the Savings and Retirement Plan
coinciding with the 2006 Deferral Period, multiplied by the Caesars Fraction
(as defined in paragraph (3)), plus

(ii)           the total of the Caesars Participant’s
Salary Deferral Contributions that are deferred for the payroll periods of the
Caesars Participant commencing on or after June 13, 2006 and before January 1,
2007,

up to the Matching Limit as applied to the Caesars
Participant’s total Salary for the payroll periods commencing on or after June
13, 2006 and before January 1, 2007, less

(II)           the Caesars Participant’s 401(k)
Matching Contributions for the plan year of the Savings and Retirement Plan
coinciding with the 2006 Deferral Period, multiplied by the Caesars Fraction.

(3)           Caesars Fraction.  For purposes of subparagraph (1)(C) or
(2)(C), as applicable, the “Caesars Fraction” of a Caesars Participant shall
mean the fraction, (A) the numerator
of which is the number of days during the period commencing June 13, 2006 and
ending on December 31, 2006 (or, if earlier, the date of the termination of
such Caesars Participant’s employment with the Employers and all Affiliates),
and (B) the denominator is 365 days.

(4)           Caesars Participants Eligible for
Special Matching Contributions.  The EDCP Committee shall maintain a list of
each Caesars Participant who is eligible for the special Matching Contributions
under paragraph (1) or (2).

4.3          Change
or Suspension of Contributions.

(a)           Rules.  Any and all changes or
suspensions of Deferral Contributions made pursuant to this Section 4.3 shall
be made in accordance with rules promulgated by the EDCP Committee.

(b)           Salary Deferral Contributions.

(1)           A Participant may
change the amount or percentage of his or her Salary Deferral Contributions
under Section 4.1(a) (Participant Contributions – Salary

 18
 

 

Deferral
Contributions), or suspend his or her Salary Deferral
Contributions under Section 4.1)(a), prior to the beginning of any Deferral
Period.  Any change in the amount or
percentage of the Salary Deferral Contributions to be made from any Salary, or
suspension of Salary Deferral Contributions, shall be effective with respect to
Salary earned on or after the first day of the first full pay period of the
next following Deferral Period.

(2)           A Participant may
not change or suspend the amount of his or her Salary Deferral Contributions
for a Deferral Period under Section 4.1(d) (Participant Contributions –
Mandatory Salary Deferral Contributions).

(c)           Bonus
Deferral Contributions.

(1)           A
Participant may change the amount or percentage of his or her Bonus Deferral
Contributions under Section 4.1(b) (Participant Contributions – Bonus
Deferral Contributions), or suspend his or her Bonus Deferral Contributions
under Section 4.1(b), prior to the beginning of any Deferral Period.  Any change in the amount or percentage of the
Bonus Deferral Contributions to be made from any Bonus shall be effective with
respect to Bonus earned on or after the first day of the next following
Deferral Period.

(2)           Notwithstanding
paragraph (1), the EDCP Committee, in its discretion, may permit a Participant
to change the amount or percentage of his or her Bonus Deferral Contributions
under Section 4.1(b), or suspend his or her Bonus Deferral Contributions under
Section 4.1(b), to the extent such Participant’s Bonus constitutes
performance-based compensation based on services performed over a period of at
least twelve (12) months (within the meaning of Section 409A(a)(4)(B)(iii) of
the Code and the Treasury Regulations thereunder), not later than six months
before the end of the service period of such Bonus, in accordance with Section
409A(a)(4)(B)(iii) of the Code and the Treasury Regulations thereunder.

(d)           Future Participation.  A Participant’s election to
make no Deferral Contributions to the Plan during one or more Deferral Periods,
or to suspend his or her Deferral Contributions, shall not affect his or her
continued participation in the Plan or his or her ability to resume his
Deferral Contributions to the Plan in a future Deferral Period.

4.4          Discretionary
Contributions. 
With the approval of the EDCP Committee, each Employer, in its sole
discretion, may make a Discretionary Contribution on behalf of such
Participants as it designates.  The amount
of the Discretionary Contribution shall be determined by the Employer in its
sole discretion, and approved by the EDCP Committee.  All Discretionary Contributions shall be
credited to the Participant’s Discretionary Contribution Account as of the time
designated by the Employer or the EDCP Committee.  Discretionary Contributions may be subject to
additional requirements, including vesting and withdrawal limitations (which
shall be in addition to the withdrawal and distribution limitations of Articles
Five (Withdrawals upon Unforeseeable Emergency) and Eight (Distribution
Elections; Payment of Benefits), as established by the Company or the EDCP
Committee.  Any Discretionary
Contributions made

 19
 

 

under this Section 4.4 shall be made in accordance
with the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the
Treasury Regulations thereunder.

4.5          2005
Contributions under the Caesars Plan.

(a)           Caesars Base Compensation Deferral
Contributions.  A
Caesars Participant’s “Base Compensation” (as defined in the Caesars Plan)
deferred by such Caesars Participant for any payroll period of such Caesars
Participant commencing on or after July 1, 2005 and before January 1, 2006 in
accordance with Section 3.1(a) of the Caesars Plan shall be credited to such
Caesars Participant’s Deferral Contribution Account (and shall not be credited
to such Caesars Participant’s “Deferral Account” (as defined in the Caesars
Plan) or the subaccounts thereunder).

(b)           Caesars Bonus Deferral Contributions.  A Caesars Participant’s “Bonus Compensation”
(as defined in the Caesars Plan) earned for services performed during 2005, and
otherwise payable on or after July 1, 2005, and deferred in accordance with
Section 3.2 of the Caesars Plan shall be credited to such Caesars Participant’s
Deferral Contribution Account (and shall not be credited to such Caesars
Participant’s “Deferral Account” (as defined in the Caesars Plan) or the
subaccounts thereunder).

(c)           Caesars Matching Contributions.

(1)           Base Compensation Company
Contribution Amount. 
A Caesars Participant’s “Base Compensation Company Contribution Amount”
(as defined in the Caesars Plan), if any, for any payroll period for such
Caesars Participant commencing on or after July 1, 2005 and before January 1,
2006, determined in accordance with Section 4.2 of the Caesars Plan, shall be
credited to such Caesars Participant’s Caesars Company Contribution Account
(and shall not be credited to such Caesars Participant’s “Company Contribution
Account” (as defined in the Caesars Plan) or the subaccounts thereunder).

(2)           Bonus Compensation Company
Contribution Amount. 
A Caesars Participant’s “Bonus Compensation Company Contribution Amount”
(as defined in the Caesars Plan), if any, with respect to such Caesars
Participant’s “Bonus Compensation” (as defined in the Caesars Plan) earned for
services performed during 2005, and otherwise payable after July 1, 2005, and
deferred under the Caesars Plan, determined in accordance with Section 4.2 of
the Caesars Plan, shall be credited to such Caesars Participant’s Caesars
Company Contribution Account (and shall not be credited to such Caesars
Participant’s “Company Contribution Account” (as defined in the Caesars Plan)
or the subaccounts thereunder).

4.6          Second
Enhancement Contributions.  If
a Harrah’s ESSP Participant becomes entitled to an “Enhancement Contribution”
(as defined in the Harrah’s ESSP) under Section 4.8(b) of the Harrah’s ESSP
on  or after the Harrah’s ESSP Second
Transfer Date, such “Enhancement Contribution” shall be credited to such Harrah’s
ESSP Participant’s Transferred Harrah’s ESSP Deferral Contribution Account
under this Plan (and shall not be credited to such 

 20
 

 

Harrah’s ESSP Participant’s “Deferral Contribution
Account” (as defined in the Harrah’s ESSP) under the Harrah’s ESSP or the
subaccounts thereunder).

4.7          Transfers
from Caesars Plan.

(a)           (1)           Amounts to be Transferred.  Effective as of the Caesars Plan Transfer
Date, in the case of a Caesars Participant, the amounts credited to such
Caesars Participant’s “Accounts” (as defined in the Caesars Plan) that are
described in this Section 4.7 shall be transferred from such “Accounts” to such
Caesars Participant’s Transferred Caesars Deferral Account and Transferred
Caesars Company Contribution Account, as provided in subsections (b), (c), (d)
and (e).  The amounts described in this
Section 4.7 include compensation deferred by such Caesars Participant under the
Caesars Plan during 2005, and matching contribution credits under the Caesars
Plan related thereto, and amounts credited to such Caesars Participant’s “Accounts”
under the Caesars Plan as of December 31, 2004 that were not earned and vested
as of December 31, 2004, in each case as adjusted for any earnings credited
thereto or any losses debited therefrom under the Caesars Plan.  The amounts transferred pursuant to Section
4.7 shall be debited from such Caesars Participant’s “Accounts” under the
Caesars Plan, and shall be credited to such Caesars Participant’s Transferred
Caesars Deferral Account and Transferred Caesars Company Contribution Account,
as applicable, effective as of the Caesars Plan Transfer Date.

(2)           Grandfathered Amounts.  The amounts credited to such Caesars
Participant’s “Accounts” (as defined in the Caesars Plan) as of December 31,
2004 that were earned and vested as of December 31, 2004, as adjusted for any
earnings credited thereto or any losses debited therefrom under the Caesars
Plan, are not subject to Section 409A of the Code, and such amounts shall not
be transferred from such Caesars Participant’s “Accounts” under the Caesars
Plan.

(b)           Caesars Base Compensation Deferral
Contributions.  The
Caesars Participant’s “Base Compensation” (as defined in the Caesars Plan)
deferred by such Caesars Participant for any payroll period of such Caesars
Participant commencing on or after January 1, 2005 and commencing before July
1, 2005 in accordance with Section 3.1(a) of the Caesars Plan, as adjusted for
any earnings credited thereto and any losses debited therefrom under the
Caesars Plan, shall be transferred from such Caesars Participant’s “Deferral
Account” (as defined in the Caesars Plan) to such Caesars Participant’s
Transferred Caesars Deferral Account, effective as of the Caesars Plan Transfer
Date.

(c)           Caesars Bonus Deferral
Contributions.  The
Caesars Participant’s “Bonus Compensation” (as defined in the Caesars Plan)
otherwise payable on or after January 1, 2005 and payable before July 1, 2005
and deferred by such Caesars Participant in accordance with Section 3.2(a) of
the Caesars Plan, as adjusted for any earnings credited thereto and any losses
debited therefrom under the Caesars Plan, shall be transferred from such
Caesars Participant’s “Deferral Account” (as defined in the Caesars Plan) to
such Caesars Participant’s Transferred Caesars Deferral Account, effective as
of the Caesars Plan Transfer Date.

 21
 

 

(d)           Caesars Matching Contributions.  The Caesars Participant’s “Base
Compensation Company Contribution Amount” (as defined in the Caesars Plan) for
any payroll period for such Caesars Participant commencing on or after January
1, 2005 and commencing before July 1, 2005, determined in accordance with
Section 4.2(b) of the Caesars Plan, as adjusted for any earnings credited
thereto and any losses debited therefrom under the Caesars Plan, and a Caesars
Participant’s “Bonus Compensation Company Contribution Amount” (as defined in
the Caesars Plan) with respect to such Caesars Participant’s “Bonus
Compensation” (as defined in the Caesars Plan) otherwise payable after January
1, 2005 and deferred under the Caesars Plan, determined in accordance with
Section 4.2(c) of the Caesars Plan, as adjusted for any earnings credited
thereto and any losses debited therefrom under the Caesars Plan, shall be
transferred from such Caesars Participant’s “Company Contribution Account” (as
defined in the Caesars Plan) to such Caesars Participant’s Transferred Caesars
Company Contribution Account, effective as of the Caesars Plan Transfer Date.

(e)           Non-Grandfathered Company
Contribution Account Balances.  The portion of the amount credited to the
Caesars Participant’s “Company Contribution Account” (as defined in the Caesars
Plan), determined as of December 31, 2004, that was not earned and vested for
purposes of Section 409A of the Code, as of December 31, 2004, adjusted for any
earnings credited thereto and losses debited therefrom under the Caesars Plan,
shall be transferred from such Caesars Participant’s “Company Contribution
Account” (as defined in the Caesars Plan) to such Caesars Participant’s
Transferred Caesars Company Contribution Account, effective as of the Caesars
Plan Transfer Date.

