Contents:

Employment Agreement - WALLACE R. BARR

Change of Control Agreement - WALLACE R. BARR

Letter of Understanding among Caesars Entertainment, Inc., Harrah's Entertainment, Inc., and Wallace R. Barr
 


EMPLOYMENT AGREEMENT

        AGREEMENT by and between PARK PLACE ENTERTAINMENT CORPORATION, a Delaware corporation (the "Company"), and WALLACE R. BARR (the "Executive"), dated as of November 19, 2002.

        WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to employ the Executive as the President and Chief Executive Officer of the Company, and the Executive desires to serve in that capacity;

        NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1.    Employment Period.    The Company shall employ the Executive, and the Executive shall serve the Company, on the terms and conditions set forth in this Agreement, for the period beginning on the date of this Agreement and ending on March 31, 2006 (the "Employment Period"). The Employment Period shall automatically renew beginning on April 1, 2006, for periods of one year unless one party gives written notice to the other at least 60 days prior to the end of any one-year renewal period, that the Agreement shall not be further extended. Otherwise, the Agreement may be terminated as specifically provided below.

        Other than as provided in Section 3(h)(iv) below, this Agreement supercedes in its entirety that certain Executive Employment Agreement ("Prior Agreement") by and between Executive and the Company dated November 1, 2001.

2.    Position and Duties.

        (a)  During the Employment Period, the Executive shall be employed as the President and Chief Executive Officer of the Company and, when applicable, the Company shall recommend that the Executive be reelected as a member of the Board. In his executive capacities, the Executive shall report to the Board as appropriate to the duties assigned by the Board. During the Employment Period, the Executive shall have such reasonable and customary powers as are generally associated with the positions of President and Chief Executive Officer.

        (b)  During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such attention and time during normal business hours to the business and affairs of the Company to the extent necessary to discharge the responsibilities assigned to the Executive under this Agreement and Executive shall use reasonable efforts to carry out such responsibilities faithfully and efficiently. It shall not be considered a violation of the foregoing for the Executive to (A) serve on corporate, civic or charitable boards or committees (excluding those which could create a conflict of interest), (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement.

3.    Compensation.

        (a)  Base Salary.

        1)    During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary") of $1,000,000, payable in accordance with the regular payroll practices of the Company; provided, however, that the portion of such Annual Base Salary during any taxable year of the Company which, when added to any otherwise deductible compensation and benefits paid or provided to the Executive by the Company during such taxable year, would not be deductible by the Company in the taxable year such Annual Base Salary is paid or accrued because of the applicable limitations under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), shall be deferred and paid to the Executive, in a lump sum, on that date (the "Deferral Date") which is 30 days after the earlier of (i) the last day of the Company's


taxable year in which the Executive ceases to be a "covered employee" within the meaning of Section 162(m)(3) of the Code, or (ii) the date upon which the Company's deduction with respect to all deferred Annual Base Salary shall no longer be subject to limitation under Section 162(m) of the Code or any successor section thereto. During the Employment Period, the Annual Base Salary shall be reviewed for possible increase at least annually but shall not be reduced after any such increase. The term "Annual Base Salary" shall thereafter refer to the Annual Base Salary as so increased.

        2)    Any amounts of Annual Base Salary deferred as provided above (plus any Annual Bonus, as defined below, deferred pursuant to Section 3(b)) shall be credited, from the date it would otherwise have been paid to the date the deferred amounts are paid, with interest at a floating rate equal to the rate which Morgan Guaranty announces from time to time as its prime lending rate, as in effect from time to time, compounded quarterly, and such accrued interest shall be paid to the Executive on the Deferral Date (said deferred Annual Base Salary and Annual Bonus plus interest collectively referred to as the "Deferred Compensation").

        3)    The Deferred Compensation shall be paid on the Deferral Date by wire transfer to an account designated by the Executive prior to the Deferral Date without setoff or offset for any claim whatsoever against the Executive or any of his affiliates.

        (b)  Annual Bonus.    In addition to the Annual Base Salary, the Executive shall be eligible to receive, for each fiscal year or portion of a fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") (either pursuant to the Company's annual incentive plan or otherwise). The target amount of any Annual Bonus shall be set at 100% of Annual Base Salary depending upon Company and individual performance and shall be subject to the discretion of the Board. The Executive will be eligible for additional special bonus awards if and when determined by the Board in its sole discretion. At the Executive's election, the Annual Bonus may be deferred, in whole or in part, on the same basis as it if it were deferred Annual Base Salary under Section 3(a) above and paid to the Executive on the Deferral Date.

