Employment Agreement - Gary W. Loveman
Severance Agreement - Gary W. Loveman
 
 
 EMPLOYMENT AGREEMENT
 
 THIS AGREEMENT, made as of 4th day of September, 2002, between Harrah's
Entertainment, Inc., with offices at One Harrah's Court, Las Vegas, Nevada (the
"Company"), and Gary W. Loveman ("Executive").
 
 The Company and Executive agree as follows:
 
 1. INTRODUCTORY STATEMENT
 
 The Company desires to secure the services of Executive as Chief
Executive Officer and President effective January 1, 2003, and Executive is
willing to execute this Agreement with respect to his employment. This Agreement
is effective on September 4, 2002, and shall expire January 1, 2008. This
Agreement supersedes the employment agreement between the Company and Executive
dated May 4, 1998, as amended on April 26, 2001 and February 21, 2001; this
Agreement does not supersede the Severance Agreement between the Company and
Executive dated October 29, 1998 as amended on April 26, 2000 (the "Severance
Agreement") which remains in full force and effect.
 
 2. AGREEMENT OF EMPLOYMENT
 
 The Company agrees to, and hereby does, employ Executive, and
Executive agrees to, and hereby does accept, employment by the Company, in a
full-time capacity as Chief Executive Officer and President effective January 1,
2003, pursuant to the provisions of this Agreement and of the bylaws of the
Company, and subject to the control of the Board of Directors ("Board"). It is
understood that the Company will use its reasonably best efforts to amend its
bylaws to clarify that Executive will report directly to the Board. It is
understood that Executive's positions as Chief Executive Officer and President
are subject to his yearly re-election to these positions by the Board. (See
paragraph 8 herein for Executive's rights if such re-election does not occur
during the term of this Agreement.) From the period of September 4, 2002,
through December 31, 2002, Executive will continue performing his duties as
Chief Operating Officer and President.
 
 3. EXECUTIVE'S OBLIGATIONS
 
 During the period of his service under this Agreement, Executive shall
devote substantially all of his time and energy during business hours,
faithfully and to the best of his ability, to the supervision and conduct of the
business and affairs of the Company and to the furtherance of its interests, and
to such other duties as directed by the Board. (Executive may serve on the Board
of Directors of other companies with Board approval (which will not be
unreasonably withheld), if it does not substantially interfere with his primary
duties or create a conflict of interest.)
 
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 4. COMPENSATION
 
 Effective January 1, 2003, the Company shall pay to Executive a salary
at the rate of $1,100,000.00 per year, in equal bi-weekly installments,
PROVIDED, HOWEVER, that Executive will defer any portion of the salary greater
than $1,000,000.00 into the Company's ESSP or any successor program. The Human
Resources Committee of the Board (or any successor committee responsible for
setting compensation levels for executives, the "HRC") shall, in good faith,
review the salary of Executive, on an annual basis, with a view to consideration
of appropriate merit increases (but not decrease) in such salary. Subsequent
increases, if any, will be effective at the July HRC Meeting each year of this
Agreement. There will be no diminution of the above compensation (as increased
from time to time) except as provided in this Agreement. All payments will be
subject to Executive's chosen benefit deductions and the deductions of payroll
taxes and similar assessments as required by law. All bonus awards will be based
on the current bonus plan, unless any changes provide for an enhancement in the
amount of bonus for Executive.
 
 Executive will use the Company's aircraft or charter aircraft for
security purposes for himself and his family for business and personal travel
(with standard charges for family members and for non-Company business usage),
including travel between Boston, Massachusetts and Las Vegas, Nevada. Executive
will also be entitled to be reimbursed for first class travel or charter
aircraft travel expenses. The Company also will provide Executive, if he so
chooses, with appropriate security arrangements at his residences.
 
 If Executive dies or resigns pursuant to this Agreement or pursuant to
any other agreement between the Company and Executive providing for such
resignation during the period of this Agreement, service for any part of the
month in which any such event occurs shall be considered service for the entire
month.
 
 5. PROMOTIONAL AWARD
 
 The Company shall pay to Executive, as further consideration for
entering into this Agreement, including the Non-Competition provisions, a
Promotional Award pursuant to the Company's Executive Stock Incentive Plan (the
"Stock Plan"), of a stock option grant valued by the HRC at Five Million Dollars
($5,000,000.00) and a deferrable (as determined by the HRC) restricted stock
grant, also valued at Five Million Dollars ($5,000,000.00). The options will
have a term of at least seven (7) years. The options and restricted stock will
be based on the model currently used by the Company for its current executives
with the strike price being set by the HRC as the average of the high and low
price on September 4, 2002, which shall be the grant date. Both the option grant
and the restricted stock grant will vest in increments of twenty-five percent
(25%) on January 1, 2006, twenty-five percent (25%) on January 1, 2007, and
fifty percent (50%) on January 1, 2008. The options will be exercised according
to the Stock Plan. Should Executive be terminated Without Cause or cease
employment for Good Reason
 
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pursuant to paragraph 8 (but not as a consequence of death or disability), the
Promotional Award would continue to vest based on the time table set forth
above. Should Executive be terminated Without Cause or leave employment For Good
Reason, all Promotional Award stock options may be exercised until January 15,
2009. Given the fact that this Agreement ends on January 1, 2008, Executive is
granted up to January 15, 2009, to exercise vested Promotional Awards. Any other
issues will be subject to the rules of the Stock Plan.
 
 6. BENEFITS
 
 Executive shall be entitled to participate during the term of the
Agreement, except as otherwise provided herein, in incentive compensation
programs, including bonus programs and stock options, and to receive benefits
and perquisites at least as favorable to Executive as those presently provided
to Executive by the Company, and as may be enhanced for all senior officers.
 
 6.1 HEALTH INSURANCE
 
 Executive will receive the regular group health plan provided to
senior officers, which may be subject to change during the term of the
Agreement. Executive will be required to contribute to the cost of the basic
plan in the same manner as other senior officers. Executive will receive no less
favorable a health plan than other senior officers.
 
 6.2 LONG TERM DISABILITY BENEFITS
 
 Executive will be eligible to receive long term disability
coverage paid by the Company as follows: group plan providing $180,000 annual
maximum benefit and a supplemental plan with an additional $60,000 annual
maximum benefit. Executive will also receive, subject to Executive being able to
comply with the medical and physical eligibility requirement of the policy
(insurability) chosen by the Company, to an individual long term disability
policy with a $180,000 annual maximum benefit and an individual long term
disability excess policy with an additional $540,000 annual maximum benefit,
both fully paid by the Company during the term of this Agreement.
 
 6.3 LIFE INSURANCE
 
 Executive will receive life insurance paid by the Company with a
death benefit equal to at least three (3) times his current base salary.
 
 6.4 RETIREMENT PLAN
 
 Executive will also be eligible during the term of the Agreement
to participate in the Company's 401(k) Plan, as may be modified or changed, as
well as its Executive Supplemental Savings Plan (the "ESSP"), as may be modified
or changed from time to time, in the same manner as other senior officers of the
Company.
 
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 6.5 FINANCIAL COUNSELING
 
 Executive will also receive during the term of the Agreement
Twenty-Five Thousand Dollars ($25,000.00) per year of the Agreement for
financial counseling. Any unused portion will not carry over to the following
year.
 
 6.6 VACATION
 
 Executive will be paid for five (5) weeks paid vacation per
calendar year of the Agreement.
 