4.8          Transfers from Harrah’s ESSP.

(a)           (1)           First
Amounts to be Transferred.  Effective as of the Harrah’s ESSP First
Transfer Date, in the case of a Harrah’s ESSP Participant, the amount credited
to such Harrah’s ESSP Participant’s “Matching Contribution Account” (as defined
in the Harrah’s ESSP) that is described in subsection (b) shall be transferred
from such “Matching Contribution Account” to such Harrah’s ESSP Participant’s
Transferred Harrah’s ESSP Matching Account, as provided in subsection (b).

(2)           Second Amounts to be Transferred.  Effective as of the Harrah’s ESSP Second
Transfer Date, in the case of a Harrah’s ESSP Participant, the amount credited
to such Harrah’s ESSP Participant’s “Deferral Contribution Account” (as defined
in the Harrah’s ESSP) that is described in subsection (c) shall be transferred
from such “Deferral Contribution Account” to such Harrah’s ESSP Participant’s
Transferred Harrah’s ESSP Deferral Contribution Account, as provided in
subsection (c).

(3)           Transferred Amounts.  The amounts described in this Section 4.8
include amounts credited to such Harrah’s ESSP Participant’s “Accounts” under
the Harrah’s ESSP as of December 31, 2004 that were not earned and vested as of
December 31, 2004, as adjusted for any earnings credited thereto or any losses
debited therefrom under the Harrah’s ESSP, and amounts credited under the
Harrah’s ESSP after December 31, 2004, as adjusted for any earnings credited
thereto or any losses debited

 22
 

 

therefrom under the
Harrah’s ESSP.  The amounts transferred
pursuant to this Section 4.8 shall be debited from such Harrah’s ESSP
Participant’s “Accounts” under the Harrah’s ESSP, and shall be credited to such
Harrah’s ESSP Participant’s Transferred Harrah’s ESSP Accounts, effective as of
Harrah’s ESSP First Transfer Date, or the Harrah’s ESSP Second Transfer Date,
as applicable.

(4)           Grandfathered Amounts.  The amounts credited to such Harrah’s ESSP
Participant’s “Accounts” (as defined in the Harrah’s ESSP) as of December 31,
2004 that were earned and vested as of December 31, 2004, as adjusted for any
earnings credited thereto or any losses therefrom under the Harrah’s ESSP, are
not subject to Section 409A of the Code, and such amounts shall not be
transferred from such Harrah’s ESSP Participant’s “Accounts” under the Harrah’s
ESSP.

(b)           Harrah’s ESSP Matching
Contributions.  In
the event that all or any portion of a Harrah’s ESSP Participant’s “Matching
Contribution Account” (as defined in the Harrah’s ESSP) was not fully vested as
of December 31, 2004 under the Harrah’s ESSP, the portion of the total balance
in such Harrah’s ESSP Participant’s “Matching Contribution Account” (as defined
in the Harrah’s ESSP) that was not vested as of December 31, 2004 under the
Harrah’s ESSP, as adjusted for any earnings credited thereto or any losses
debited therefrom under the Harrah’s ESSP, shall be transferred from such
Harrah’s ESSP Participant’s “Matching Contribution Account” (as defined in the
Harrah’s ESSP) to such Harrah’s ESSP Participant’s Transferred Harrah’s ESSP
Matching Contribution Account, effective as of the Harrah’s ESSP First Transfer
Date.  The portion of the balance in such
Harrah’s ESSP Participant’s “Matching Contribution Account” that was vested as
of December 31, 2004, as adjusted for any earnings credited thereto or any
losses debited therefrom under the Harrah’s ESSP, shall not be transferred and
shall remain credited to such Harrah’s ESSP Participant’s “Matching
Contribution Account.”

(c)           Harrah’s ESSP Bonus Deferral
Contributions.  The
Harrah’s ESSP Participant’s “Bonus” (as defined in the Harrah’s ESSP) earned by
such Harrah’s ESSP Participant during the 2004 “Deferral Period” (as defined in
the Harrah’s ESSP), and otherwise payable after December 31, 2004, and deferred
by such Harrah’s ESSP Participant in accordance with Section 4.1(b) of the
Harrah’s ESSP, as adjusted for any earnings credited thereto or any losses
debited therefrom under the Harrah’s ESSP, shall be transferred from such
Harrah’s ESSP Participant’s “Deferral Contribution Account” (as defined in the
Harrah’s ESSP) to such Harrah’s ESSP Participant’s Transferred Harrah’s ESSP
Deferral Contribution Account, effective as of the Harrah’s ESSP Second
Transfer Date.

 23

 

ARTICLE FIVE

WITHDRAWALS UPON UNFORESEEABLE EMERGENCY

5.1          Unforeseeable
Emergency Withdrawals.

(a)               General.

(1)           A
Participant may elect to receive a withdrawal from his or her Accounts upon the
occurrence of an Unforeseeable Emergency. 
Such Participant may elect to receive a withdrawal by completing and
delivering an election with the EDCP Committee in accordance with the uniform
procedures promulgated by the EDCP Committee.

(2)           The election to
receive a withdrawal upon the occurrence of an Unforeseeable Emergency by a
Participant who is entitled to a distribution under Article  Eight (Distribution Elections; Payment of
Benefits) shall override the distribution election in effect for such
Participant under Article Eight with respect to the amount to be withdrawn,
both as to form of payment and timing of payment.  If installment payments to such Participant
have begun at the time an election for a withdrawal upon the occurrence of an
Unforeseeable Emergency is made, the election shall apply only with respect to
the unpaid balance of such Participant’s Accounts.

(3)           The amount to be
distributed to a Participant who elects a withdrawal upon the occurrence of an
Unforeseeable Emergency shall not exceed the amounts necessary to satisfy such
Unforeseeable Emergency, plus amounts necessary to pay taxes reasonably
anticipated as a result of the withdrawal, after taking into account the extent
to which such Unforeseeable Emergency is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of
the Participant’s assets (to the extent the liquidation of such assets would
not itself cause severe financial hardship), as determined by the EDCP
Committee in accordance with Section 409A(a)(2)(B)(ii)(II) of the Code and the
Treasury Regulations thereunder.

(4)           For purposes of
this Section 5.1, “Unforeseeable Emergency” with respect to a Participant shall
mean a severe financial hardship to the Participant resulting from an illness
or accident of the Participant, the Participant’s spouse, or a dependent (as
defined in Section 152(a) of the Code) of the Participant, loss of the
Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant, as determined by the EDCP Committee in accordance with Section
409A(a)(2)(B)(ii)(I) of the Code and the Treasury Regulations thereunder.

(5)           For purposes of
determining the amount to be distributed to such Participant, the Participant’s
Accounts shall be valued as of the Valuation Date immediately preceding the
date the withdrawal election is approved by the EDCP Committee.  The amount to be distributed to a Participant
who elects a withdrawal upon the occurrence of an Unforeseeable Emergency shall
not exceed such Participant’s vested interest in his or her Accounts.  The Participant’s vested interest in his or
her Matching Contribution Account and Discretionary Contribution Account shall
be determined as of the Valuation Date immediately preceding the date the
withdrawal election is approved by the EDCP Committee.

 24
 

 

 

(6)           The amount to be
distributed to the Participant pursuant to such Participant’s election to
receive a withdrawal upon the occurrence of Unforeseeable Emergency shall be
paid in a lump sum payment within thirty (30) days following the approval of
the Participant’s withdrawal election by the EDCP Committee.

(b)           Suspension of Participation.  If a Participant receives a withdrawal upon
the occurrence of Unforeseeable Emergency, the Participant’s Deferral
Contributions to the Plan shall be suspended for the remainder of the Deferral
Period during which the withdrawal is distributed to the Participant, to the
extent required under Section 409A(a)(2)(B)(ii) of the Code and the Treasury
Regulations thereunder.  Upon expiration
of the suspension period described in the preceding sentence, the Participant
shall be permitted to submit a new Participation Agreement in accordance with
Section 3.2 (Participation Agreement) and to begin making Deferral Contributions
with respect to Compensation earned on or after the first day of the first
payroll period of the next following Deferral Period.

5.2          Account Adjustments.  A Participant’s withdrawal upon the
occurrence of Unforeseeable Emergency shall be charged on a pro rata basis to
the Participant’s vested interests in the subaccounts in such Participant’s
Accounts.

ARTICLE SIX

CREDITING OF CONTRIBUTIONS AND INCOME

6.1          Account
Allocations.  All
Deferral Contributions shall be credited to the Participant’s Deferral
Contribution Account.  All Matching
Contributions shall be credited to the Participant’s Matching Contribution
Account, and all Discretionary Contributions shall be credited to the
Participant’s Discretionary Contribution Account.  With respect to a Caesars Participant, all
deferral contributions under Sections 4.5(a) and (b) shall be credited to the
Caesars Participant’s Deferral Contribution Account, and all matching
contributions under Section 4.5(c) shall be credited to such Caesars
Participant’s Caesars Company Contribution Account, and all special Matching
Contributions under Section 4.2(c) shall be credited to such Caesars
Participant’s Caesars Company Contribution Account or Matching Contribution
Account, as provided therein.  All
credits and charges to all Participants’ Accounts shall be done in accordance
with the policies and procedures of the EDCP Committee.  All transfers to payments from and charges
against an Account shall be charged against the Account as of the Valuation Date
on which the transaction occurs.  The
Accounts are bookkeeping accounts only, and the EDCP Committee is not in any
way obligated to segregate assets for the benefit of any Participant.

6.2          Subaccounts.  The EDCP Committee may divide any Account
into such subaccounts as it deems necessary and desirable.

6.3          Hypothetical Investment Funds.  The EDCP Investment Committee shall establish
a series of hypothetical Investment Funds for use pursuant to this Article Six.

6.4          Investment Direction.  A Participant shall direct the hypothetical
investment of his Deferral Contribution Account, Matching Contribution Account,
and Discretionary Contribution Account (and, in the case of a Harrah’s ESSP
Participant, his or her Transferred 

 25
 

 

 

Harrah’s ESSP Accounts (if any), and, in the case of a
Caesars Participant, his or her Caesars Company Contribution Account and
Transferred Caesars Accounts (if any)) among the Investment Funds in the manner
(including, but not limited to, writing, electronic, internet, intranet, voice
response or telephonic) established by the EDCP Committee.  The Participant’s Deferral Contribution
Account, Matching Contribution Account, and Discretionary Contribution Account
(and Transferred Harrah’s ESSP Accounts (if any), and Caesars Company
Contribution Account and Transferred Caesars Accounts (if any)) shall not be
invested in the Investment Funds, but the value of the Participant’s Accounts
shall be measured by the performance of the Investment Funds selected.  Any and all changes to a Participant’s
Investment Fund allocation shall be made in accordance with the uniform
procedures of the EDCP Committee, which shall permit changes in Investment Fund
allocations on a quarterly or more frequent basis.  Notwithstanding the foregoing provisions of
this Section 6.4, the EDCP Investment Committee may retain the overriding
discretion regarding the Participant’s selection of Investment Funds under this
Section 6.4.  If a Participant fails to
direct the hypothetical investment of his or her Accounts in the manner
established by the EDCP Committee, the Participant shall be deemed to have
selected the default hypothetical Investment Fund(s) selected by the EDCP
Investment Committee for such purpose, in the discretion of the EDCP Committee
and in accordance with its uniform policies and procedures.

6.5          Rate of Return.  A Participant’s Accounts shall be adjusted on
each Valuation Date to reflect investment gains and losses as if the Accounts
were invested in the hypothetical Investment Funds selected by the Participant
in accordance with Section 6.4 (Investment Direction) and charged with
any and all reasonable expenses related to the administration of the Plan
including, but not limited to, the reasonable expenses of carrying out the
hypothetical investment directions related to each Account.  The earnings and losses allocated to any
Account shall be allocated among the subaccounts of that Account in the same
manner.  The earnings and losses
determined by the EDCP Investment Committee in good faith and in its discretion
pursuant to this Article Six shall be binding and conclusive on the
Participant, the Participant’s Beneficiary and all parties claiming through
them.