        (c)  Other Benefits.    During the Employment Period; (i) the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs of the Company to at least the same extent as other senior executives of the Company; (ii) the Executive and/or the Executive's family, as the case may be, shall be eligible for participation, and shall receive all benefits under, all welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life insurance, group life insurance, accidental death and travel accident insurance plans and programs) to at least the same extent as other senior executives of the Company; and (iii) the Executive shall be entitled to, and the Company shall provide the Executive with, the use of an appropriate automobile of the Executive's choosing and payment of related expenses.

                So long as Executive is employed hereunder, the Company shall maintain in full force and effect a policy of term insurance on the life of Executive in the amount of $2,200,000. Executive shall promptly advise the Company of the designated beneficiary or beneficiaries of such policy. Upon termination of Executive's employment, to the extent permitted under the policy, Executive shall have the right to transfer such policy to his own name or the name of a beneficiary thereof, provided Executive shall pay all premiums for such policy as shall accrue thereafter.

        (d)  Expenses.    During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in carrying out all the Executive's duties under this Agreement, provided that the Executive complies with the generally applicable policies, practices and procedures of the Company for submission of expense reports, receipts, or similar documentation of such expenses.

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        (e)  Fringe Benefits and Air Travel.    During the Employment Period, the Executive shall be entitled to fringe benefits and perquisites in accordance with the most favorable plans, practices, programs and policies of the Company as in effect at the time with respect to other senior executives of the Company, including, without limitation, first-class travel accommodations on all commercial carriers for travel related to the business of the Company. The Executive shall also be entitled to unrestricted, but not exclusive, use of the Company's aircraft (leased or owned); provided, however, that if the Executive uses the Company's aircraft for his personal purposes, he shall pay to the Company the cost of such usage, as determined in accordance with the Company's cost determination methodology applied to the Company's senior executives with respect to their personal use of the Company's aircraft.

        (f)    Office and Support Services.    During the Employment Period, the Executive shall be entitled to office space, and to secretarial and other support services, at least equal to the most favorable of such as provided with respect to other senior executives of the Company. Without limiting the generality of the foregoing, the Executive shall at all times have a personal secretary and a personal assistant of his choosing.

        (g)  Vacation.    During the Employment Period, the Executive shall be entitled to four weeks of paid vacation annually.

        (h)  Stock Options and Stock Retention Units:

        (i)    The Executive shall be granted non-statutory stock options (the "Incentive Options") under the Company's Stock Incentive Plan (the "Stock Plan") covering 1,450,000 shares of the Company's common stock within sixty (60) days of the date of this Agreement. The exercise price of the shares subject to the Incentive Option shall be equal to the closing price of the Company's common shares on the New York Stock Exchange on the date granted. The Incentive Options shall be exercisable for ten years after grant except as otherwise specifically provided in this Agreement. The Incentive Options shall vest and become exercisable on a cumulative basis according to the following schedule if the Executive continues in the employment of the Company through the applicable vesting date(s):

        (1)  25% on the first anniversary of the grant date.

        (2)  50% on the second anniversary of the grant date.

        (3)  75% on the third anniversary of the grant date.

        (4)  100% on the fourth anniversary of the grant date.

        The Executive shall be granted 635,000 Stock Retention Units, pursuant to the Company's Supplemental Retention Plan dated November 1, 2001 within sixty (60) days of the date of this Agreement. The Stock retention Units shall vest and become exercisable on a cumulative basis according to the following schedule if the Executive continues in the employment of the Company through the applicable vesting dates:

        (1)  20% on the first anniversary of the grant date.

        (2)  40% on the second anniversary of the grant date.

        (3)  70% on the third anniversary of the grant date.

        (4)  100% on the fourth anniversary of the grant date.

        Notwithstanding the foregoing paragraphs, all shares subject to the Incentive Options and the Stock Retention Units shall vest and become exercisable upon the occurrence of any of the following events (each of (A), (B), (C) and (D) below a "Triggering Event"):

        (A)  termination of the Executive's employment by the Company other than for Cause, as defined below;

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        (B)  termination of the Executive's employment because of death or disability;

        (C)  termination of the Executive's employment by the Executive for Good Reason, as defined below; or

        (D)  termination of the Employment Period by the Executive or the Company pursuant to Section 1 of this Agreement after March 31, 2006.