 7. TERMINATION FROM EMPLOYMENT
 
 7.1 Except as otherwise provided in this Agreement, the date of
Executive's termination from employment shall be January 1, 2008.
 
 7.2 After the date of Executive's termination from employment at any
time, and for any reason or for no reason (including termination or resignation
prior to January 1, 2008, if that should occur), he will be entitled to
participate for his lifetime in the Company's group health insurance plans
applicable to senior officers, including family coverage as applicable (medical,
dental and vision coverage). His group health insurance benefits after any
termination of employment will not be less than those offered to active senior
officers of the Company, and he will be entitled to any later enhancements in
such benefits. However, during the Life Coverage Period Executive shall pay
twenty percent (20%) of the current premium (revised annually) on an after-tax
basis each quarter, and the Company shall pay eighty percent (80%) of said
premium on an after-tax basis, which contribution will be imputed income to
Executive. As soon after the end of Executive's full-time active employment
status and after Executive becomes eligible for Medicare coverage, the Company's
group health insurance plan shall become secondary to Medicare.
 
 8. TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON
 
 8.1 The Board reserves the right to terminate Executive from his
then current position Without Cause at any time upon at least three (3) months
prior written notice. The failure of the Board to elect Executive as Chief
Executive Officer during the annual election of officers shall also be deemed
termination Without Cause for purposes of this Agreement unless, before the
election, the Board has sent written notice initiating Termination for Cause as
provided in paragraph 13.1, and Executive is thereafter terminated for Cause.
Executive reserves the right to resign his position for Good Reason (as defined
in paragraph 13.2 herein) by giving the Company thirty (30) days written notice
which states the basis for such Good Reason.
 
 8.2 Upon Executive's termination Without Cause or resignation from
his position for Good Reason as described in paragraph 8.1 above:
 
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 (a) Executive will begin a Transition Period (the "Transition
Period") that provides for pay and benefits (as set forth below) for a period of
two (2) years beginning on the date of such termination Without Cause or
resignation for Good Reason from his position. His stock options will continue
in force for vesting purposes during the Transition Period. Any unvested stock
options that do not vest before the expiration of the Transition Period will be
forfeited, except those provided pursuant to the Promotional Award. The
Promotional Award will continue to vest according to its regular vesting
schedule. If a Change in Control as defined in Executive's Severance Agreement
occurs during the Transition Period, all unvested stock options and restricted
stock from the Promotional Award will immediately vest as of the date of the
Change in Control. Executive also shall be entitled: (i) to the bonus Executive
has earned but for which he has not been paid for the year prior to the year in
which he is terminated Without Cause or in which he resigns his position for
Good Reason; and (ii) to a prorated bonus for the year in which he is terminated
Without Cause or in which he resigns for Good Reason.
 
 (b) Executive will continue to receive his then-current salary
rate and the right to participate in the Company's benefit plans during the
Transition Period, but, except as otherwise provided in subsection (a) above, he
no longer will be eligible for future bonus, stock option or restricted stock
grants or any other long-term incentive awards.
 
 (c) In no event shall Executive be obligated to seek other
employment or take any action by way of mitigation of the amounts payable to
Executive under any provisions of this Agreement, and any amounts payable to
Executive shall not be subject to reduction for any compensation received from
other employment.
 
 9. TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON
 
 9.1 The Board will have the right to terminate Executive at any time
from his then-current positions For Cause (as defined in paragraph 13.1 herein).
Executive shall resign from the Board promptly after the Company's request, in
the event Executive is so terminated or Executive resigns with or without Good
Reason. A resignation by Executive without Good Reason shall not be a breach of
this Agreement.
 
 9.2 If Executive is terminated For Cause, or if he resigns his
position without Good Reason, then: (a) all of his rights and benefits under
this Agreement shall thereupon terminate and his employment shall be deemed
terminated on the date of such termination or resignation; (b) he shall be
entitled to all accrued rights, bonuses, payments and benefits vested or paid on
or before such date under the Company's plans and programs, but unvested stock
options or unvested restricted stock, including the Promotional Award, if any,
will be forfeited; (c) his right to exercise vested stock options will expire at
11:59 p.m. PST on the date of such termination or resignation, and all stock
options not so exercised will be forfeited; (d) his Indemnification Agreement
will
 
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continue in force; (e) the Escrow Agreement, if then in force, will continue in
force, unless such agreement is thereafter amended or terminated pursuant to its
terms; (f) he will be entitled to the lifetime group insurance benefits
described in paragraph 7.2 above, except that any future amendments to such
benefits shall apply to him in the same manner as such amendments apply to other
employees; and (g) his Severance Agreement and all rights thereunder will
terminate as of such termination or resignation date, unless a Change in Control
or Potential Change in Control (as such terms are defined in the Severance
Agreement) has occurred prior to such termination or resignation date.
 
 If Executive's Severance Agreement is in force upon a Change in
Control (as defined in the Severance Agreement), the provisions of this
paragraph 9.2 will not be applicable if there is a termination of the Executive
pursuant to Section 3 of his Severance Agreement. In the event of such
termination, Executive will be entitled to the payments, rights and benefits set
forth in the Severance Agreement.
 
 10. DEATH
 
 In the event of Executive's death prior to January 1, 2008, during his
employment under this Agreement, his salary and all rights and benefits under
this Agreement will terminate, and his estate and beneficiary(ies) will receive
the benefits they are entitled to under the terms of the Company's benefit plans
and programs by reason of a participant's death during active employment,
including applicable rights and benefits under the Company's Stock Plans,
including any accrued but unpaid bonus. Notwithstanding anything to the contrary
contained in the Stock Plan documents or this paragraph, upon Executive's death
one hundred percent (100%) of Executive's unvested annual options, if any, and
fifty percent (50%) of the unvested Promotional Awards options and fifty percent
(50%) of the Promotional restricted stock will vest and the other fifty percent
(50%) of the Promotional Awards options and fifty percent (50%) of the
Promotional restricted stock will terminate. The Escrow Agreement, if then in
force, will continue in force (subject to its amendment or termination in
accordance with its terms) for the benefit of Executive's beneficiaries until
his deferred compensation accounts are paid in full, and Executive's
Indemnification Agreement will continue in force for the benefit of his estate.
If Executive dies during the Transition Period, all of the provisions of the
previous sentences apply, except that the remaining salary will be paid in a
lump sum to his estate.
 
 11. DISABILITY
 
 In the event of Executive's disability (as defined below) prior to
January 1, 2008, during his employment, he will be entitled to apply, at his
option, for the Company's long-term disability benefits. If he is accepted for
such benefits, then the terms and provisions of the Company's benefit plans and
programs (Stock Option and Restricted Stock Plan) that are applicable in the
event of such disability of an employee shall apply in lieu of the salary and
benefits under this Agreement, except that: (a) the Escrow Agreement (if then in
force) and his Indemnification Agreement will continue in
 
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force (subject to amendment or termination in accordance with their terms); and
(b) he will be entitled to the lifetime group insurance benefits described in
paragraph 7.2. If Executive is disabled so that he cannot perform his duties (as
determined by the HRC), then the Board may terminate his duties under this
Agreement. For purposes of this Agreement, disability will be the inability of
Executive, with or without a reasonable accommodation, to perform the essential
functions of his job (as reasonably determined by the HRC). In such event, he
will receive two (2) years salary continuation, offset by any long term
disability benefits to which he is entitled, together with all other benefits,
and during such period of salary continuation, any stock options and restricted
stock then in existence will continue in force for vesting purposes.
Notwithstanding anything to the contrary contained in the Stock Plan or this
paragraph, after the two (2) years of salary continuation has expired, one
hundred percent (100%) of Executive's unvested annual options, if any, and fifty
percent (50%) of the unvested Promotional Awards options and fifty percent (50%)
of the Promotional restricted stock will vest and the other fifty percent (50%)
of the Promotional Awards options and fifty percent (50%) of the Promotional
restricted stock will terminate. In addition, during such period of salary
continuation for disability, Executive will not be eligible to participate in
the annual bonus plan, nor will he be eligible to receive new stock option
grants or any other long-term incentive awards except to the extent approved by
the HRC.
 