6.6          Application to Beneficiaries.  The provisions of this Article Six shall also
apply to the Beneficiaries of a deceased Participant.

6.7          EDCP Investment Committee.

(a)               Membership.  The EDCP Investment Committee shall be
appointed by action of the HRC.  The EDCP
Investment Committee members shall serve without compensation but shall be
reimbursed for all expenses by the Company. 
The EDCP Investment Committee shall conduct itself in accordance with
the provisions of this Section. The members of the EDCP Investment Committee
may resign with thirty (30) days notice in writing to the Company and may be
removed immediately at any time by written notice from the HRC.  The EDCP Investment Committee may have duties
with respect to other plans of the Company that are similar or identical to its
duties under the Plan.

(b)               Appointment of Agents.  The EDCP Investment Committee may appoint
such other agents, who need not be members of the EDCP Investment 

 26
 

 

 

Committee, as it may deem
necessary for the effective performance of its duties, whether ministerial or
discretionary, as the EDCP Investment Committee may deem expedient or appropriate.  The compensation of any agents who are not
employees of the Company shall be fixed by the committee within any limitations
set by the HRC.

(c)               Majority Vote.
On all matters, questions and decisions, the action of the EDCP Investment
Committee shall be determined by a majority vote of its members.  They may meet informally or take any ordinary
action without the necessity of meeting as a group.  All instruments executed by the EDCP
Investment Committee shall be executed by a majority of its members or by any
member of the EDCP Investment Committee designated to act on its behalf.

(d)               Allocation of Responsibilities.  The EDCP Investment Committee may allocate
responsibilities among its members or designate other persons to act on its
behalf.  Any allocation or designation,
however, must be set forth in writing and must be retained in the permanent
records of the EDCP Investment Committee.

(e)               Indemnification.  The Company shall indemnify and hold harmless
the members of the EDCP Investment Committee against any and all claims, loss,
damage, expense or liability arising from any action or failure to act with
respect to this Plan on account of such member’s service on the EDCP Investment
Committee, except in the case of gross negligence or willful misconduct.

ARTICLE SEVEN

VESTING

7.1          Vesting
of Accounts.

(a)               Deferral
Contributions. 
Each Participant shall at all times have a fully vested interest in his
or her Deferral Contribution Account, his or her Transferred Caesars Deferral
Account (if any), and his or her Transferred Harrah’s ESSP Deferral
Contribution Account (if any), and a Participant’s rights and interests therein
shall not be forfeitable for any reason.

(b)               Matching Contributions.

(1)         Full Vesting.  Each Participant shall have a fully vested interest
in his or her Matching Contribution Account on and after the first to occur of
the following events:

(A)          the
Participant’s attainment of age 60;

(B)          the
Participant’s date of death;

(C)          the
Participant’s Disability;

(D)          a
Change of Control;

 27
 

 

 

(E)           termination
of the Plan; or

(F)           the
completion of five Years of Vesting Service.

(2)           Vesting Schedule.  If a Participant terminates employment with
an Employer at a time when the Participant does not have a fully vested
interest in his or her Matching Contribution Account, the Participant’s vested
interest shall be determined in accordance with the applicable vesting schedule
for matching contributions in effect under the Savings and Retirement Plan in
which such Participant was last eligible to make 401(k) Contributions.

(3)           Forfeiture.
A Participant’s vested interest in his or her Matching Contribution Account
shall be determined as of the Valuation Date immediately preceding his or her
termination of employment with the Company and all Affiliates.  Any portion of a Participant’s Matching
Contribution Account which is not vested shall be forfeited in the first
Deferral Period in which his or her termination of employment with the Company
and all Affiliates occurs.

(c)           Discretionary
Contributions.  Except as
provided by the Employer or EDCP Committee at the time a Discretionary
Contribution is made, each Participant shall vest in his or her Discretionary
Contribution Account in the same manner he or she vests in his or her Matching
Contribution Account.  A Participant’s
vested interest in his or her Discretionary Contribution Account shall be
determined as of the Valuation Date immediately preceding his or her
termination of employment with the Company and all Affiliates. Any portion of a
Participant’s Discretionary Contribution Account which is not vested shall be
forfeited in the first Deferral Period in which his or her termination of
employment with the Company and all Affiliates occurs.

(d)           Caesars Company
Contribution Accounts and Transferred Caesars Company Contribution Accounts.  Each Caesars Participant shall have a vested
interest in his or her Caesars Company Contribution Account and Transferred
Caesars Company Contribution Account, which is determined as follows:

(1)           Vesting of Caesars Company Contribution
Accounts.

(A)          Vesting Schedule.  A Caesars Participant shall vest in the “Base
Compensation Company Contribution Amount” under Section 4.5(c)(1), the “Bonus
Compensation Company Contribution Amount” under Section 4.5(c)(2) and the
special Matching Contributions under Sections 4.2(c)(1)(A) and (B) (if any)
(collectively, the “Caesars Company Contribution Amount”) that are credited to
the Caesars Participant’s Caesars Company Contribution Account in a Plan Year
(plus investment gains and losses thereon under Article Six), upon completion
of the applicable vesting period for such portion of the Caesars Company
Contribution Account.  The vesting period
for the Caesars Participant’s Caesars Company Contribution Account shall
commence with the Plan Year in which the Caesars Company Contribution Amount is
credited under Section 4.5(c) or Sections 4.2(c)(1)(A) and (B), as applicable,
with the Caesars Participant 

 28
 

 

 

vesting in:  (I) 33 1/3% of the Caesars Company
Contribution Amount upon being credited with a “Year of Vesting Service” (as
defined in the Caesars Plan) for the Plan Year for which such Caesars Company
Contribution Amount is credited, (II) 33 1/3% of the Caesars Company
Contribution Amount upon being credited with a “Year of Vesting Service” for
the immediately following Plan Year, and (III) 33 1/3% of the Caesars
Company Contribution Amount upon being credited with a “Year of Vesting Service”
for the next following Plan Year.

(B)          Accelerated Vesting.  Notwithstanding paragraph (1), a Caesars
Participant’s Caesars Company Contribution Account shall become fully vested
should:  (I) the Caesars Participant die
while employed by the Company or an Affiliate, (II) the Caesars Participant
become “Disabled” (as defined in the Caesars Plan) while employed by the
Company or an Affiliate, or (III) there occur a “Change of Control.”  If a Caesars Participant retires on or after
attaining age 55 and does not become employed by a “Competitor” (as defined in
the Caesars Plan) during the six month period immediately following his or her
retirement (the “Six Month Period”), such Caesars Participant’s Caesars Company
Contribution Account shall become fully vested upon the completion of the Six
Month Period (irrespective of the form of distribution elected by the Caesars
Participant) and such Caesars Participant shall receive or commence to receive
the distribution of the amount credited to his or her Caesars Company
Contribution Account that becomes vested under this subparagraph in accordance
with subparagraph (D).

(C)          Forfeiture.

(I)            If
a Caesars Participant who is not fully vested in his or her Caesars Company
Contribution Account retires on or after attaining age 55 and becomes employed
by a “Competitor” during the Six Month Period, the portion of such Caesars
Participant’s Caesars Company Contribution Account which is not vested shall
immediately be forever forfeited and the Company and the Affiliates shall have
no obligation to the Caesars Participant (or his or her Beneficiary) with
respect to such forfeited amount.

(II)           Subject to subparagraph (B) and
clause (I) of this subparagraph, if a Caesars Participant who is not fully
vested in his or her Caesars Company Contribution Account receives or commences
to receive the distribution of the amount credited to his or her Caesars
Company Contribution Account, the portion of such Caesars Participant’s Caesars
Company Contribution Account which is not vested shall immediately be forever
forfeited and the Company and the Affiliates shall have no obligation to the
Caesars Participant (or his or her Beneficiary) with respect to such forfeited
amount.

(D)          Special Distribution.  If a Caesars Participant becomes fully vested
in his or her Caesars Company Contribution Account under 

 29
 

 

 

subparagraph (B) on
account of such Caesars Participant’s retirement on or after attaining age 55,
then, notwithstanding Article Eight, such Caesars Participant shall receive or
commence to receive the distribution of the amount credited to his or her
Caesars Company Contribution Account that becomes vested under subparagraph (B)
as soon as administratively feasible following the completion of the Six Month
Period which follows such Participant’s retirement, in form of distribution
elected under his or her Separation from Service Election or Distribution Year
Election under Section 3.2(b).

(2)           Vesting of Transferred Caesars
Company Contribution Account.  Each Caesars Participant shall at
all times have a full vested interest in his or her Transferred Caesars Company
Contribution Account, and a Caesars Participant’s rights and interests therein
shall not be forfeitable for any reason.

(e)           Transferred
Harrah’s ESSP Matching Contribution Account.  Each Harrah’s ESSP Participant shall have a
vested interest in his or her Transferred Harrah’s ESSP Matching Contribution
Account, which is determined as follows:

(1)           Full Vesting.  Each Participant shall have a fully vested
interest in his Transferred Harrah’s ESSP Matching Contribution Account on and
after the first to occur of the following events:

(A)          the Participant’s attainment of age
60;

(B)          the Participant’s date of death;

(C)          the Participant’s Disability;

(D)          a Change of Control;

(E)           termination of the Plan; or

(F)           the completion of five Years of
Vesting Service.

(2)           Vesting Schedule.  If a Harrah’s ESSP Participant terminates
service with an Employer at a time when the Harrah’s ESSP Participant does not
have a fully vested interest in his Transferred Harrah’s ESSP Matching
Contribution Account, the Harrah’s ESSP Participant’s vested interest shall be
determined as follows:  (A) the excess,
if any, of (I) the percentage determined in accordance with the applicable
vesting schedule for matching contributions in effect under the Savings and
Retirement Plan, over (II) the Transfer Vested Percentage, divided by (B) the
Transfer Unvested Percentage.  As of the
Harrah’s ESSP First Transfer Date, the vesting schedule under the Savings and
Retirement Plan is as follows:

 30
 

 

 

	
  Completed Years 

  of Vesting Service

  	
   

  	
  

  Percentage Vested

  	
   

  
	
  Less than 1

  	
   

  	
  0

  	
  %

  
	
  1 but less than
  2

  	
   

  	
  20

  	
  %

  
	
  2 but less than
  3

  	
   

  	
  40

  	
  %

  
	
  3 but less than
  4

  	
   

  	
  60

  	
  %

  
	
  4 but less than
  5

  	
   

  	
  80

  	
  %

  
	
  5 or more

  	
   

  	
  100

  	
  %.

  

 

For purposes of this
paragraph (2), a Harrah’s ESSP Participant’s “Transfer Vested Percentage” shall
mean his or her vested interest percentage in his or her “Matching Contribution
Account” (as defined in the Harrah’s ESSP), determined as of December 31, 2004,
and a Harrah’s ESSP Participant’s “Transfer Unvested Percentage” shall mean
100%, less his or her “Transfer Vested Percentage”.

(3)           A Harrah’s ESSP
Participant’s vested interest in his Transferred Harrah’s ESSP Matching
Contribution Account shall be determined as of the Valuation Date immediately
preceding the first distribution to the Harrah’s ESSP Participant from his
Transferred Harrah’s ESSP Matching Contribution Account following his
Separation from Service.  Any portion of
a Harrah’s ESSP Participant’s Transferred Harrah’s ESSP Matching Contribution
Account which is not vested shall be forfeited in the first Deferral Period in
which the Harrah’s ESSP Participant or his Beneficiary receives a distribution
from this Plan under Article Eight.

7.2          Changes in Vesting Schedule.  In the event that an amendment to this Plan
or the Savings and Retirement Plan directly or indirectly changes the vesting
provisions of Section 7.1 (Vesting of Benefits), the vested
percentage for each Participant in his or her benefit accumulated to the date
when the amendment is adopted shall not be reduced as a result of the
amendment.