        (ii)  If a Triggering Event occurs, any portion of the Incentive Options and the Stock Retention Units that have become vested on or before the date of such Event (including without limitation, any portion that becomes exercisable due to such Triggering Event and the Incentive Options) shall remain exercisable for the balance of their term.

        (iii)  The Executive may assign the right to exercise the Incentive Options and the Stock Retention Units to his spouse, children, grandchildren or parents of a recipient, to trusts for the benefit of the Executive's immediate family, to a family partnership or limited liability company designated by the Executive in which the Executive's family members are the only partners or shareholders or to an entity exempt from federal income tax under Section 501(C)(3) of the Code.

        (iv)  All Incentive Options and Stock Retention Units granted pursuant to the Prior Agreement shall continue to be governed by the Company's Stock Plan and the Supplemental Retention Plan.

        (v)  All Incentive Options and Stock Retention Units shall be, subject to the terms of the Stock Plan and the Supplemental Retention Plan in all respects not described herein but only to the extent not inconsistent with the terms of this Agreement, to the extent not inconsistent with the provisions of this Section 3(h).

        (i)    Temporary Living and Moving Expenses.    Executive acknowledges and agrees that he shall perform his duties hereunder at the corporate headquarters of the Company in Las Vegas, NV and at the Company's east coast office located in Atlantic City, NJ, and such other locations as may be required by the nature of Executive's responsibilities. It is understood that Executive maintains his primary residence in Linwood, NJ and it is agreed that he shall not be required to relocate his primary residence to Las Vegas, NV or any other location. The Company shall provide temporary housing for the Executive in a suitable residence in the vicinity of its offices. If the Executive decides, in his sole discretion, to relocate his residence to Las Vegas, Nevada, the Company shall reimburse Executive for moving and home seeking and buying expenses incurred by Executive in accordance with its relocation policy for senior level executives, including at least all brokerage commissions, transfer taxes and closing costs incurred in purchasing a new residence and/or selling the Executive's current residence. The Company shall also pay Executive a tax equivalency bonus in an amount such that all federal, state and local income taxes (calculated at the highest marginal rate) which may be due by reason of any such expenses and the tax equivalency bonus being included in Executive's taxable income will not reduce the net amount of reimbursement that Executive is to receive hereunder.

        (j)    Supplemental Retirement Benefit Joint and Survivor Annuity Benefit.    Subject to the terms and conditions set forth herein, the Executive shall be entitled to a supplemental retirement benefit (the "Supplemental Benefit"), in the form of a 100% joint and survivor annuity, which shall provide the Executive and his spouse with a lifetime annual benefit, commencing on the latest of (x) April 1, 2006, (y) the date the Executive elects in writing on or before April 1, 2005, and (z) the date of the Executive's termination from the employment of the Company, (the "Distribution Date") equal to 3% of the Executive's total cash compensation (Annual Base Salary and Annual Bonus, without regard to the effect of any deferrals as provided above) for each year of the Executive's service to the Company through December 31, 2005. The Executive shall vest in such Supplemental Benefit in equal increments on December 31 of each year, beginning December 31, 2003 and be fully vested on December 31, 2005, provided that the Executive is employed by the Company on each such December 31; and provided, further, that, (i) after the occurrence of a Change of Control, as defined below, and as further

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consideration for the Executive's undertaking not to breach the terms of the covenants contained in Section 8 below, and (ii) in the event of the involuntary or Good Reason termination of the Executive's employment from the Company, including on account of death or disability, the Executive shall be fully vested in and have a nonforfeitable right to the Supplemental Benefit.

4.    Termination of Employment.

        (a)  Death or Disability.    The Executive's employment and the Employment Period shall terminate automatically upon the Executive's death during the Employment Period. The Company shall be entitled to terminate the Executive's employment because of the Executive's Disability during the Employment Period. "Disability" means that (i) the Executive has been unable, for a period of 180 consecutive business days, to perform the Executive's duties under this Agreement, as a result of physical or mental illness or injury, and (ii) a physician selected by the Company or its insurers, and acceptable to the Executive or the Executive's legal representative, has determined that the Executive's incapacity is total and permanent. The Executive agrees to reasonably cooperate with the Company in order to obtain the physician's evaluation of the Executive. A termination of the Executive's employment by the Company for Disability shall be communicated to the Executive by written notice ("Notice of Termination for Disability"), stating the date, time and place of a meeting of the Board called and held specifically for the purpose of considering the Executive's termination for Disability, that takes place not less than five and not more than 25 business days after the Executive receives the Notice of Termination for Disability.