 12. CHANGE IN CONTROL
 
 If a Change in Control, as defined in Executive's Severance Agreement,
occurs during Executive's active employment, and if the Severance Agreement is
in force when the Change in Control occurs, then the Severance Agreement
supersedes and replaces this Agreement. If, prior to a Change in Control (as
defined above), Executive's active employment has been terminated for any reason
by either party, or this Agreement is not renewed by the Company, then
Executive's Severance Agreement terminates automatically on the last day of the
sixth full month following the date of termination of Executive' s employment.
 
 13. DEFINITIONS OF CAUSE AND GOOD REASON
 
 13.1(a) For purposes of this Agreement, "Cause" shall mean:
 
 (i) the willful failure of Executive to perform
substantially Executive's duties with the Company (as described in paragraph 2)
or to follow a lawful reasonable directive from the Board (other than any such
failure resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to Executive by the
Board which specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties or to follow a
lawful reasonable directive and Executive is given a reasonable opportunity (not
to exceed thirty (30) days) to cure any such failure to substantially perform,
if curable;
 
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 (ii) (A) any willful act of fraud, or embezzlement or
theft by Executive, in each case, in connection with Executive's duties
hereunder or in the course of Executive's employment hereunder or (B)
Executive's admission in any court, or conviction of, a felony involving moral
turpitude, fraud, or embezzlement, theft or misrepresentation, in each case,
against the Company.
 
 13.1(b) Termination by the Company of this Agreement for "Cause"
shall also include Executive being found unsuitable for or having a gaming
license denied or revoked by the gaming regulatory authorities in Arizona,
California, Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi,
Missouri, Nevada, New Jersey, New York, and North Carolina.
 
 13.1(c) Termination by the Company of this Agreement for "Cause"
shall also include (i) Executive's willful and material violation of, or
noncompliance with, any securities laws or stock exchange listing rules,
including, without limitation, the Sarbanes-Oxley Act of 2002, provided that
such violation or noncompliance resulted in material economic harm to the
Company, or (ii) a final judicial order or determination prohibiting Executive
from service as an officer pursuant to the Securities and Exchange Act of 1934
or the rules of the New York Stock Exchange.
 
 13.1(d) For purposes of this paragraph 13, no act or failure to act,
on the part of Executive, shall be considered "willful" unless it is done, or
omitted to be done, by Executive in bad faith and without reasonable belief that
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. The cessation of employment of
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to Executive and Executive is given an
opportunity, together with counsel for Executive, to be heard before the Board),
finding that, in the good faith opinion of the Board, Executive is guilty of the
conduct described in paragraph 13.1(a)(i)(ii), 13.1(b), and 13.1(c), and
specifying the particulars thereof in detail; PROVIDED, that if Executive is a
member of the Board, Executive shall not vote on such resolution nor shall
Executive be counted in determining the "entire membership" of the Board.
 
 13.2 GOOD REASON. "Good Reason" shall mean, without Executive's
express written consent, the occurrence of any of the following circumstances
unless, in the case of paragraphs (a), (d), (e) or (f), such circumstances are
fully corrected prior to the date of termination specified in the written notice
given by Executive notifying the Company of his resignation for Good Reason:
 
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 (a) The assignment to Executive of any duties materially
inconsistent with his status as Chief Executive Officer of the Company or a
material adverse alteration in the nature or status of his responsibilities;
 
 (b) The requirement that Executive report to anyone other than
the Board;
 
 (c) The failure of Executive to be elected/re-elected as a
member of the Board;
 
 (d) A reduction by the Company in his annual base salary of One
Million One Hundred Thousand Dollars ($1,100,000.00) or as the same may be
increased from time to time pursuant to paragraph 4 hereof;
 
 (e) The relocation of the Company's principal executive offices
from Las Vegas, Nevada, to a location more than fifty (50) miles from such
offices, or the Company's requiring Executive either: (i) to be based anywhere
other than the location of the Company's principal offices in Las Vegas (except
for required travel on the Company's business to an extent substantially
consistent with Executive's present business travel obligations); or (ii) to
relocate his primary residence from Boston to Las Vegas;
 
 (f) The failure by the Company to pay to him any material
portion of his current compensation, except pursuant to a compensation deferral
elected by Executive, or deferral compensation required by this Agreement, or to
pay to Executive any material portion of an installment of deferred compensation
under any deferred compensation program of the Company within thirty (30) days
of the date such compensation is due;
 
 (g) Except as permitted by this Agreement, the failure by the
Company to continue in effect any compensation plan in which Executive is
participating on the date of this Agreement which is material to Executive's
total compensation, including but not limited to, the Company's annual bonus
plan, the ESSP, or the Stock Option Plan or any substitute plans, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company to
continue Executive's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of Executive's participation relative to other
participants at Executive's grade level;
 
 (h) The failure by the Company to continue to provide Executive
with benefits substantially similar to those enjoyed by him under the Savings
and Retirement Plan and the life insurance, medical, health and accident, and
disability plans in which Executive is participating on the date of this
Agreement, the taking of any action by the Company which would directly or
indirectly materially reduce any of such
 
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benefits or deprive Executive of any material fringe benefit enjoyed by
Executive on the date of this Agreement, except as permitted by this Agreement;
or
 
 (i) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in paragraph 19 hereof.
 
 Executive's right to terminate his employment pursuant to this
Agreement for Good Reason shall not be affected by Executive's incapacity due to
physical or mental illness. Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.
 
 Notwithstanding any provision in this Agreement to the contrary, in
the event Executive's active employment as an executive officer with the
Company, or its direct or indirect subsidiaries, terminates For Cause or
Executive ceases employment Without Good Reason, any Promotional Award of stock
options and restricted stock granted to Executive which are unvested on the date
of such termination of active employment will be forfeited as of 11:59 p.m. PST
on such date.
 
 14. NON-COMPETITION AGREEMENT
 
 14.1 For a period of two (2) years after Executive's full-time,
active employment (which, for purposes of this paragraph 14.1, shall not include
the salary continuation period under paragraph 8.2(a)) with the Company or a
direct or indirect subsidiary ends, he will not, directly or indirectly, engage
in any activity, including development activity, whether as an employee,
consultant, director, investor, contractor, or otherwise, directly or
indirectly, in the casino business (or any hotel or resort that operates a
casino business) in the United States, Canada or Mexico at the time such
employment ends, except with the prior specific approval of the Company.
Executive acknowledges that the restrictions are reasonable as to both time and
geographic scope, as the Company competes for customers with all gaming
establishments in these areas.
 
 14.2 If Executive breaches any of the covenants in paragraph 14.1,
then the Company may terminate any of his rights under this Agreement upon
thirty (30) days written notice, whereupon all of the Company's obligations
under this Agreement shall terminate (including, without limitation, the right
to lifetime group insurance) without further obligation to him except for
obligations that have been paid, accrued or are vested as of or prior to such
termination date. In addition, the Company shall be entitled to seek to enforce
any such covenants, including obtaining monetary damages, specific performance
and injunctive relief.
 