ARTICLE EIGHT

DISTRIBUTION ELECTIONS; PAYMENT OF BENEFITS

8.1          Distribution
Elections.  A
Participant shall make, in his or her Participation Agreement with respect to a
Deferral Period, either:  a Separation
from Service Election under subsection (b), or a Distribution Year Election
under subsection (c).  Such Separation
from Service Election or Distribution Year Election shall apply to the
distribution of the subaccounts of such Participant’s Account to which his or
her Deferral Contributions, Matching Contributions and Discretionary
Contributions for such Deferral Period are credited.  In the case of a Caesars Participant, a
special Separation from Service Election shall apply with respect to the
distribution of such Caesars Participant’s Transferred Caesars Accounts, as provided
in subsection (e).  In the case of a
Harrah’s ESSP Participant, a special Separation from Service Election shall
apply with respect to the distribution of such Harrah’s ESSP Participant’s
Transferred Harrah’s ESSP Accounts, as provided in subsection (f).

(a)           Subaccounts.  A Participant’s Deferral Contributions for a
Deferral Period (and, in the case of a Caesars Participant, such Caesars
Participant’s deferral contributions 

 31
 

 

 

under Sections 4.5(a) and (b) for the Deferral Period)
shall be credited to the subaccount for such Deferral Period under such
Participant’s Deferral Contribution Account. 
Such Participant’s Matching Contributions for a Deferral Period (if any)
shall be credited to the subaccount for such Deferral Period under such
Participant’s Matching Contribution Account. 
Such Participant’s Discretionary Contributions for a Deferral Period (if
any) shall be credited to the subaccount for such Deferral Period under such
Participant’s Discretionary Contribution Account.  Such Participant’s Separation from Service
Election or Distribution Year Election for such Deferral Period shall apply to
distributions from the subaccounts of such Participant’s Accounts for such
Deferral Period.

(b)           Separation from Service Election.  Subject to Section 8.3 (Time of Payment),
a Participant’s Separation from Service Election with respect to a Deferral
Period shall provide for the distribution of the subaccounts of such
Participant’s Accounts for such Deferral Period upon such Participant’s
Separation from Service.

(1)           Form of Distribution.  Such Participant may select the form of
distribution for purposes of distributions from the subaccounts of such
Participant’s Accounts for such Deferral Period.  Such Participant may select distribution in
the form of a lump sum payment, or monthly installment payments over a period
of years.  If such Participant selects
distribution in the form of monthly installment payments, such Participant
shall designate the period of years (which shall be not less than one and not
more than fifteen (15)) over which such monthly installment payments shall be
made.  If such Participant fails to
select a form of distribution for purposes of distributions from the
subaccounts of such Participant’s Accounts for a Deferral Period, such distributions
shall be made in a lump sum payment.

(2)           Prohibition on Change of
Separation from Service Election.  Such Participant may not change his or her
Separation from Service Election with respect to a Deferral Period, or the form
of distribution of the subaccounts of such Participant’s Accounts for such
Deferral Period.  As provided in Section
3.2 and subsection (d), such Participant may elect a new Separation from
Service Election with respect to a future Deferral Period in accordance with
this Section 8.1.

(c)           Distribution Year Election.  Subject to Section 8.2 (Changes of
Distribution Year Election) and Section 8.3 (Time of Payment), a
Participant’s Distribution Year Election with respect to a Deferral Period
shall provide for the distribution of the subaccounts of such Participant’s
Accounts for such Deferral Period upon the earlier of:  the first day of the Distribution Year (as
selected by the Participant), or the Participant’s Separation from Service.

(1)           Distribution Year.  Such Participant shall select the
Distribution Year for purposes of distributions from the subaccounts of such
Participant’s Accounts for a Deferral Period. 
The Distribution Year shall be not earlier than the second calendar year
following the Deferral Period, and shall be not later than the twentieth
calendar year following the Deferral Period.

(2)           Form of Distribution.  The distribution of the subaccounts of such
Participant’s Accounts for such Deferral Period shall be made in a lump sum
payment.

 32
 

 

 

(3)           Change to Distribution Year
Election.  A
Participant may change such Participant’s Distribution Year Election with
respect to a Deferral Period in accordance with Section 8.2.

(d)           Separate Elections.  A Participant may make a separate Separation
of Service Election or Distribution Year Election with respect to each Deferral
Period.

(e)           Distribution of Transferred
Caesars Accounts. A Caesars Participant’s Transferred
Caesars Accounts shall be distributed upon such Participant’s Separation from
Service in accordance with this subsection (e), and shall not be distributed in
accordance with such Caesars Participant’s Separation from Service Election
with respect to any Deferral Period. 
Such distribution shall be made commencing upon such Caesars Participant’s
Separation from Service, except as otherwise provided under Section
8.3(b).  Such Caesars Participant may not
make a Distribution Year Election with respect to his or her Transferred
Caesars Accounts.

(1)         Form of Distribution.  Such Caesars Participant’s Transferred
Caesars Accounts shall be distributed in the form of distribution elected by
such Caesars Participant for the distribution of his or her “Accounts” (as
defined in the Caesars Plan), in accordance with the Caesars Plan, as in effect
as of the Caesars Plan Transfer Date.  Such
distribution form shall be a lump sum payment, or installment payments over a
period of five, ten or fifteen years.  If
such Caesars Participant’s Transferred Caesars Accounts are to be distributed
in the form of installment payments, such distribution shall be made in the
form of monthly installment payments; provided, however, that, if such Caesars
Participant’s Transferred Caesars Accounts are to be distributed commencing in
2006, the first installment payment shall be determined on the basis of annual
installment payments, as provided in accordance with the Caesars Plan (and in
accordance with the transition relief under Q/A 19(c) of Internal Revenue
Service Notice 2005-1), and monthly installment payments from such Caesars
Participant’s Transferred Caesars Accounts shall commence on January 1,
2007.  If such Caesars Participant has
failed to select a form of distribution for purposes of the distribution of his
or her “Accounts” (as defined in the Caesars Plan), in accordance with the
Caesars Plan, as of the Caesars Plan Transfer Date, such Caesars Participant’s
Transferred Caesars Accounts shall be distributed in the form of a lump sum
payment.  The distribution of such
Caesars Participant’s Transferred Caesars Accounts shall be made in accordance
with Sections 8.3 and 8.4.

(2)         Prohibition on Change of Separation
from Service Election. 
Such Caesars Participant may not change his or her special Separation
from Service Election applicable to the distribution of his or her Transferred
Caesars Accounts, or the form of distribution of such Transferred Caesars
Accounts.

(f)            Distribution of Transferred
Harrah’s ESSP Accounts. A Harrah’s ESSP Participant’s
Transferred Harrah’s ESSP Accounts shall be distributed upon such Participant’s
Separation from Service in accordance with this subsection (f), and shall not
be distributed in accordance with such Harrah’s ESSP Participant’s Separation
from Service Election with respect to any Deferral Period.  Such distribution shall be made commencing
upon such Harrah’s ESSP Participant’s Separation from Service, except as
otherwise provided under 

 33
 

 

 

Section 8.3(b). 
Such Harrah’s ESSP Participant may not make a Distribution Year Election
with respect to his or her Transferred Harrah’s ESSP Accounts.

(1)         Form of Distribution.  Such Harrah’s ESSP Participant’s Transferred
Harrah’s ESSP Matching Contribution Account shall be distributed in the form of
distribution elected by such Harrah’s ESSP Participant for the distribution of
his or her “Accounts” (as defined in the Harrah’s ESSP), in accordance with the
Harrah’s ESSP, as in effect as of the Harrah’s ESSP First Transfer Date.  The distribution of such Harrah’s ESSP
Participant’s Transferred Harrah’s ESSP Deferral Contribution Account shall be
made in accordance with Sections 8.3 and 8.4.

(2)         Form of Distribution.  Such Harrah’s ESSP Participant’s Transferred
Harrah’s ESSP Deferral Contribution Account shall be distributed in the form of
distribution elected by such Harrah’s ESSP Participant for the distribution of
his or her “Accounts” (as defined in the Harrah’s ESSP), in accordance with the
Harrah’s ESSP, as in effect as of the Harrah’s ESSP Second Transfer Date.  The distribution of such Harrah’s ESSP
Participant’s Transferred Harrah’s ESSP Deferral Contribution Account shall be
made in accordance with Sections 8.3 and 8.4.

(3)         Prohibition on Change of Separation
from Service Election. 
Such Harrah’s ESSP Participant may not change his or her special
Separation from Service Election applicable to the distribution of his or her
Transferred Harrah’s ESSP Accounts, or the form of distribution of such
Transferred Harrah’s ESSP Accounts.

8.2          Changes
of Distribution Year Election.

(a)           Election
to Change Distribution Selections.  A Participant may change a Distribution Year
Election with respect to a Deferral Period (as set forth in such Participant’s
Participation Agreement in effect for such Deferral Period), following the
commencement of such Deferral Period, in accordance with this Section 8.2.  Such Participant shall complete and deliver
an election to change his or her Distribution Year Election with respect to a
Deferral Period in accordance with the rules and procedures adopted by the EDCP
Committee for such purpose.

(b)           Change
of Distribution Year.

(1)           Such Participant
may make a new Distribution Year Election with respect to a Deferral Period for
purposes of such distributions of the subaccounts of such Participant’s
Accounts for such Deferral Period by electing a new Distribution Year that is
not less than five years later than the Distribution Year previously selected
by such Participant under the prior Distribution Year Election with respect to
such Deferral Period; provided, however,
that the new Distribution Year shall not be later than the twentieth calendar
year following such Deferral Period.

(2)           In the event a
Participant makes a new Distribution Year Election with respect to a Deferral
Period, and such new Distribution Year Election becomes effective, the
distribution of the subaccounts of Participant’s Accounts for such Deferral
Period shall be 

 34
 

 

 

made upon the earlier of:  (A) the first day of the new Distribution
Year, or (B) the fifth anniversary of such Participant’s Separation from
Service.

(c)           Additional Changes.  A Participant may make subsequent new
Distribution Year Elections with respect to a Deferral Period, subject to the
requirements of paragraph (b)(1) and subsection (d), and the distribution of
the subaccounts of such Participant’s Accounts for such Deferral Period shall
be made upon the earlier of:  (A) the new
Distribution Year (selected by the Participant), or (B) five years later than
then date such distribution would have been made in the event of such
Participant’s Separation from Service under the Participant’s next preceding
Distribution Year Election.

(d)           Limitations on Distribution
Changes.  A
Participant may not change his or her Separation from Service Election with
respect to a Deferral Period.  A
Participant may change his or her Distribution Year Election applicable to the
subaccounts of such Participant’s Accounts for a Deferral Period in accordance
with subsection (b), subject to this subsection (d).  A Participant’s new Distribution Year
Election shall be subject to the following limitations:

(1)           The Participant’s
election of a new Distribution Year Election applicable to the subaccounts of
such Participant’s Accounts for a Deferral Period shall not take effect until
at least twelve (12) months after the new Distribution Year Election is made in
accordance with Section 409A(a)(4)(C)(i) of the Code and the Treasury
Regulations thereunder.  If the
distribution from the subaccounts of such Participant’s Accounts for such
Deferral Period is made before the new Distribution Year Election becomes
effective, the new Distribution Year Election shall not thereafter become
effective, and the distribution from the subaccounts of such Participant’s
Accounts for such Deferral Period shall be made in accordance with the
Distribution Year Election, as in effect prior to the new Distribution Year
Election.

(2)           The Participant’s
election of a new Distribution Year, in accordance with subsection (b) or (c)
for the subaccounts of such Participant’s Accounts for a Deferral Period shall
provide that each payment with respect to which such new Distribution Year
Election is made be deferred for a period of not less than five years from the
date such payment would otherwise have been made, as determined in accordance
with Section 409A(a)(4)(C)(ii) of the Code and the Treasury Regulations
thereunder.

(3)           The Participant’s
election of a new Distribution Year Election in accordance with subsection (b)
or (c) for the subaccounts of such Participant’s Accounts for a Deferral Period
shall not be made less than twelve (12) months prior to the date of the first
scheduled distribution payment under the Distribution Year Election in effect
for the subaccounts of such Participant’s Accounts for such Deferral Period in
accordance with Section 409A(a)(4)(C)(iii) of the Code and the Treasury
Regulations thereunder.

(e)           Compliance with Section 409A of
the Code.  Any
change to a Participant’s Distribution Year Election shall be made in
accordance with Section 409A(a)(4)(C) of the Code and the Treasury Regulations
thereunder.