        The Executive shall be given an opportunity, together with counsel, to be heard at such special Board meeting. The Executive's termination for Disability shall be effective, if confirmed at the meeting, 30 days after the adoption of a resolution at such special Board meeting, stating that the Executive's employment shall be terminated because of Disability (the "Disability Effective Date"), unless the Executive returns to full-time performance of the Executive's duties, as determined by the Board, before the Disability Effective Date.

        (b)  By the Company.

          (i)  The Company may terminate the Executive's employment during the Employment Period for Cause or without Cause. Subject to clause (ii) below, "Cause" means:

        A)  the willful and continued failure of the Executive substantially to perform the Executive's duties under this Agreement (other than as a result of physical or mental illness or injury), after the Board delivers to the Executive a written demand for substantial performance that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties;

        B)    illegal conduct or gross misconduct by the Executive, in either case that is willful and results in material and demonstrable damage to the business or reputation of the Company; or

        C)    a material breach of the covenants or representations contained in Section 8.

        (ii)  A termination of the Executive's employment for Cause shall be effected in accordance with the following procedures. The Company shall give the Executive written notice ("Notice of Termination for Cause") of its intention to terminate the Executive's employment for Cause, setting forth in reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provision(s) of this Agreement on which it relies and stating the date, time and place of the Special Board Meeting. The "Special Board Meeting" means a meeting of the Board called and held specifically for the purpose of considering the Executive's termination for Cause that takes place not less than 30 and not more than 60 days after the Executive receives the Notice of Termination for Cause. The Executive shall be given an opportunity, together with counsel, to be heard at the Special Board Meeting. The Executive's termination for Cause shall be effective when and if a resolution is duly adopted at the Special Board Meeting, stating that, in the

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good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination for Cause, such conduct constitutes Cause under this Agreement and such conduct has not ceased or been cured between the date the Executive receives the Notice of Termination for Cause and the date of the meeting.

        (c)  Good Reason.

          (i)  The Executive may terminate employment for Good Reason or without Good Reason. "Good Reason" means:

        A)  the assignment to the Executive of any duties inconsistent in any material respect (in any respect, whether or not material, following a Change of Control) with paragraph (a) or, if applicable, (b) of Section 2 of this Agreement, or any other action by the Company that results in a material diminution in the Executive's position or authority, duty, titles, responsibilities, or reporting requirements other than an isolated, insubstantial and inadvertent action that is not taken in bad faith and is remedied by the Company within 30 days after receipt of written notice thereof from the Executive;

        B)    any material failure (any failure, whether or not material, following a Change of Control, as defined below) by the Company to comply with any provision of Section 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure that is not taken in bad faith and is remedied by the Company within 30 days after receipt of written notice thereof from the Executive;

        C)    any purported termination of the Executive's employment by the Company for a reason or in a manner not expressly permitted by this Agreement;

        D)  any relocation of the Executive's principal business location to a location other than Las Vegas, Nevada, Atlantic City, New Jersey (within 50 miles) or the New York Metropolitan area (within 50 miles of Manhattan);

        E)    the Executive is not elected or reelected, as appropriate to the Board; or

        F)    any failure by the Company to comply with and satisfy paragraph (c) of Section 9 of this Agreement.

        In addition, following a Change of Control, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Change of Control shall be deemed to be a termination for Good Reason for all purposes of this Agreement.

        (ii)  A termination of employment by the Executive for Good Reason shall be effectuated by giving the Company written notice ("Notice of Termination for Good Reason") of the termination, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which the Executive relies. A termination of employment by the Executive for Good Reason shall be effective on the fifth business day following the date when the Notice of Termination for Good Reason is given, unless the notice sets forth a later date (which date shall in no event be later than 30 days after the notice is given).

        (iii)  A termination of the Executive's employment by the Executive without Good Reason shall be effected by giving the Company at least 10 business days' advance written notice of the termination.