 14.3 Executive will not, at any time prior to two (2) years from the
end of Executive's full-time active employment status (which, for purposes of
this Agreement, shall not include the period of time Executive is receiving
salary continuation under paragraph 8.2(a)), directly or indirectly induce,
persuade or attempt to induce or
 
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persuade, any salary grade 20 or higher employee of the Company or its
subsidiaries, to leave or abandon employment with the Company, its subsidiaries
or affiliates, for any reason whatsoever (other than Executive's personal
secretary and/or assistants).
 
 14.4. Executive will not, for the 2-year period beginning at the end
of Executive's full-time active employment (which, for purposes of this
Agreement, shall not include the period of time Executive is receiving salary
continuation under paragraph 8.2(a)) communicate with employees, customers, or
suppliers of the Company, or its subsidiaries or affiliates of the Company or
any principals or employee thereof, or any person or organization in any manner
whatsoever that is detrimental to the interest of the Company, its subsidiaries
or affiliates. Executive further agrees from the end of Executive's full-time
active employment not to make statements to the press or general public with
respect to the Company or its subsidiaries or affiliates that are detrimental to
the Company, its subsidiaries, affiliates or employees without the express
written prior authorization of the Company, and the Company agrees that it will
not to make statements to the press or general public with respect to Executive
that are detrimental to him without the express written prior authorization of
Executive. Notwithstanding the foregoing, Executive shall not be prohibited at
the expiration of the non-competition period from pursuing his own business
interests which may conflict with the interests of the Company.
 
 14.5 Executive and Company each intends and agrees that if, in any
action before any court, agency or arbitration tribunal, legally empowered to
enforce the covenants in this paragraph 14, any term, restriction, covenant or
promise contained therein is found to be unreasonable and, accordingly,
unenforceable, then such terms, restriction, covenant or promise shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
 
 14.6 Should any court, agency or arbitral tribunal legally empowered
to enforce the covenants contained in this paragraph 14 find that Executive has
beached the terms, restrictions covenants or promises herein (except if it has
been modified to make it enforceable): (i) the Company will not be obligated to
pay Executive the salary or benefits provided for under salary continuation
payments contained in the Agreement (including all required benefits under
benefit plans), and (ii) Executive will also reimburse the Company any salary or
benefit payments received, as well as any reasonable costs, and attorney fees to
secure such repayments.
 
 15. CONFIDENTIALITY
 
 15.1 Executive's position with the Company will or has resulted in
his exposure and access to confidential and proprietary information which he did
not have access to prior to holding the position, which information is of great
value to the Company and the disclosure of which by him, directly or indirectly,
would be irreparably injurious and detrimental to the Company. During his term
of employment and without limitation thereafter, Executive agrees to use his
best efforts and to observe the utmost diligence to guard and protect all
confidential or proprietary information relating to the
 
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Company from disclosure to third parties. Executive shall not at any time during
and after the end of his full-time active employment, make available, either
directly or indirectly, to any competitor or potential competitor of the Company
or any of its subsidiaries, or their affiliates or divulge, disclose,
communicate to any firm corporation or other business entity in any manner
whatsoever, any confidential or proprietary information covered or contemplated
by this Agreement, unless expressly authorized to do so by the Company in
writing. Notwithstanding the above, Executive may provide such Confidential
Information if ordered by a federal or state court or any governmental authority
or pursuant to subpoena. In such cases, Executive will notify the Company at
least five (5) days prior to providing such information, and the nature of the
information required to provide.
 
 15.2 For the purpose of this Agreement, "Confidential Information"
shall mean all information of the Company, its subsidiaries and affiliates,
relating to or useful in connection with the business of the Company, its
subsidiaries, affiliates, whether or not a "trade secret" within the meaning of
applicable law, which at the time of Executive's initial employment is not
generally known to the general public and which has been or is from time to time
disclosed to or developed by Executive as a result of his employment with the
Company. Confidential Information includes, but is not limited to the Company's
product development and marketing programs, data, future plans, formula, food
and beverage procedures, recipes, finances, financial management systems, player
identification systems (Total Rewards), pricing systems, client and customer
lists, organizational charts, salary and benefit programs, training programs,
computer software, business records, files, drawings, prints, prototyping
models, letters, notes, notebooks, reports, and copies thereof, whether prepared
by him or others, and any other information or documents which Executive is told
or reasonably ought to know that the Company regards as confidential.
 
 15.3 Executive agrees that upon separation of employment for any
reason whatsoever, he shall promptly deliver to the Company all Confidential
Information, including but not limited to, documents, reports, correspondences,
computer printouts, work papers, files, computer lists, telephone and address
books, rolodex cards, computer tapes, disks, and any and all records in his
possession (and all copies thereof) containing any such Confidential Information
created in whole or in part by Executive within the scope of his employment,
even if the items do not contain Confidential Information.
 
 15.4 Executive shall also be required to sign a non-disclosure or
confidentiality agreement. Such an agreement shall also remain in full force and
effect, PROVIDED THAT, in the event of any conflict between any such
agreement(s) and this Agreement, this Agreement shall control.
 
 15.5 This paragraph and any of its provisions will survive
Executive's separation of employment for any reason.
 
 12
<Page>
 
 16. INJUNCTIVE RELIEF
 
 Executive acknowledges and agrees that the terms provided in Sections
14 and 15 are the minimum necessary to protect the Company, its affiliates and
subsidiaries, its successors and assigns in the use and enjoyment of the
Confidential Information and the good will of the business of the Company.
Executive further agrees that damages cannot fully and adequately compensate the
Company in the event of a breach or violation of the restrictive covenants
(Confidential Information and Non-Competition) and that without limiting the
right of the Company to pursue all other legal and equitable remedies available
to it, that the Company shall be entitled to seek injunctive relief, including
but not limited to a temporary restraining order, temporary injunction and
permanent injunction, to prevent any such violations or any continuation of such
violations for the protection of the Company. The granting of injunctive relief
will not act as a waiver by the Company to pursue any and all additional
remedies.
 
 17. POST EMPLOYMENT COOPERATION
 
 Executive agrees that upon separation for any reason from the Company,
Executive will cooperate in assuring an orderly transition of all matters being
handled by him. Upon the Company providing reasonable notice to him, he will
also appear as a witness at the Company's request and/or assist the Company in
any litigation, bankruptcy or similar matter in which the Company or any
affiliate thereof is a party or otherwise involved. The Company will defray any
reasonable out-of-pocket expenses incurred by Executive in connection with any
such appearance. In connection thereof, the Company agrees to indemnify
Executive as prescribed in Article Tenth of the Certificate of Incorporation, as
amended, of the Company.
 
 18. RELEASE
 
 Upon the termination of Executive's active full-time employment, and
in consideration of the actual receipt of all compensation and benefits
described in this Agreement, except for claims arising from the covenants,
agreements, and undertakings of the Company as set forth herein and except as
prohibited by statutory language, Executive will sign an agreement which forever
and unconditionally waives, and releases Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc., their subsidiaries and affiliates, and their officers,
directors, agents, benefit plan trustees, and employees ("Released Parties")
from any and all claims, whether known or unknown, and regardless of type, cause
or nature, including but not limited to claims arising under all salary,
vacation, insurance, bonus, stock, and all other benefit plans, and all state
and federal anti-discrimination, civil rights and human rights laws, ordinances
and statutes, including Title VII of the Civil Rights Act of 1964 and the Age
Discrimination in Employment Act, concerning his employment with Harrah's
Entertainment, Inc., its subsidiaries and affiliates, and the cessation of that
employment.
 