 35

 

 

8.3          Time of Payment.

(a)           A Participant’s Accounts shall be
distributed in accordance with the Separation from Service Election or
Distribution Year Election for the subaccounts of such Participant’s Accounts
for each Deferral Period; provided, however,
that, in the case of a Caesars Participant, such Caesars Participant’s
Transferred Caesars Accounts shall be distributed in accordance with the
special Separation from Service Election, as provided under Section 8.1(e);
and, provided, further, that in the case of a
Harrah’s ESSP Participant, such Harrah’s ESSP Participant’s Transferred Harrah’s
ESSP Accounts shall be distributed in accordance with the special Separation
from Service Election, as provided under Section 8.1(f).

(b)           The distributions
from the subaccounts of a Participant’s Accounts for a Deferral Period shall be
made or commence upon the earliest of:

(1)           the first day of
the Distribution Year (if any) selected by such Participant (in the case of
subaccounts subject to such Participant’s Distribution Year Election), or

(2)           the Participant’s
Separation from Service (or such later date is determined under Sections
8.2(b), (c) and (d)); or

(3)           the Participant’s
death;

provided, however, that, in the
case of a Participant who is a Specified Employee, the distributions of the
subaccounts of such Participant’s Accounts for such Deferral Period shall not
be made before the date which is six months after the date of such Participant’s
Separation from Service (or, if earlier, the date of such Participant’s death)
in accordance with Section 409A(a)(2)(B)(i) of the Code and the Treasury
Regulations thereunder.

(c)           Subject to
subsection (d), if the subaccounts of a Participant’s Accounts for any Deferral
Period are to be distributed in the form of monthly installment payments, and
such Participant is a Specified Employee as of the date of such Participant’s
Separation from Service, the monthly installment payments that otherwise would
be made to such Participant prior to the date which is six months after the date
of such Participant’s Separation from Service (or, if earlier, the date of such
Participant’s death) shall be accumulated in the subaccounts of such
Participant’s Accounts for such Deferral Period and paid after such date in
accordance with Section 409A(a)(2)(B)(i) of the Code and the Treasury
Regulations thereunder, as adjusted to reflect the rate of return on the
hypothetical Investment Funds selected by the Participant in accordance with
Section 6.4.  The subaccounts of such
Participant’s Accounts for such Deferral Period shall be distributed in
installment payments, commencing after the date which is six months after the
date of such Participant’s Separation from Service (or, if earlier, the date of
such Participant’s death), over the installment payment period designated under
the Separation from Service Election for the subaccounts of such Participant’s
Accounts for the Deferral Period.

(d)           In the case of a
Participant who was a Specified Employee as of the date of such Participant’s
Separation from Service, and whose monthly installment payments commenced
during 2005 in accordance with Section 8.3 of the Plan, monthly installment

 36
 

 

 

payments shall be paid during 2005 in accordance with
the transitional relief under Internal Revenue Service Notice 2005 Q/A 20, and
such monthly installments shall be suspended effective as of January 1, 2006
and until the date which is six months after the date of such Participant’s
Separation from Service in accordance with Section 409A(a)(2)(B)(i) of the Code
and the Treasury Regulations thereunder and recommenced after the date which
was six months after the date of such Participant’s Separation from Service
(or, if earlier, the date of such Participant’s death).  Any monthly installment payments subject to
such suspension shall be accumulated and paid after such date in accordance
with Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations
thereunder, as adjusted to reflect the rate of return on the hypothetical
Investment Funds selected by the Participant in accordance with Section
6.4.  The subaccounts of such Participant’s
Accounts for such Deferral Period  shall
be distributed in installment payments, commencing after the date which is six
months after the date of such Participant’s Separation from Service (or, if
earlier, the date of such Participant’s death), over the installment payment
period designated under the Separation from Service Election for the
subaccounts of such Participant’s Accounts for the Deferral Period.

8.4          Form of Payments

(a)               Separation from Service
Election Payments.  In
the event a Participant made a Separation from Service Election with respect to
a Deferral Period, the distribution from the subaccounts in such Participant’s
Accounts for such Deferral Period shall be made in a lump sum payment, or in
monthly installment payments, in accordance with Section 8.1 (Distribution
Elections); provided, however, that, in the
case of a Caesars Participant, such Caesars Participant’s Transferred Caesars
Accounts shall be distributed in accordance with the special Separation from
Service Election, as provided under Section 8.1(e); and, provided,
further, that in the case of a Harrah’s ESSP Participant, such
Harrah’s ESSP Participant’s Transferred Harrah’s ESSP Accounts shall be
distributed in accordance with the special Separation from Service Election, as
provided under Section 8.1(f).

(b)               Distribution Year Election
Payment.  In the
event a Participant made a Distribution Year Election with respect to a
Deferral Period, the distribution from the subaccounts in such Participant’s
Accounts for such Deferral Period shall be made to such Participant in a lump
sum payment.  Such lump sum payment shall
be made not later than sixty (60) days after the date determined under Section
8.3(b).

(c)               Payments
upon Death.

(1)           In
the event of a Participant’s death prior to such Participant’s Separation from
Service, the distributions from the subaccounts of such Participant’s Accounts
for all Deferral Periods shall be made to his or her Beneficiary in a lump sum
payment.  Such lump sum payment shall be
made not later than sixty (60) days after the date determined under Section
8.3(b).

(2)           In the event of a
Participant’s death after his or her Separation from Service, the distributions
from the subaccounts of such Participant’s Accounts shall be made or continue
to be made to his or her Beneficiary in accordance with the Participant’s

 37
 

 

 

Separation from Service Election or Distribution Year
Election in accordance with Sections 8.1 and 8.2, and distribution payments shall
be made to the Beneficiary in the same form as such distribution payments would
have been made to such Participant.

(d)               Installment Payments.

(1)           In the event a Participant makes a
Separation from Service Election, and elects distribution in the form of
installment payments, the amount of each monthly installment in any calendar
year for the distribution of the subaccounts in a Participant’s Accounts for a
Deferral Period shall be calculated as follows. 
The amount of the monthly installment shall be determined before the
first installment is paid and on each January 1st in
all subsequent calendar years; provided, however,
that in the case of installment payments that are suspended under Section
8.3(d), the amount of the monthly installment shall be determined on the date
as of which the installment payments recommence under Section 8.3(d).  The amount of each monthly installment for
such calendar year shall be determined by dividing:  (A) the number of remaining monthly
installments into (B) the Participant’s vested balance in the subaccounts in
the Participant’s Accounts for such Deferral Period, determined as of the last
Valuation Date of the prior month.  A
Participant’s last installment payment shall be adjusted as needed to reflect
investment gains or losses.  If the
vested balance in the Participant’s Accounts for such Deferral Period,
determined as of the last Valuation Date of the month prior to the month in
which the installment payments are to commence is less than $50,000, such
vested balance shall be paid to the Participant in a lump sum payment not later
than sixty (60) days after such Valuation Date, to the extent permitted under
Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations
thereunder.

(2)           If installment payments are made, the
provisions of Sections 6.3, 6.4 and 6.5 shall continue to apply to the unpaid
interest in the relevant subaccounts.

(3)           In the event that a Caesars Participant’s
special Separation from Service Election, determined under Section 8.1(e),
provides for the distribution of such Caesars Participant’s Transferred Caesars
Accounts in the form of installment payments, the amount of each monthly
installment payment for any calendar year for the distribution of such Caesars
Participant’s Transferred Caesars Accounts shall be calculated by applying
paragraph (1) separately with respect to such Caesars Participant’s Transferred
Caesars Accounts.

8.5          Beneficiary Designations

(a)               General.  In the event of the death of the Participant,
the Participant’s vested interest in his or her Accounts shall be paid to the
Participant’s Beneficiary as described in Section 8.4(c).  Each Participant shall have the right to
designate, in the manner specified by the EDCP Committee, a Beneficiary or
Beneficiaries to receive his benefits hereunder in the event of the Participant’s
death.

(b)               Spousal Consent Requirements.  If the Participant is married at the time the
Beneficiary designation is filed, the Participant must designate his spouse as
the Beneficiary of at least 50% of the Participant’s Accounts or provide the
spouse’s consent to the designation of a Beneficiary other than the spouse. If
a Participant marries or

 38
 

 

 

divorces after a
Beneficiary designation is filed, the designation will no longer be effective.

(c)               Revised Designations.  Subject to the spousal consent requirements
noted above, each Participant may change his Beneficiary designation from time
to time in the manner described above. 
Upon receipt of such designation by the EDCP Committee, such designation
or change of designation shall become effective as of the date of the notice,
whether or not the Participant is living at the time the notice is
received.  There shall be no liability on
the part of the Employer, the EDCP Committee or the Trustee with respect to any
payment authorized by the EDCP Committee in accordance with the most recent
Beneficiary designation of the Participant in the possession of the EDCP
Committee before the EDCP Committee receives a more recent Beneficiary
designation.

(d)               Deemed Beneficiary
Designations.  If
no designated Beneficiary is living when benefits become payable, or if there
is no designated Beneficiary, the Beneficiary shall be the Participant’s
spouse.  If there is no living spouse,
the Beneficiary shall be the Participant’s estate.  If the designated Beneficiary dies after the
payment of benefits begin, then the Beneficiary for the remainder of the
benefits payable shall be the estate of the Beneficiary.

8.6          Prohibition on Acceleration of
Distributions.  The
time or schedule of payment of any withdrawal or distribution under the Plan
shall not be subject to acceleration, except as provided under Treasury
Regulations promulgated in accordance with Section 409A(a)(3) of the Code.

8.7          Withholding and Payroll Taxes.  The Employer shall withhold from Plan payment
any taxes required to be withheld from such payments under federal, state or
local law.  Any withholding of taxes or
other amounts required by federal, state or local law with respect to amounts
credited to a Participant’s Accounts including, without limitation to, tax due
under the Federal Insurance Contributions Act, shall be withheld, to the
maximum extent possible, from the portion of the Participant’s Salary or Bonus
that is not contributed to this Plan (or, in the case of a Caesars Participant,
from the portion of the Caesars Participant’s “Base Compensation” and “Bonus
Compensation” (each, as defined in the Caesars Plan) that is not contributed to
this Plan).  Any withholding amount that
cannot be withheld in accordance with the preceding sentence shall be withheld
from the Participant’s Deferral Contributions (or, in the case of a Caesars
Participant, from the Caesars Participant’s deferral contributions under
Sections 4.5(a) and (b)).

ARTICLE NINE

ADMINISTRATION OF THE PLAN

9.1          Adoption of Trust.  The Company shall enter into a Trust
Agreement with the Trustee, which Trust Agreement shall form a part of this
Plan and is hereby incorporated herein by reference.

 39
 

 

 

9.2          Powers
of the EDCP Committee

(a)               Plan
Administrator.  The
EDCP Committee shall be the administrator of the Plan and shall be responsible
for the administration of the Plan.

(b)               General Powers of the EDCP
Committee.  The
EDCP Committee shall have the power and discretion to perform the
administrative duties described in this Plan or required for proper
administration of the Plan and shall have all powers necessary to enable it to
properly carry out such duties.  Without
limiting the generality of the foregoing, the EDCP Committee shall have the
power and discretion to construe and interpret this Plan, to hear and resolve
claims relating to this Plan, and to decide all questions and disputes arising
under this Plan.  The EDCP Committee
shall determine, in its discretion, the service credited to the Participants,
the status and rights of a Participant, and the identity of the Beneficiary or
Beneficiaries entitled to receive any benefits payable hereunder on account of
the death of a Participant.  The decision
or action of the EDCP Committee in respect of any question arising under or in
connection with the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having an interest
in the Plan.

(c)               Distributions.  Except as is otherwise provided hereunder, the
EDCP Committee shall determine the manner and time of payment of benefits under
this Plan.  All benefit disbursements by
the Trustee shall be made upon the instructions of the EDCP Committee.

(d)               Decisions Conclusive.  The decision of the EDCP Committee upon all
matters within the scope of its authority shall be binding and conclusive upon
all persons.

(e)               Reporting.  The EDCP Committee shall file all reports and
forms lawfully required to be filed by the EDCP Committee and shall distribute
any forms, reports or statements to be distributed to Participants and others.