        (d)  Date of Termination.    The "Date of Termination" means the date of the Executive's death, the Disability Effective Date, the date the termination of the Executive's employment by the Company for Cause or without Cause or by the Executive for Good Reason or without Good Reason, as the case may be, is effective.

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5.    Obligations of the Company upon Termination.

        (a)  By the Company, Other Than for Cause, Death or Disability, or By the Executive for Good Reason.    If, during the Employment Period, the Company terminates the Executive's employment, other than for Cause or Disability or by reason of the Executive's death, or the Executive terminates employment for Good Reason, the Company shall pay the Executive in a single lump sum an amount equal to his Annual Base Salary under Section 3(a) hereof for the greater of (i) two years or (ii) the balance of the then Employment Period as well as the Annual Bonus for the same period determined at the target rate under the Company's then annual incentive plan. Fifty percent of such amounts shall be consideration for the Executive's undertaking not to breach the terms of the covenants contained in Section 8 below. The Company shall also pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the Executive's accrued but unpaid cash compensation (the "Accrued Obligations"), which shall include but not be limited to, (1) any portion of the Executive's Annual Base Salary through the Date of Termination that has not yet been paid and an amount representing the Annual Bonus for the year of termination based on target, and multiplying that amount by a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 (the "Annual Bonus Amount"), (2) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) that has not yet been paid, (3) any accrued but unpaid vacation pay, and (4) similar unpaid items that have accrued or to which the Executive has become entitled as of the Date of Termination, including declared but unpaid bonuses and unreimbursed employee business expenses, and the Company shall also pay all brokerage commissions, transfer taxes and closing costs incurred in selling the Executive's then current Las Vegas, Nevada residence if Executive has relocated his residence to Las Vegas, Nevada as set fort in Section 3(i) and if the Executive is unable to sell such property within 90 days of placing it on the market, for its appraised fair market value as determined in accordance with the Company's normal policy for senior level executives; provided, however, that in no event shall such purchase be at a price less than the Executive's documented cost for such residence including all renovations and improvements; and provided further, that the Company's obligation to make any payments under this Section 5(a) to the extent any such payment shall not have accrued as of the day before the Date of Termination shall also be conditioned upon the Executive's execution, and non-revocation, of a written release, substantially in the form attached hereto as Annex 1 (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive's employment by the Company (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit), or the termination thereof.

        Notwithstanding the foregoing, in the event the Company terminates the Executive's employment for Disability, the Executive shall be entitled to a salary continuation benefit equal to 60% of his Annual Base Salary through age 65, reduced by the value of any Annual Base Salary continuation received (whether in lump sum or periodically) under the Company's Long Term Disability Plan, any other applicable insurance or group benefit provided by the Company, and the amounts specified as Annual Base Salary in the first sentence of the prior paragraph.

        Notwithstanding the foregoing, in the event payment is due to the Executive under this Section following a Change of Control, then conditioned upon the Executive's execution, and non-revocation, of the Release and for Executive not breaching the terms of the covenants contained in Section 8(a) and (b) below, the Executive, in lieu of the amounts specified in the first sentence of the first paragraph of this Section other than the residence expenditures, shall receive in a lump sum in cash within 30 days after the Date of Termination equal to 2.99 multiplied by the sum of the Executive's Annual Base Salary and Annual Bonus for the year in which the Change of Control occurs or the immediately preceding year, whichever produces the higher sum. Fifty percent of such amount shall be consideration for the Executive's undertaking not to breach the terms of the covenants contained in

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Sections 8(a) and (b) below. In addition, the Executive shall also be entitled to, in the case of compensation previously deferred by the Executive, a lump sum equal to all amounts previously defined (together with any accrued interest thereon) and not yet paid by the Company, any accrued vacation pay not yet paid by the Company. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3 of this Agreement if the Employee's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its subsidiaries during the 90-day period immediately preceding the date on which the Change of Control occurs or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees and their families and for purposes of eligibility for retiree benefits pursuant to such plans, practices, programs and policies, the Employee shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period.