 13
<Page>
 
 19. ASSUMPTION OF AGREEMENT ON MERGER, CONSOLIDATION OR SALE OF ASSETS
 
 In the event the Company agrees to (i) enter into any merger or
consolidation with another company in which the Company is not the surviving
company; or (ii) sell or dispose of all or substantially all of its assets, and
the company which is to survive fails to make a written agreement with Executive
to either: (1) assume the Company's financial obligations to Executive under
this Agreement; or (2) make such other provision for Executive as is
satisfactory to Executive, then Executive shall have the right to resign For
Good Reason as defined under this Agreement.
 
 20. ASSURANCES ON LIQUIDATION
 
 The Company agrees that until the termination of this Agreement as
above provided, it will not voluntarily liquidate or dissolve without first
making a full settlement or, at the discretion of Executive, a written agreement
with Executive satisfactory to and approved by him in writing, in fulfillment of
or in lieu of its obligations to him under this Agreement.
 
 21. AMENDMENTS
 
 This Agreement may not be amended or modified orally, and no provision
hereof may be waived, except in a writing signed by the parties hereto.
 
 22. ASSIGNMENT
 
 22.1 Except as otherwise provided in paragraph 22.2, this Agreement
cannot be assigned by either party hereto, except with the written consent of
the other. Any assignment of this Agreement by either party shall not relieve
such party of its or his obligations hereunder.
 
 22.2. The Company may elect to perform any or all of its obligations
under this Agreement through its wholly-owned subsidiary, Harrah's Operating
Company, Inc., or another subsidiary, and if the Company so elects, Executive
will be an employee of Harrah's Operating Company, Inc., or such other
subsidiary. Notwithstanding any such election, the Company's obligations to
Executive under this Agreement will continue in full force and effect as
obligations of the Company, and the Company shall retain primary liability for
their performance.
 
 23. BINDING EFFECT
 
 This Agreement shall be binding upon and inure to the benefit of the
personal representatives and successors in interest of the Company.
 
 14
<Page>
 
 24. GOVERNING LAW
 
 This Agreement shall be governed by the laws of the State of Nevada as
to all matters, including but not limited to matters of validity, construction,
effect and performance.
 
 25. JURISDICTION
 
Any judicial proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement or any agreement identified herein may be
brought only in state or federal courts of the State of Nevada, and by the
execution and delivery of this Agreement, each of the parties hereto accepts for
themselves the exclusive jurisdiction of the aforesaid courts and irrevocably
consents to the jurisdiction of such courts (and the appropriate appellate
courts) in any such proceedings, waives any objection to venue laid therein and
agrees to be bound by the judgment rendered thereby in connection with this
Agreement or any agreement identified herein.
 
 26. NOTICES
 
 Any notice to be given hereunder by either party to the other may be
effected by personal delivery, in writing, or by mail, registered or certified,
postage prepaid with return receipt requested. Mailed notices shall be addressed
to the parties at the addresses set forth below, but each party may change his
or its address by written notice in accordance with this paragraph 26. Notices
shall be deemed communicated as of the actual receipt or refusal of receipt.
 
 If to Executive: Gary W. Loveman
 
 ---------------------------------
 
 ---------------------------------
 
 
And to:
 
 Stewart Reifler, Esq.
 Vedder, Price, Kaufman & Kammholz
 805 Third Avenue
 New York, New York 10022
 
 
 If to Company: Harrah's Entertainment, Inc.
 One Harrah's Court
 Las Vegas, Nevada 89119
 Attn: General Counsel
 
 15
<Page>
 
 IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has
caused this Agreement to be executed in its name and on its behalf and its
corporate seal to be hereunto affixed and attested by its corporate officers
thereunto duly authorized.
 
 /s/ GARY W. LOVEMAN
 ----------------------------
 Gary W. Loveman
 
 
 Harrah's Entertainment, Inc.
 
 
 By /s/ STEPHEN H. BRAMMELL
 -----------------------
 Its: Senior Vice President
 
 16
 

 

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HARRAH'S ENTERTAINMENT, INC.

January 1, 2003

Mr. Gary W. Loveman
Harrah's Entertainment, Inc.
One Harrah's Court
Las Vegas, NV 89119-4312

Re:    Severance Agreement

Dear Mr. Loveman:

        Harrah's Entertainment, Inc. (the "Company") considers it essential to the best interest of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.

        The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated.

        In order to induce you to remain in the employ of the Company or its subsidiaries and in consideration of your agreements set forth in Subsection 2(b) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("this Agreement") in the event your employment with the Company or its subsidiaries terminates subsequent to a "Change in Control of the Company" (as defined in Section 2 hereof) or within six months prior to a Change in Control under the circumstances described below.

        1.    Term of Agreement.    This Agreement shall commence on January 1, 2003 and shall continue in effect through December 31, 2003; provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless the Company shall have given you written notice that it does not wish to extend this Agreement not later than January 1 of the preceding year in the event a Potential Change in Control has occurred or the failure to extend is done in contemplation of a Change in Control or a Potential Change in Control, or June 30 of the preceding year in all other events; provided, further, if a Change in Control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall automatically continue in effect for a period of twenty-four months beyond the month in which such Change in Control occurred. This Agreement will terminate on the last day of the sixth full month following the date your active employment terminates for any reason prior to a Change in Control.

        2.    Change in Control    

        (a)  Change in Control means and includes each of the following:

          (i)  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 generally in the election of directors ("voting securities") of the Company that represent 25% or more of the combined voting power of the Company's then outstanding voting securities, other than

        (A)  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

        (B)  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

        (C)  an acquisition of voting securities pursuant to a transaction described in clause (iii) below that would not be a Change in Control under clause (iii);

        Notwithstanding the foregoing, neither of the following events shall constitute an "acquisition" by any person or group for purposes of this clause (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 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 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 in Control; or

        (ii)  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 clauses (i) or (iii) of this Section) 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

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

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

        (B)  after which no person or group beneficially owns voting securities representing 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 clause (B) as beneficially owning 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

        (iv)  the Company's stockholders approve a liquidation or dissolution of the Company.

        (v)  The Human Resources Committee of the Board (the "Committee") shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a

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Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.

        (b)  For purposes of this Agreement, a "Potential Change in Control of the Company" shall be deemed to have occurred if the following occur:

          (i)  The Company enters into a written agreement or letter of intent, the consummation of which would result in the occurrence of a Change in Control of the Company;

        (ii)  Any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company;

        (iii)  Any person (other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company) who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the Board increases such beneficial ownership of such securities by an additional five percentage points or more thereby beneficially owning 14.5% or more of such securities; or

        (iv)  The Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred.

        You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company, you will remain in the employ of the Company (or the subsidiary thereof by which you are employed at the date such Potential Change in Control occurs) until the earliest of (x) a date which is six months from the occurrence of such Potential Change in Control of the Company, (y) the termination by you of your employment by reasons of Disability or Retirement (at your normal retirement age), as defined in Subsection 3(a) or your termination by reason of death, or (z) the occurrence of a Change in Control of the Company.