(f)                Trust Fund.  The EDCP Committee shall keep itself advised
with respect to the funded status and investment of the Trust Fund.

9.3          Creation of Committee.  The EDCP Committee shall be appointed by the
Chief Executive Officer of the Company. 
The EDCP Committee must consist of at least three members.  The EDCP Committee members shall serve
without compensation but shall be reimbursed for all expenses by the
Company.  The EDCP Committee shall
conduct itself in accordance with the provisions of this Article Nine.  The members of the EDCP Committee may resign
with thirty (30) days notice in writing to the Company and may be removed
immediately at any time by written notice from the Company.  The EDCP Committee may have duties with
respect to other plans of the Company that are or identical to its duties under
the Plan.

9.4          Appointment of Agents .  The EDCP Committee may appoint such other
agents, who need not be members of the EDCP Committee, as it may deem necessary
for the effective performance of its duties, whether ministerial or
discretionary, as the EDCP Committee may

 40
 

 

 

deem expedient or appropriate.  The compensation of any agents who are not
employees of the Company shall be fixed by the committee within any limitations
set by the HRC.

9.5          Majority Vote and Execution of
Instruments.  In
all matters, questions and decisions, the action of the EDCP Committee shall be
determined by a majority vote of its members. 
They may meet informally or take any ordinary action without the
necessity of meeting as a group.  All
instruments executed by the EDCP Committee shall be executed by a majority of
its members or by any member of the EDCP Committee designated to act on its
behalf.

9.6          Allocation of Responsibilities.  The EDCP Committee may allocate
responsibilities among its members or designate other persons to act on its
behalf.  Any allocation or designation,
however, must be set forth in writing and must be retained in the permanent
records of the EDCP Committee.

9.7          Conflict of Interest.  No member of the EDCP Committee who is a
Participant shall take any part in any action in connection with his
participation as an individual.  Such
action shall be voted or decided by the remaining members of the EDCP
Committee.

9.8          Indemnification.  The Company shall indemnify and hold harmless
the members of the EDCP Committee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act with respect to
this Plan on account of such member’s service on the EDCP Committee, except in
the case of gross negligence or willful misconduct.

9.9          Action Taken by Employer.  Any action to be taken by an Employer shall
be taken by resolution adopted by its board of directors or appropriate board
committee; provided, however, that by resolution, the board of directors or
appropriate board committee  may delegate
to any committee of the board or any officer of the Employer the authority to
take any actions under this Plan, other than the power to determine the basis
of Employer contributions.

9.10        Discretionary Authority.  All delegations of responsibility set forth
in this document regarding the determination of benefits and the interpretation
of the terms of the Plan confer discretionary authority upon the person
delegated such responsibility.

9.11        Participant Statements.  The EDCP Committee shall provide a statement
of Plan Accounts to each Participant and Beneficiary on a quarterly or more
frequent basis, as determined by the EDCP Committee in its discretion.  Such statement of Plan Accounts shall reflect
the amounts allocated to each Account maintained for the Participant, the
Participant’s vested interest in his Accounts, any distributions, withdrawals
or expenses charged against the Participant’s Account, the hypothetical
investment earnings and losses on the Participant’s Account, and any other
information deemed appropriate by the EDCP Committee.

9.12        Compliance with Section 409A of the
Code.  The Plan
shall be interpreted, construed and administered in a manner that satisfies the
requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury
Regulations thereunder.

 41
 

 

 

ARTICLE TEN

CLAIMS REVIEW PROCEDURE

10.1        General

(a)           A Participant or
Beneficiary who believes that he or she has not received the benefits to which
he or she is entitled may assert a claim for benefits under the Plan in
accordance with the claims procedure of this Article Ten.  The claims procedure of this Article Ten
shall be applied in accordance with Section 503 of ERISA and Department of
Labor Regulation Section 2560.503-1.  A
Participant or Beneficiary may assert a benefit claim, or appeal the denial of
a benefits claim, through such Participant’s or Beneficiary’s authorized
representative, provided that such Participant or Beneficiary has submitted a
written notice evidencing the authority of such representative to the EDCP
Committee.  A Participant or Beneficiary
asserting a benefits claim shall be referred to as a “Claimant” under this
Article Ten.

(b)           A Claimant shall
submit his or her benefits claim under the Plan in writing to the EDCP
Committee.  The Claimant may include
documents, records or other information relating to the benefits claim for
review by the EDCP Committee in connection with such benefits claim.

10.2        Benefit
Determination

(a)           The
EDCP Committee shall review the Claimant’s benefits claim (including any
documents, records or other information submitted with such benefits claim) and
determine whether such benefits claim shall be approved or denied in accordance
with the Plan.

(b)           In the event that a
Claimant’s benefits claim is wholly or partially denied, the EDCP Committee
shall provide to the Claimant with written notice of the denial within a
reasonable period of time, but not later than ninety (90) days after the
receipt of the benefits claim by the EDCP Committee, unless the EDCP Committee
determines that special circumstances require an extension of time for making a
determination with respect to the benefits claim.  If the EDCP Committee determines that an
extension of time for making a determination with respect to the benefits claim
is required, the EDCP Committee shall provide the Claimant with written notice
of such extension prior to the end of the initial ninety (90) day period.  The extension of time shall not exceed a
period of ninety (90) days from the end of such initial period.  The extension notice shall indicate the
special circumstances requiring the extension of time and the date by which the
EDCP Committee expects to render the benefit determination.

(c)           The notice of
denial of the Claimant’s benefits claim shall set forth:

(1)           the specific reason
or reasons for the denial;

(2)           references to
specific Plan provisions on which the denial is based;

(3)           a description of
any additional material or information necessary for the Claimant to perfect
the claim and an explanation of why the material or information is necessary;
and

 42
 

 

 

(4)           a description of
the Plan’s appeal procedures and the time limits applicable to such procedures,
including a statement of the Claimant’s right to bring a civil action under
Section 502(a) of ERISA following a denial of the appeal of the denial of the
benefits claim.

(d)           The Claimant may
appeal any denial of the benefits claim in writing to the EDCP Committee within
sixty (60) days after receipt of the EDCP Committee’s notice of denial of
benefits claim.  The Claimant’s failure
to appeal the denial of the benefits claim by the EDCP Committee in writing
within the sixty (60) day period shall render the EDCP Committee’s
determination final, binding, and conclusive.

10.3        Appeals

(a)           A Claimant may
appeal the denial of a benefits claim to the EDCP Committee.  The EDCP Committee shall review the appeal of
the denial of the benefits claim and make a final determination as to whether
the benefits claim should be approved or denied in accordance with the Plan.

(b)           The Claimant shall
be afforded the opportunity to submit written comments, documents, records, and
other information relating to the benefits claim, and the Claimant shall be
provided, upon request and free of charge, reasonable access to all documents,
records, and other information relevant to the Claimant’s benefits claim.  A document, record or other information shall
be considered “relevant” to the benefits claim, as provided in Department of
Labor Regulation Section 2560.503-1(m)(8). 
The review on appeal by the EDCP Committee shall take into account all
comments, documents, records, and other information submitted by the Claimant,
without regard to whether such information was submitted or considered in the
EDCP Committee’s initial determination with respect to the benefits claim.  The EDCP Committee shall advise the Claimant
in writing of the EDCP Committee’s determination of the appeal within sixty
(60) days of the claimant’s written request for review, unless special
circumstances (such as a hearing) would make the rendering of a determination
within the sixty (60) day period infeasible, but in no event shall the EDCP
Committee render a determination regarding the denial of a claim for benefits
later than one hundred twenty (120) days after its receipt of a request for
review.  If an extension of time for
review is required because of special circumstances, written notice of the
extension shall be furnished to the Claimant prior to the date the extension
period commences.

(c)           The notice of
denial of the Claimant’s appeal of the denial of the Claimant’s benefit claim
shall set forth:

(1)           the specific reason
or reasons for the denial of the appeal;

(2)           reference to the
specific Plan provisions on which the denial of the appeal is based;

(3)           a statement that
the Claimant is entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other information
relevant to the Claimant’s benefits claim (and a document, record or other

 43
 

 

 

information shall be
considered “relevant” to the benefits claim, as provided in Department of Labor
Regulation Section 2560.503-1(m)(8)); and

(4)           a statement
describing Claimant’s right to bring an action under ERISA Section 502(a).

(d)           If, upon appeal,
the EDCP Committee shall grant the relief requested by the Claimant, then, in
addition, the EDCP Committee shall award to the Claimant reasonable fees and
expenses of counsel, or any other duly authorized representative of Claimant,
which shall be paid by the Company.  The
determination as to whether such fees and expenses are reasonable shall be made
by the Company in its sole and absolute discretion and such determination shall
be binding and conclusive on all parties.

10.4        Notice of Denials.  The EDCP Committee’s notice of denial of a
benefits claim shall identify the address to which the Claimant may forward his
appeal.

ARTICLE ELEVEN

LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY

INCOMPETENT DISTRIBUTEE

11.1        Anti-Alienation Clause.  No benefit which shall be payable under the
Plan to any person shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of the same shall be void. 
No benefit shall in any manner be subject to the debts, contracts,
liabilities, engagements or torts of any person, nor shall it be subject to
attachment or legal process for or against any person, except to the extent as
may be required by law.  The benefits
provided by this Plan are not subject to the qualified domestic relations order
provisions of ERISA or the Code.

11.2        Permitted Arrangements.  Section 11.1 (Anti-Alienation Clause)
shall not preclude arrangements for the withholding of taxes from benefit
payments, arrangements for the recovery of benefit overpayments, arrangements
for the transfer of benefit rights to another plan, or arrangements for direct
deposit of benefit payments to an account in a bank, savings and loan
association or credit union (provided that such arrangement is not part of an
arrangement constituting an assignment or alienation).

11.3        Payment to Minor or Incompetent.  Whenever any benefit which shall be payable
under the Plan is to be paid to or for the benefit of any person who is then a
minor or determined by the EDCP Committee to be incompetent, the EDCP Committee
need not require the appointment of a guardian or custodian, but shall be
authorized to cause the same to be paid over to the person having custody of
the minor or incompetent, or to cause the same to be paid to the minor or
incompetent without the intervention of a guardian or custodian, or to cause
the same to be paid to a legal guardian or custodian of the minor or
incompetent if one has been appointed or to cause the same to be used for the
benefit of the minor or incompetent.

 44
 

 

 

ARTICLE TWELVE

AMENDMENT, MERGER AND TERMINATION

12.1        Amendment.

(a)           The Company shall
have the right at any time, by an instrument in writing duly executed,
acknowledged and delivered to the EDCP Committee, to modify, alter or amend
this Plan, in whole or in part, prospectively or retroactively.  Additionally, the EDCP Committee shall also
have the right to modify, alter or amend the Plan by written instrument
provided that such amendment does not have a material adverse financial effect
on the Company or the Plan.  No amendment
shall substantially increase the duties and liabilities of the EDCP Committee
and the Trustee hereunder without its written consent.  No amendment shall reduce any Participant’s
vested interest in the Plan, calculated as of the date on which the amendment
is adopted.

(b)           Notwithstanding
anything to the contrary in the Plan, if and to the extent the Company shall
determine that the terms of the Plan may result in the failure of the Plan, or
amounts deferred by or for any Participant under the Plan, to comply with the
requirements of Section 409A of the Code, or any applicable regulations or
guidance promulgated by the Secretary of the Treasury in connection therewith,
the Company shall have authority to take such action to amend, modify, cancel
or terminate the Plan or distribute any or all of the amounts deferred by or
for a Participant, as it deems necessary or advisable, including without
limitation:

(1)           Any amendment or
modification of the Plan to conform the Plan to the requirements of Section
409A of the Code or any regulations or other guidance thereunder (including,
without limitation, any amendment or modification of the terms of  applicable to any Participant’s Accounts
regarding the timing or form of payment).

(2)           Any cancellation or
termination of any unvested interest in a Participant’s Accounts without any
payment to the Participant.

(3)           Any cancellation or
termination of any vested interest in any Participant’s Accounts, with
immediate payment to the Participant of the amount otherwise payable to such
Participant.

Any such amendment, modification, cancellation, or
termination of the Plan may adversely affect the rights of a Participant
without the Participant’s consent.

(c)           Any Affiliate or
other entity adopting this Plan hereby delegates the authority to amend the
Plan to the Company and the EDCP Committee. 
If the Plan is amended after it is adopted by an Affiliate, unless
otherwise expressly provided, it shall be treated as so amended by such
Affiliate without the necessity of any action on the part of the
Affiliate.  An Affiliate or other entity
that has adopted this Plan may terminate its future participation in the Plan
at any time.

12.2        Merger or Consolidation of Company.  The Plan shall not be automatically
terminated by the Company’s acquisition by or merger into any other employer,
but the Plan shall be continued after such acquisition or merger if the
successor employer elects and agrees to continue the Plan.  Except as provided in Section 12.4 (Continuation
of Plan following Change 

 45
 

 

 

of Control),
all rights to amend, modify, suspend, or terminate the Plan shall be
transferred to the successor employer, effective as of the date of the merger.

12.3        Termination of Plan or Discontinuance
of Contributions. 
It is the expectation of the Company that this Plan and the contributions
hereunder shall be continued indefinitely. 
However, continuance of the Plan is not assumed as a contractual
obligation of the Company.  Except as
provided in Section 12.4 (Continuation of Plan following a Change of Control),
the Company reserves the right at any time to terminate this Plan or to reduce,
temporarily suspend or discontinue contributions hereunder.  If this Plan is terminated, all Plan benefits
shall be distributed in accordance with Article Eight and the Separation from
Service Elections and the Distribution Year Elections of the Participants,
following the termination of the Plan.

12.4        Continuation of Plan following a
Change of Control. 
Notwithstanding any provision of this Plan to the contrary, if a Change
of Control occurs following the Effective Date of this Plan, a successor
employer shall have the power to (a) terminate this Plan, (b) amend Section
13.5 (Funding upon a Change of Control) of the Plan, or (c) amend any
provision of the Plan that affects a Participant’s entitlement to a
distribution from the Plan, only if 80% of the individuals who are Participants
in the Plan, both as of the date of the Change of Control and as of the date of
the adoption of such amendment or termination, consent to such an amendment or
termination.  The provisions of this
Section 12.4 shall not limit a successor employer’s authority to take other
actions with respect to the Plan, including the authority to discontinue
contributions to the Plan.

12.5        Limitation of Company’s Liability.  The adoption of this Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any employee or Participant or to
be consideration for, an inducement to, or a condition of the employment of any
employee.  A Participant, employee, or
Beneficiary shall not have any right to retirement or other benefits except to
the extent provided herein.

12.6        Limitation on Distributions.  To the extent that any
payment to be made to a Participant under this Plan during a taxable year of
such Participant’s Employer, when combined with all other payments received or
to be received during such taxable year of the Participant’s Employer that are
subject to the limitation on deductibility under Section 162(m) of the Code,
would exceed the limitation on deductibility under Section 162(m) of the Code,
such payment under the Plan shall be deferred to such Participant’s Separation
from Service (or, in the case of a Participant who is a Specified Employee, the
date which is six months after the date of such Participant’s Separation from
Service (or, if earlier, the date of such Participant’s death) in accordance
with Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations
thereunder).  Any payment that is deferred
in accordance with this Section 12.6 shall be credited with hypothetical
investment earnings and losses in accordance with Article Six (Crediting of
Contributions and Income).

 46
 

 

 

ARTICLE THIRTEEN

GENERAL PROVISIONS

13.1        Limitation
of Rights.  Neither
this Plan, the Trust nor membership in the Plan shall give any employee or
other person any right except to the extent that the right is specifically
fixed under the terms of the Plan.  The
establishment of the Plan shall not be construed to give any individual a right
to be continued in the service of a Employer or as interfering with the right
of a Employer to terminate the service of any individual at any time.

13.2        Construction.  The masculine gender, where appearing in the
Plan, shall include the feminine gender (and vice versa), and the singular
shall include the plural, unless the context clearly indicates to the
contrary.  Headings and subheadings are
for the purpose of reference only and are not to be considered in the
construction of this Plan.  If any
provision of this Plan is determined to be for any reason invalid or
unenforceable, the remaining provisions shall continue in full force and
effect.  All of the provisions of this
Plan shall be construed and enforced in accordance with ERISA and, to the
extent applicable, the laws of the State of Nevada.

13.3        Status of Participants as Unsecured
Creditors.  All
benefits under the Plan shall be the unsecured obligations of the Company and
each Employer, as applicable, and, except for those assets which will be placed
in the Trust established in connection with this Plan, no assets will be placed
in trust or otherwise segregated from the general assets of the Company or each
Employer, as applicable, for the payment of obligations hereunder.  To the extent that any person acquires a
right to receive payments hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company and each Employer, as
applicable.

13.4        Status of Trust Fund.  The Trust Fund is being established to assist
the Company and the Employers in meeting their obligations to the Participants
and to provide the Participants with a measure of protection in certain limited
instances.  In certain circumstances
described in the Trust Agreement, the assets of the Trust Fund may be used for
the benefit of the Company’s or an Affiliate’s creditors and, as a result, the
Trust Fund is considered to be part of the Company’s and Employer’s general
assets.  Benefit payments due under this
Plan shall either be paid from the Trust Fund or from the Company’s or
Affiliate’s general assets as directed by the EDCP Committee.  Despite the establishment of the Trust Fund,
it is intended that the Plan be considered to be “unfunded” for purposes of the
ERISA and the Code.

13.5        Funding upon a Change of Control.  Immediately before the occurrence of a Change
of Control, the Company shall determine whether, for any reason, the assets of
the Trust Fund are less than the aggregate Account balances of all Participants
(determined without regard to the vested interest of each Participant) and
transfer an amount equal to the deficiency to the Trustee of the Trust.  If it is discovered at any time that the
amount initially transferred is less than the total amount called for by the
preceding sentence, the shortfall, including any accrued interest on the
shortfall, shall be transferred to the Trustee immediately upon the discovery
of such error.

13.6        Uniform Administration.  Whenever in the administration of the Plan
any action is required by the EDCP Committee, such action shall be uniform in
nature as applied to all

 47
 

 

 

persons similarly situated, except as otherwise
provided to the contrary in this Plan document or the Trust Agreement.

13.7        Heirs and Successors.  All of the provisions of this Plan shall be
binding upon all persons who shall be entitled to any benefits hereunder, and
their heirs and legal representatives.

13.8        Electronic Administration.  The EDCP Committee shall have the authority
to employ alternative means (including, but not limited to, electronic,
internet, intranet, voice response or telephonic) by which Participants may
submit participation elections, directions, and forms required for
participation in, and the administration of, this Plan.  If the EDCP Committee chooses to use these
alternative means, any elections, directions or forms submitted in accordance
with the rules and procedures promulgated by the EDCP Committee will be deemed
to satisfy any provision of this Plan calling for the submission of a written
election, direction or form.

*     *    
*     *     *

To signify its adoption of this Amendment and
Restatement of the Harrah’s Entertainment, Inc. Executive Supplemental Savings
Plan II, the Company has caused this Plan document to be executed by a duly
authorized officer of the Company on this          
day of                                ,
2006.

	
   

  	
  HARRAH’S ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 48

 

Exhibit A

AMENDMENT AND RESTATEMENT OF

THE HARRAH’S ENTERTAINMENT, INC.

EXECUTIVE SUPPLEMENTAL SAVINGS PLAN II

SPECIAL EFFECTIVE DATES

The following provisions of the Amendment and
Restatement of the Plan shall be effective as of the dates set forth below.

1.             Section
3.1(c)(4) of the Plan shall be effective as of the dates provided in the First
and Second Amendments to the Plan.

2.             Sections
2.5A, 2.5C, 2.11, 2.34, 3.1(e), 3.2(b), 4.2, 4.5, 6.1, and 8.7 of the Plan
shall be effective as of June 13, 2005.

3.             Effective
as of June 13, 2005 and prior to the Caesars Plan Transfer Date, Section 2.5B
of the Plan shall read in its entirety as follows:

2.5B       “Caesars Participant” means an
Employee who is a “Participant” (as defined in the Caesar Plan) and who becomes
a Participant in accordance with Section 3.1(e)(1) of the Plan.

4.             Effective
as of January 1, 2005 and prior to June 13, 2005, Section 2.33 of the Plan
shall read in its entirety as follows:

2.33        “Participant” means any Employee who
has been selected for participation in the Plan.  The term “Participant” also shall include
former Participants whose benefits under the Plan have not been fully
distributed pursuant to the provisions of the Plan.  The term “Participant” shall also include,
with respect to Transferred Harrah’s ESSP Accounts, a Harrah’s ESSP
Participant.

5.             Effective
as of June 13, 2005 and prior to the Caesars Plan Transfer Date, Section 2.33
of the Plan shall read in its entirety as follows:

2.33        “Participant” means any Employee who
has been selected for participation in the Plan.  The term “Participant” also shall include
former Participants whose benefits under the Plan have not been fully
distributed pursuant to the provisions of the Plan.  The term “Participant” shall also
include:  (a) with respect to Transferred
Harrah’s ESSP Accounts, a Harrah’s ESSP Participant, and (b) a Caesars
Participant.

6.             Effective
as of June 13, 2005, Section 2.11 of the Plan shall read in its entirety as
follows:

2.11        “Deferral Contribution Account”
means the Account maintained to record the Deferral Contributions made by a
Participant pursuant to Section 4.1 (Participant Contributions) (and, in
the case of a Caesars Participant, the deferral contributions made under
Sections 4.5(a) and (b) (Ceasars Base Compensation Deferral

 

Contributions
and Caesars Bonus Deferral Contributions)), as adjusted to reflect the
rate of return on the hypothetical Investment Funds selected by the Participant
in accordance with Section 6.4 (Investment Direction) and other credits
or charges in accordance with this Plan. 
A Participant’s Deferral Contribution Account shall be divided into
subaccounts as determined by the EDCP Committee.

7.             Effective
as of June 13, 2005 and prior to the Caesars Plan Transfer Date, Section 6.4 of
the Plan shall read in its entirety as follows:

6.4          Investment Direction.  A Participant shall direct the hypothetical
investment of his Deferral Contribution Account, Matching Contribution Account,
and Discretionary Contribution Account (and, in the case of a Caesars
Participant, his Caesars Company Contribution Account) among the Investment
Funds in the manner (including, but not limited to, writing, electronic,
internet, intranet, voice response or telephonic) established by the EDCP
Committee.  The Participant’s Deferral
Contribution Account, Matching Contribution Account and Discretionary
Contribution Account (and Caesars Company Contribution Account, if any) shall
not be invested in the Investment Funds, but the value of the Participant’s
Accounts shall be measured by the performance of the Investment Funds
selected.  Any and all changes to a
Participant’s Investment Fund allocation shall be made in accordance with the
uniform procedures of the EDCP Committee, which shall permit changes in
Investment Fund allocations on a quarterly or more frequent basis.  If a Participant fails to direct the
hypothetical investment of his or her Accounts in the manner established by the
EDCP Committee, the Participant shall be deemed to have selected the default
hypothetical Investment Fund(s) selected by the EDCP Investment Committee for
such purpose, in the discretion of the EDCP Committee and in accordance with
its uniform policies and procedures.