        (c)    Good Reason.    For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a Change in Control of the Company, of any of the following circumstances unless such circumstances occur by reason of your death, Disability or your voluntary termination or voluntary Retirement, or, in the case of paragraphs (i), (iv), (v), (vi), or (vii), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as such terms are defined in Subsections 3(e) and 3(d), respectively, given in respect thereof:

          (i)  The assignment to you of any duties materially inconsistent with your status as Chief Executive Officer of the Company or a material adverse alteration in the nature or status of your responsibilities;

        (ii)  The requirement that you report to anyone other than the Board;

        (iii)  The failure of you to be elected/re-elected as a member of the Board;

        (iv)  A reduction by the Company in your annual base salary as in effect on the date hereof or as the same may have been increased from time to time;

        (v)  The relocation of the Company's principal executive offices just prior to the Change in Control to a location more than fifty (50) miles from such offices, or the Company's requiring you either: (y) to be based any where other than the location of the Company's principal executive offices just prior to the Change in Control (except for required travel on the Company's business to an extent substantially consistent with your business travel obligations during the year prior to the Change in Control), or (z) to relocate your primary residence from Boston to Las Vegas;

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        (vi)  The failure by the Company to pay to you any material portion of your current compensation, except pursuant to a compensation deferral elected by you or required by any agreement with you, or to pay to you any material portion of an installment of deferred compensation under any deferred compensation program of the Company within thirty (30) days of the date such compensation is due;

      (vii)  Except as permitted by any agreement with you, the failure by the Company to continue in effect any compensation plan in which you are participating immediately prior to the Change in Control which is material to your total compensation, including but not limited to, the Company's annual bonus plan, the ESSP, or the Stock Option Plan or any substitute plans, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants at your grade level;

      (viii)  The failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under the Savings and Retirement Plan and the life insurance, medical, health and accident, and disability plans in which you are participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control, except as permitted in any agreement with you;

        (ix)  The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or

        (x)  Any purported termination of your employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 3(d) hereof and the requirements of Subsection 3(b) below; for purposes of this Agreement, no such purported termination shall be effective.

        Your right to terminate your employment pursuant to this Agreement for Good Reason shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

        3.    Termination Following Change in Control (or Prior to a Change in Control in Specific Circumstances).    If any of the events described in Subsection 2(a) hereof constituting a Change in Control of the Company shall have occurred, then following such Change in Control, you shall be entitled to the benefits provided in Subsection 4(c) hereof: (1) if your employment was terminated within six months prior to the Change in Control under the circumstances described in Section 4.(2) below, or (2) if your employment is terminated during the term of this Agreement after such Change in Control if such termination is (y) by the Company, other than for Cause, your Disability or death, or (z) by you for Good Reason as provided in Subsection 3(c)(i) hereof or by your Voluntary Termination as provided in Subsection 3(c)(ii) hereof.

        (a)    Disability; Retirement.    If, as a result of your meeting the definition of disability under the Company's Long Term Disability Plan, you shall have been absent from the full-time performance of your duties with the Company for twenty-six consecutive weeks, and within thirty days after written notice of termination is given, you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination at age 65 (or later) with ten years of service or retirement in accordance with any retirement contract between the Company and you.

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        (b)    Cause.    For purposes of this Agreement, "Cause" shall mean:

          (i)  Your willful failure to perform substantially your duties or to follow a lawful reasonable directive from the Board (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties or to follow a lawful reasonable directive and you are given a reasonable opportunity (not to exceed thirty (30) days) to cure any such failure to substantially perform, if curable;

        (ii)  (A) any willful act of fraud, or embezzlement or theft by you, in each case, in connection with your duties to the Company or in the course of your employment with the Company or (B) your admission in any court, or conviction of, a felony involving moral turpitude, fraud, or embezzlement, theft or misrepresentation, in each case, against the Company;

        (iii)  Your being found unsuitable for or having a gaming license denied or revoked by the gaming regulatory authorities in Arizona, California, Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nevada, New Jersey, New York, and North Carolina;

        (iv)  (A) your willful and material violation of, or noncompliance with, any securities laws or stock exchange listing rules, including, without limitation, the Sarbanes-Oxley Act of 2002, provided that such violation or noncompliance resulted in material economic harm to the Company, or (B) a final judicial order or determination prohibiting you from service as an officer pursuant to the Securities Exchange Act of 1934 and the rules of the New York Stock Exchange.

For purposes of this Subsection, no act or failure to act on your part shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. Your termination of employment shall not be deemed to be for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with your counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, you are guilty of conduct within the definition of Cause herein and specifying the particulars thereof in detail; provided, that if you are a member of the Board, you shall not vote on such resolution nor shall you be counted in determining the "entire membership" of the Board.

        (c)    Voluntary Resignation.    After a Change in Control of the Company and for purposes of receiving the benefits provided in Subsection 4(c) hereof, you shall be entitled to terminate your employment by voluntary resignation given at any time during the two years following the occurrence of a Change in Control of the Company hereunder, provided you are actively employed by the Company at such time and such resignation is (i) by you for Good Reason or (ii) by you voluntarily without the necessity of asserting or establishing Good Reason and regardless of your age or any disability and regardless of any grounds that may exist for the termination of your employment if such voluntary termination occurs by written notice given by you to the Company during the thirty days immediately following the one year anniversary of the Change in Control (your "Voluntary Termination"), provided, however, for purposes of this Subsection 3(c)(ii) only, the language "25% or more" wherever referred to in Subsection 2(a) hereof is changed to "a

5


majority". Such resignation shall not be deemed a breach of any employment contract between you and the Company.

        (d)    Notice of Termination.    Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

        (e)    Date of Termination, Etc.    "Date of Termination" shall mean:

          (i)  If your employment is terminated for Disability, thirty days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty day period), and

        (ii)  If your employment is terminated pursuant to Subsection (b) or (c) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (b) above shall not be less than thirty days, and in the case of a termination pursuant to Subsection (c) above shall not be less than fifteen nor more than sixty days (thirty days in case of your Voluntary Termination), respectively, from the date such Notice of Termination is given);

provided that if within fifteen days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration decision, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, bonus, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.

        4.    Compensation Upon Termination Following a Change in Control (or if Termination Occurs Prior to a Change in Control in Specific Circumstances).    Following a Change in Control of the Company as defined in Subsection 2(a), then: (1) upon termination of your employment after such Change in Control, or (2) notwithstanding anything in this Agreement to the contrary, if termination of your employment occurred within six months prior to the Change in Control if such termination was by the Company without Cause by reason of the request of the person or persons (or their representatives) who subsequently acquire control of the Company in the Change of Control transaction, you shall be entitled to the following benefits:

        (a)  Deleted.

        (b)  If your employment shall be terminated by reason of your death or Disability, by your voluntary Retirement, by your voluntary termination without Good Reason, or by the Company for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus the Company shall pay all other

6


 

amounts and honor all rights to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no other obligations to you under this Agreement.