8.             Effective
as of the Caesars Plan Transfer Date and prior to July     ,
2006, Section 6.4 of the Plan shall read in its entirety as follows:

6.4          Investment Direction.  A Participant shall direct the hypothetical
investment of his Deferral Contribution Account, Matching Contribution Account,
and Discretionary Contribution Account (and, in the case of a Harrah’s ESSP
Participant, his or her Transferred Harrah’s ESSP Accounts (if any), and, in
the case of a Caesars Participant, his or her Caesars Company Contribution
Account and Transferred Caesars Accounts (if any)) among the Investment Funds
in the manner (including, but not limited to, writing, electronic, internet,
intranet, voice response or telephonic) established by the EDCP Committee.  The Participant’s Deferral Contribution
Account, Matching Contribution Account, and Discretionary Contribution Account
(and Transferred Harrah’s ESSP Accounts (if any), and Caesars Company
Contribution Account and Transferred Caesars Accounts (if any)) shall not be
invested in the Investment Funds, but the value of the Participant’s Accounts
shall be measured by the performance of the Investment Funds selected.  Any and all changes to a Participant’s
Investment Fund allocation shall be made in accordance with the uniform
procedures of the

 2
 

 

EDCP Committee, which
shall permit changes in Investment Fund allocations on a quarterly or more
frequent basis.  If a Participant fails
to direct the hypothetical investment of his or her Accounts in the manner
established by the EDCP Committee, the Participant shall be deemed to have
selected the default hypothetical Investment Fund(s) selected by the EDCP
Investment Committee for such purpose, in the discretion of the EDCP Committee
and in accordance with its uniform policies and procedures.

9.             Effective
as of June 13, 2005 and prior to the Caesars Plan Transfer Date, Section 7.1(d)
of the Plan shall read in its entirety as follows:

(d)           Caesars
Matching Contributions. 
Each Caesars Participant shall have a vested interest in his or her
Caesars Company Contribution Account, which is determined as follows:

(1)           Vesting Schedule.  A Caesars Participant shall vest in the “Base
Compensation Company Contribution Amount” and the “Bonus Compensation Company
Contribution Amount” (collectively, the “Company Contribution Amount”) that are
credited to the Caesars Participant’s Caesars Company Contribution Account in a
Plan Year (plus investment gains and losses thereon under Article Six), upon
completion of the applicable vesting period for such Caesars Company
Contribution Amount.  The vesting period
for the Caesars Participant’s Caesars Company Contribution Account shall
commence with the Plan Year in which the Company Contribution Amount is
credited under Section 4.5(c), with the Caesars Participant vesting in:  (A) 33 1/3% of the Company Contribution
Amount upon being credited with a “Year of Vesting Service” (as defined in the
Caesars Plan) for the Plan Year for which such Company Contribution Amount is
credited, (B) 33 1/3% of the Company Contribution Amount upon being credited
with a “Year of Vesting Service” for the immediately following Plan Year, and
(C) 33 1/3% of the Company Contribution Amount upon being credited
with a “Year of Vesting Service” for the next following Plan Year.

(2)           Accelerated Vesting.  Notwithstanding paragraph (1), a Caesars
Participant’s Caesars Company Contribution Account shall become fully vested
should:  (A) the Caesars Participant die
while employed by the Company or an Affiliate, (B) the Caesars Participant
become “Disabled” (as defined in the Caesars Plan) while employed by the
Company or an Affiliate, or (C) there occur a “Change of Control.”  If a Caesars Participant retires on or after
attaining age 55 and does not become employed by a “Competitor” (as defined in
the Caesars Plan) during the six month period immediately following his or her
retirement (the “Six Month Period”), such Caesars Participant’s Caesars Company
Contribution Account shall become fully vested upon the completion of the Six
Month Period (irrespective of the form of distribution elected by the Caesars
Participant) and such Caesars Participant shall receive or

 

 3
 

 

commence to receive the
distribution of the amount credited to his or her Caesars Company Contribution
Account that becomes vested under this paragraph in accordance with paragraph
(4).

(3)           Forfeiture.

(A)          If a Caesars Participant who is not
fully vested in his or her Caesars Company Contribution Account retires on or
after attaining age 55 and becomes employed by a “Competitor” during the Six
Month Period, the portion of such Caesars Participant’s Caesars Company Contribution
Account which is not vested shall immediately be forever forfeited and the
Company and the Affiliates shall have no obligation to the Caesars Participant
(or his or her Beneficiary) with respect to such forfeited amount.

(B)           Subject to paragraph (2) and
subparagraph (A) of this paragraph, if a Caesars Participant who is not fully
vested in his or her Caesars Company Contribution Account receives or commences
to receive the distribution of the amount credited to his or her Caesars
Company Contribution Account, the portion of such Caesars Participant’s Caesars
Company Contribution Account which is not vested shall immediately be forever
forfeited and the Company and the Affiliates shall have no obligation to the
Caesars Participant (or his or her Beneficiary) with respect to such forfeited
amount.

(4)           Special Distribution.  If a Caesars Participant becomes fully vested
in his or her Caesars Company Contribution Account under paragraph (2) on
account of such Caesars Participant’s retirement on or after attaining age 55,
then, notwithstanding Article Eight, such Caesars Participant shall receive or
commence to receive the distribution of the amount credited to his or her
Caesars Company Contribution Account that becomes vested under paragraph (2) as
soon as administratively feasible following the completion of the Six Month
Period which follows such Participant’s retirement, in form of distribution
elected under his or her Separation from Service Election or Distribution Year
Election under Section 3.2(b).

10.           Effective
as of June 13, 2005 and prior to the Caesars Plan Transfer Date, the second
sentence of the first paragraph of Section 8.1 of the Plan shall read as
follows:

Such Separation from
Service Election or Distribution Year Election shall apply to the distribution
of the subaccounts of such Participant’s Accounts to which his or her Deferral
Contributions, Matching Contributions and Discretionary Contributions (and, in
the case of a Caesars Participant, the deferral contributions and matching
contributions under Section 4.5) for such Deferral Period are credited.

 4
 

 

11.           Effective as of June 13, 2005,
Section 8.1(a) of the Plan shall read as follows:

(a)           Subaccounts.  A Participant’s Deferral Contributions for a
Deferral Period (and, in the case of a Caesars Participant, such Caesars
Participant’s deferral contributions under Sections 4.5(a) and (b) for the
Deferral Period) shall be credited to the subaccount for such Deferral Period
under such Participant’s Deferral Contribution Account.  Such Participant’s Matching Contributions for
a Deferral Period (if any) shall be credited to the subaccount for such
Deferral Period under such Participant’s Matching Contribution Account.  Such Participant’s Discretionary
Contributions for a Deferral Period (if any) shall be credited to the
subaccount for such Deferral Period under such Participant’s Discretionary
Contribution Account.  Such Participant’s
Separation from Service Election or Distribution Year Election for such
Deferral Period shall apply to distributions from the subaccounts of such
Participant’s Accounts for such Deferral Period.

12.           Sections
2.5B, 2.33 and 4.7 of the Plan shall be effective as of the Caesars Plan
Transfer Date.

 5Exhibit
10.40

AMENDMENT
TO

PARK PLACE ENTERTAINMENT CORPORATION

1998 STOCK INCENTIVE PLAN, AS AMENDED MAY 11, 2001

THIS AMENDMENT TO PARK PLACE ENTERTAINMENT CORPORATION
1998 STOCK INCENTIVE PLAN, AS AMENDED MAY 11, 2001, dated as of June 13, 2005,
is made and adopted by Harrah’s Operating Company, Inc. (“Harrah’s Operating
Company”), a Delaware corporation and a wholly owned subsidiary of Harrah’s
Entertainment, Inc., a Delaware corporation. 
Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to them in the Plan (as defined below).

WHEREAS, Harrah’s Operating Company previously entered
into that certain Agreement and Plan of Merger, dated as of July 14, 2004 (the “Agreement”),
pursuant to which Caesars Entertainment, Inc., a Delaware corporation (“Caesars”),
upon the terms and subject to the conditions set forth in the Agreement, merged
with and into Harrah’s Operating Company, with Harrah’s Operating Company as
the surviving entity (the “Merger”);

WHEREAS, Caesars maintains the Park Place
Entertainment Corporation 1998 Stock Incentive Plan, as amended May 11, 2001
(the “Plan”);

WHEREAS, pursuant to Section 8 of the Plan, the Board
of Directors of the Corporation may at any time amend the Plan;

WHEREAS, Harrah’s Operating Company, as successor to
Caesars, desires to amend the Plan as set forth herein; and

WHEREAS, this Amendment was adopted by the Special
Plan Amendment Committee of Harrah’s Operating Company on June 13, 2005.

NOW, THEREFORE, in consideration of the foregoing,
Harrah’s Operating Company hereby amends the Plan as follows, effective as of
immediately after the consummation of the Merger:

1.                                       Section
1(k) of the Plan is hereby amended to delete the amount “$.01” appearing
therein and to substitute the amount “$.10” therefor.

2.                                       Section
1(l) of the Plan is hereby amended and restated in its entirety as follows:

“(l)          ‘Corporation’
means Harrah’s Entertainment, Inc., a Delaware corporation.”

 1
 

 

 

3.                                       The
following new Section 1(cc) is hereby added to the Plan:

“(cc)       ‘Harrah’s Merger Agreement’
shall mean that certain Agreement and Plan of Merger, dated as of July 14,
2004, pursuant to which Caesars Entertainment, Inc., a Delaware corporation,
merged with and into Harrah’s Operating Company, Inc., a Delaware corporation
and a wholly owned subsidiary of the Corporation, with Harrah’s Operating
Company, Inc. as the surviving entity.”

4.                                       The
following new Section 1(dd) is hereby added to the Plan:

“(dd)       ‘Harrah’s Merger Effective
Time’ shall mean the effective time of the merger (the “Merger”) pursuant to the Harrah’s Merger Agreement.”

5.                                       The
first paragraph of Section 2 of the Plan is hereby amended and restated in its
entirety as follows:

“The
Plan shall be administered by the Human Resources Committee of the Board (the ‘Committee’);
provided, however that the Human
Resources Committee may delegate to a committee of one or more members of the
Board the authority to grant or amend Awards to participants other than (i)
senior executives of the Corporation who are subject to Section 16 of the
Exchange Act or (ii) any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Corporation or any subsidiary who is,
or could be, a “covered employee” within the meaning of Section 162(m) of the
Code.  The Committee shall consist of at
least two individuals, each of whom qualifies as (i) a member of the Board who
qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) of the
Exchange Act, or any successor definition adopted by the Board, and (ii) an “outside
director” pursuant to Code Section 162(m) and the regulations issued
thereunder.  Reference to the Committee
shall refer to the Board if the Human Resources Committee ceases to exist and
the Board does not appoint a successor Committee.”

6.                                       Section
3 of the Plan is hereby amended as follows:

a.                                       The
first sentence of Section 3 of the Plan is hereby amended to add the phrase “Prior
to the Harrah’s Merger Effective Time,” to the beginning of the sentence.

b.                                      The
following new paragraph is hereby added following the first paragraph of
Section 3 of the Plan:

“Immediately
after the Harrah’s Merger Effective Time, the number of shares of Common Stock
reserved and available for grant under the Plan, the maximum number of shares
of Common Stock covered by Awards granted to any participant in any calendar
year, the maximum

 2
 

 

 

number of shares of
Common Stock covered by Special Options granted to the CEO in the aggregate,
and the maximum number of shares of Common Stock covered by Special Options
granted to the Chairman in the aggregate shall be adjusted to reflect the
Merger.”

c.             The following new sentence is hereby added to the end of
the second paragraph of Section 3 of the Plan:

“Effective immediately
after the Harrah’s Merger Effective Time, the outstanding Awards under this
Plan shall be adjusted to reflect the Merger, as provided by the Harrah’s
Merger Agreement.”

7.                                       The
following new paragraph is hereby added to the end of Section 8 of the Plan:

“Effective
immediately after the Harrah’s Merger Effective Time, the Special Plan
Amendment Committee of Harrah’s Operating Company, Inc. shall have the power to
amend this Plan as the Special Plan Amendment Committee deems necessary or
desirable to facilitate the integration of Caesars Entertainment, Inc. with
Harrah’s Operating Company, Inc. pursuant to the Merger.”

8.                                       This
Amendment shall be and is hereby incorporated in and forms a part of the Plan.

9.                                       All
other terms and provisions of the Plan shall remain unchanged except as
specifically modified herein.

10.                                 The
Plan, as amended by this Amendment, is hereby ratified and confirmed.

[SIGNATURE PAGE FOLLOWS]

 3

 

I hereby certify that the foregoing Amendment was duly
adopted by the Special Plan Amendment Committee of Harrah’s Operating Company,
Inc. on June 13, 2005.

	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Stephen H. Brammell

  
	
  Title:

  	
  Senior Vice President, General Counsel and

  
	
   

  	
  Corporate Secretary

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