        (c)  If your employment shall be terminated (y) after a Change in Control by the Company (other than by reason of your death or Disability, your voluntary Retirement or Voluntary Termination without Good Reason (except for your Voluntary Termination as provided in Subsection 3(c)(ii)), or by the Company for Cause), or (z) after a Change in Control, by you for Good Reason or by your Voluntary Termination as provided in Subsection 3(c)(ii), or (yy) within six months prior to a Change in Control, by the Company under the circumstances described in Section 4.(2) above, then you shall be entitled to the benefits provided below:

          (i)  The Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation or benefit plan of the Company, at the time such payments are due;

        (ii)  In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you a lump sum severance payment (the "Severance Payment") equal to 3.0 times the average of the Annual Compensation (as defined below) payable to you by the Company or any corporation affiliated with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"). Annual Compensation is defined to consist of two components: (a) Your annual salary in effect immediately prior to the Change in Control or in effect as of the Date of Termination, whichever annual salary is higher. Your annual salary for this purpose will be determined without any reduction for deferrals of such salary under any deferred compensation plan (qualified or unqualified) and without any reduction for any salary reductions used for making contributions to any group insurance plan of the Company or its affiliates and also without reduction for any other deductions from salary for any reason; plus (b) The average of your annual bonuses under the Company's Annual Management Bonus Plan, or any substitute or successor plan including the Senior Executive Incentive Plan, for the three highest calendar years, in terms of annual bonus paid to you in such years, during the five calendar years preceding the calendar year in which the Change in Control occurred. Your annual bonuses for this purpose will be determined without any reduction for deferrals under any deferred compensation plan (qualified or unqualified) and without any reduction for salary reductions used for making contributions to any group insurance plan of the Company or its affiliates and also without reduction for any other deductions from bonus for any reason. If you were not employed by the Company or its affiliates for a sufficient period of time to receive annual bonuses during each of the five calendar years before the Change in Control occurred, then the average bonus will be measured using the three highest calendar years, in terms of annual bonus paid to you, in all the consecutive calendar years immediately preceding the date the Change in Control occurred. If you were not eligible for three years of bonuses paid during the calendar years immediately preceding the date the Change in Control occurred, then the average bonus will be the average of the annual bonuses that were paid to you during such time under such Plan. If you were not eligible for any bonus during such time because of not being employed by the Company for a sufficient period of time to qualify for a previous bonus payment, then Annual Compensation will only consist of the salary component as provided above and will not include a bonus component.

        (iii)  The Company shall also pay to you a pro rata amount of target bonus (the bonus amount for your grade level assuming 100 bonus points are earned) as shown on the matrix for the Annual Management Bonus Plan (or any successor plan) attributable to the bonus plan year which contains your Date of Termination, regardless of whether or not any bonus is

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determined to be actually earned for such year, provided that the target bonus for calculating this pro rata payment will not be less than the target bonus under such Plan for the Plan year that contains the day immediately prior to the Change in Control (which target bonus will be the one that applies to your grade level at that time) regardless of whether or not any bonus was payable for such year. The pro-rata amount will be based on the percentage of days of your employment in the calendar year of the Date of Termination. For example, if the Date of Termination is October 1 in a year with 365 days, with October 1 counted as the last day of employment for a total of 274 days of employment that year, then the pro-rata amount will be 75.06849% of target bonus (274 days  365 days). It is understood this target bonus will be based on the Annual Management Bonus Plan target and not the target for the Senior Executive Incentive Plan even if such Plan applies to you. In addition, the Company shall pay to you the amounts of any approved compensation or awards payable to you or due to you under any incentive compensation plan of the Company including, without limitation, the Company's Restricted Stock Plan, Stock Option Plan and Executive Stock Incentive Plan (the "Option Plans") and Annual Management Bonus Plan (or any substitute or successor plan including the Senior Executive Incentive Plan) and under any agreements with you in connection therewith, and shall make any other payments and take any other actions and honor such rights you may have accrued under such plans and agreements including any rights you may have to payments after the Date of Termination, which will include the payment to you of any bonus earned during the bonus year fully completed prior to the Date of Termination if such Date of Termination occurs prior to the payment date for such bonus, it being understood, however, that the pro-rata payment provided for in the first sentence of this paragraph 4(c)(iii) is in lieu of any bonus earned for the bonus plan year during which occurred the Date of Termination.

        (iv)  At the election of the Company, in lieu of shares of common stock of the Company or any securities of a successor company which shall have replaced such common stock ("Company Shares") issuable upon exercise of outstanding and unexercised options (whether or not they are fully exercisable or "vested"), if any, granted to you under the Option Plans including options granted under the plan of any successor company that replaced or assumed the options under said Option Plans ("Options") (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (y) the excess of the higher of the closing price of Company Shares as reported on the New York Stock Exchange on the Date of Termination or the preceding business day if such Date is not a business day (or, if such Shares are not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in Company Shares is highest) or the highest per share price (including cash, securities and any other consideration) for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option held by you (whether or not then fully exercisable or "vested"), times (z) the number of Company Shares covered by each such option (referred to herein as "Company Cash Out Election"). The Company may exercise the Company Cash Out Election as to all or part of your Options. Whether the Company Cash Out Election is exercised and to what extent will be decided by the Company in its discretion before a termination of your employment that entitles you to the benefits under this Subsection (c). The Company will have no obligation to exercise the Company Cash Out Election. The Company Cash Out Election will not apply to Options you exercised before your termination or that were already cashed out in connection with the Change in Control. To the extent the Company Cash Out Election is not exercised as to any of your Options that are outstanding at the time of a termination which entitles you to the benefits under this Subsection (c), such Options will become 100% vested upon such termination (if not already vested) and fully exercisable and you will have the right to exercise such Options at any time

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prior to midnight on the date of such termination (or prior to such other time as the terms of the Option may allow) or prior to such extended date as may be authorized in the discretion of the Board or the Human Resources Committee.

        (v)  The Company shall also pay to you all reasonable legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder).

        (vi)  In the event that you become entitled to the payments, benefits or other rights (the "Severance Payments") provided under paragraphs (ii), (iii), and (iv), above (and Subsection (d) below), and if any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to you at the time specified in paragraph (vii), below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you (such net amount to be the amount remaining after deducting any Excise Tax on the Severance Payments and any federal, state and local income tax and Excise Tax payable on the payment provided for by this paragraph), shall be equal to the amount of the Severance Payments after deducting normal and ordinary taxes but not deducting (a) the Excise Tax and (b) any federal, state and local income tax and Excise tax payable on the payment provided for by this paragraph. For example, if the Severance Payments are $1,000,000 and if you are subject to the Excise Tax, then the Gross-Up Payment will be such that you will retain an amount of $1,000,000 less only any normal and ordinary taxes on such amount. (The Excise Tax and federal, state and local taxes and any Excise Tax on the payment provided by this paragraph will not be deemed normal and ordinary taxes). For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax, the following will apply:

        (A)  Any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;

        (B)  The amount of the Severance Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (y) the total amount of the Severance Payments or (z) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (A), above); and

        (C)  The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with proposed, temporary or final regulations under Sections 280G(d)(3) and (4) of the Code or, in the absence of such regulations, in accordance with the principles of Section 280G(d)(3) and

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(4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay Federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the amount of Excise Tax attributable to Severance Payments is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment then, subject to applicable law, appropriate adjustments will be made with respect to the payments hereunder.

      (vii)  The payments provided for in paragraphs (ii), (iii), (iv) and (vi) above, shall be made as soon as practicable but not later than the thirtieth day following the Date of Termination (or following the date of the Change in Control if your employment is terminated under the circumstances described in Section 4.(2) above).

        (d)  If your employment shall be terminated (y) after a Change in Control, by the Company (other than by reason of your death, your Disability, your voluntary Retirement or Voluntary Termination without Good Reason (except for your Voluntary Termination as provided in Subsection 3(c)(ii)) or by the Company for Cause), or (z) after a Change in Control by you voluntarily for Good Reason or by your Voluntary Termination as provided in Subsection 3(c)(ii), or (yy) by the Company within six months prior to a Change in Control under the circumstances described in Section 4.(2) hereof, then for a twenty-four month period after such termination, the Company shall arrange to provide you with life, accident and health insurance benefits substantially similar to those which you are receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this Subsection 4(d) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four month period following your termination, and any such benefits actually received by you shall be reported to the Company.

        (e)  In exchange for the payments and benefits provided in paragraphs (ii), (iii), (iv) (v) and (vi) of Subsection 4(c) above and in Subsection 4(d) above, you expressly agree that, for a period of two years from the Date of Termination, you:

          (i)  will not, directly or indirectly, engage in any activity, including development activity, whether as an employee, consultant, director, investor, contractor, or otherwise, in the casino business (or any hotel or resort that operates a casino business) in the United States, Canada or Mexico, except with the prior specific approval of the Company. You acknowledge that these restrictions are reasonable as to both time and geographic scope as the Company competes with all gaming establishments in these areas;

        (ii)  will not, directly or indirectly, induce, persuade or attempt to induce or persuade, any salary grade 20 or higher employee of the Company, its subsidiaries or affiliates, to leave or abandon employment with the Company, its subsidiaries or its affiliates, for any reason whatsoever (other than your personal secretary and/or assistants); and

        (iii)  will not communicate with employees, customers, or suppliers of the company, or its it subsidiaries or affiliates or any principals thereof, or any person or organization in any manner whatsoever that is detrimental to the interest of the Company, its subsidiaries and affiliates. You further agree not to make statements to the press or general public with respect to the Company or its subsidiaries or affiliates that are detrimental to the company, its subsidiaries, affiliates or employees without the express written prior authorization of the Company, and the Company agrees that it will not make statements to the press or general public that are detrimental to you without your express prior written authorization.

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Notwithstanding the foregoing, you shall not be prohibited at the expiration of the non-competition period from pursuing business interests which may conflict with the interests of the Company.

It is further agreed:

          (i)  If, in any action before any court, agency or arbitration tribunal, legally empowered to enforce the covenants in this Subsection (e), any term, restriction, covenant, or promise contained therein is found to be unreasonable and, accordingly, unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency;

        (ii)  Should any court, agency or arbitration tribunal legally empowered to enforce the covenants contained in this Subsection (e) find that you have breached the terms, restrictions, covenants or promises herein (except if it has been modified to make it enforceable): (x) the Company will not be obligated to make the payments and benefits provided in paragraphs (ii), (iii), (iv), (v) and (vi) of Subsection (c) above and in Subsection 4(d) above, and (y) you will reimburse to the Company any such payments and benefits received by you, as well as any reasonable costs and attorneys fees to secure such repayments. In addition, the Company shall be entitled to seek to enforce any such covenants, including obtaining monetary damages, specific performance and injunctive relief.

        (f)    Confidentiality

          (i)  Your position with the Company will or has resulted in your exposure and access to confidential and proprietary information which you did not have access to prior to holding the position, which information is of great value to the Company and the disclosure of which by you, directly or indirectly, would be irreparably injurious and detrimental to the Company. During your employment and without limitation thereafter, you agree to use your best efforts and to observe the utmost diligence to guard and protect all confidential or proprietary information relating to the Company from disclosure to the third parties. You shall not any time during and after the end of full time active employment, make available, either directly or indirectly, to any competitor or potential competitor of the Company or any of its subsidiaries, or their affiliates or divulge, disclose, communicate to any corporation or other business entity in any manner whatsoever, any confidential or proprietary information covered or contemplated by this Subsection (f), unless expressly authorized to do so by the Company in writing. Notwithstanding the above, you may provide such Confidential Information if ordered by a federal or state court or any governmental authority or pursuant to a subpoena. In such case, you will notify the Company at least five (5) days prior to providing such information, and the nature of the information required to provide.

        (ii)  For the purpose of this Agreement, "Confidential Information" shall mean all information of the Company, its subsidiaries and affiliates, relating to or useful in connection with the business of the Company, its subsidiaries and affiliates, whether or not a "trade secret" within the meaning of applicable law, which at the time of your initial employment is not generally known to the general public and which has been or is from time to time disclosed to or developed by you as a result of your employment with the Company. Confidential Information includes, but is not limited to, the Company's product development and marketing programs, data, future plans, formulas, food and beverage procedures, recipes, finances, financial management systems, player identification systems (Total Rewards), pricing systems, client and customer lists, organizational charts, salary and benefit programs, training programs, computer software, business records, files, drawings, prints, prototyping models, letters, notes, notebooks, reports, and copies thereof, whether prepared by you or others, and any other information which you are told or reasonably ought to know the Company regards as confidential.

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        (iii)  You agree that upon termination of your employment for any reason whatsoever, you shall promptly deliver to the Company all Confidential Information, including but not limited to, documents, reports, correspondences, computer printouts, work papers, files, computer lists, telephone and address books, rolodex cards, computer tapes, disks, and any and all records in your possession (and all copies thereof) containing any such Confidential Information created in whole or in part by you within the scope of your employment, even if the items do not contain Confidential Information.

        (iv)  You may also have signed a non-disclosure or confidentiality agreement. Such an agreement shall also remain in full force and effect, provided that, in the event of any conflict between any such agreement(s) and this Agreement, this Agreement shall control.

        (v)  This Subsection (f) will survive your termination of employment for any reason.

        (g)  You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise (except as specifically provided in this Section 4 and this Subsection 4(g) will not limit or affect any remedies of the Company for your violation of Subsection 4(e) above or Subsection 4(f) above).

        (h)  In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under any benefit plan of the Company in which you participate to the extent such benefits are not paid under this Agreement.

        (i)    Notwithstanding any provision in this Agreement to the contrary, this Severance Agreement shall not replace or supersede Paragraph 7.2 of your Employment Agreement with the Company and the provisions of such Paragraph 7.2 shall survive any replacement by this Severance Agreement of your Employment Agreement.

        5.    Successors; Binding Agreement.    

        (a)  The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment voluntarily for Good Reason following a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

        (b)  This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

        6.    Notices.    For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered

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or mailed by United States registered or certified mail, return receipt requested, postage prepaid, by FAX if available, or by overnight courier service, addressed as follows:

        To the Company:

General Counsel
Harrah's Entertainment, Inc.
One Harrah's Court
Las Vegas, NV 89119
FAX: 702-407-6418

        To you:

Addressed to your name at your office address (or FAX number) with the Company or its affiliates (or any successor thereto) at the time the notice is sent and your home address at that time; and if you are not employed by the Company at the time of the notice, your home address as shown on the records of the Company or its affiliates (or any successor thereto) on the date of the notice.

To such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

        7.    Miscellaneous.    No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement.

        8.    Validity.    The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

        9.    Counterparts.    This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

        10.    Arbitration.    Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Las Vegas, Nevada in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

        11.    Similar Provisions in Other Agreement.    The Severance Payment under this Agreement supersedes and replaces any previous severance agreement and any other severance payment to which you may be entitled under any previous agreement between you and the Company or its affiliates.

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        If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our binding agreement on this subject.

 

 

Very truly yours,


 


 


HARRAH'S ENTERTAINMENT, INC.
  


 


 


By:


/s/  STEPHEN H. BRAMMELL      


Stephen H. Brammell
Senior Vice President


Agreed:
  


 


 


 


/s/  GARY W. LOVEMAN      


Gary W. Loveman


 


 


 

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