        (b)  Death or Disability.    If the Executive's employment is terminated by reason of the Executive's death or Disability during the Employment Period, the Company shall (i) pay the Annual Base Salary to the Executive or the Executive's estate or legal representative, as applicable, for the remaining portion of the Employment Period (determined without regard to the fact that the Employment Period otherwise terminates under this Agreement) and (ii) pay the Accrued Obligations to the Executive or the Executive's estate or legal representative, as applicable, in a lump sum in cash within 30 days after the Date of Termination. In such event, the Company shall have no further obligations under this Agreement other than for any entitlements under the terms of any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit.

        (c)  Cause: Other than for Good Reason.    If the Executive's employment is terminated by the Company for Cause during the Employment Period, the Company shall pay the Executive the Annual Base Salary through the Date of Termination, the amount of any compensation previously defined by the Executive (together with any accrued interest, or earnings thereon), in each case to the extent not yet paid and the amount of any earned but unpaid Annual Bonuses and vacation pay, and the Company shall have no further obligations under this Agreement other than for any entitlements under the terms of any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit. If the Executive voluntarily terminates employment during the Employment Period, other than for Good Reason, the Company shall pay the Accrued Obligations to the Executive in a lump sum in cash within 30 days of the Date of Termination, and the Company shall have no further obligations under this Agreement other than for any entitlements under the terms of any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit.

        (d)  Other.    If the Executive's employment is terminated (i) by the Company (1) other than for Cause, Death or Disability, or, (2) following a Change in Control; or (ii) the Executive terminates employment for Good Cause; or (iii) the Employment Period in Section 1 terminates at a date subsequent to March 31, 2006 for any reason, then the Executive and/or Executive's family, as the case may be, shall be entitled to lifetime health, medical, prescription and dental benefits. The type, kind and nature of such benefits shall be to at least the same extent as those available to other senior executives of the Company.

6.    Non-exclusivity of Rights.    Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify, nor shall anything in this Agreement limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Vested benefits and other amounts that the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any

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contract or agreement with, the Company or any of its affiliated companies on or after the Date of Termination shall be payable in accordance with such plan, policy, practice, program, contract or agreement, as the case may be, except as explicitly modified by this Agreement.

7.    No Mitigation.    In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of whether the Executive obtains other employment.

8.    Confidential Information; Non-solicitation; Non-competition; Licensing; No Conflict.    In exchange for the Company agreeing to accelerated vesting and exercisability of the Incentive Options and Stock Retention Units upon any of the Triggering Events and the payment to the Executive of a portion of the Annual Base Salary and Annual Bonus in the event of Executive's termination of employment, the Executive agrees as follows:

        (a)  The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and programs, computer programs and software and financial information relating to the Company or any of its affiliated companies and their respective businesses that the Executive obtains during the Executive's employment by the Company or any of its affiliated companies and that is not public knowledge (other than as a result of the Executive's violation of this paragraph (a) of Section 8) ("Confidential Information"). The Executive shall not communicate, divulge or disseminate Confidential Information at any time during or after the Executive's employment with the Company, except in the good faith performance of his duties hereunder, with the prior written consent of the Company or as otherwise required by law or legal process. In no event shall an asserted violation of the provisions of this paragraph (a) of Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement except as provided in paragraph (e) below.

        (b)  For the period for which the Executive is receiving payments from the Company after the expiration or termination of the Executive's employment with the Company, if any, but ignoring the fact that payment may be made in a single lump sum, the Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive's name to be used in connection with, any business or enterprise which is engaged in any business that involves any gaming venture, Indian gaming, river boat gaming or other gaming, casino or similar business within any foreign country or any state of the United States or any metropolitan area involving multiple jurisdictions) in which there is located any gaming facility owned, managed or under development to be owned or managed by the Company, determined as of the date Executive ceases to be employed hereunder. In addition, the Executive agrees that he will not, for a period of two years after the expiration or termination of the Executive's employment with the Company, without the prior written consent of the Company, whether directly or indirectly, employ, whether as an employee, officer, director, agent, consultant or independent contractor, or solicit the employment of, any managerial or higher level person who is or at any time during the previous twelve months was an employee, representative, officer or director of the Company or any of its subsidiaries.

        (c)  The Executive represents that he is or will become within an appropriate time, licensed by the gaming authorities in Nevada and New Jersey and knows of no reason why a license necessary for him to perform his duties hereunder would not be granted to or maintained by him by those authorities in the future, except that any failure to qualify or disqualification or suspension resulting from Executive's corporate conduct, rather than individual conduct, shall not constitute cause hereunder.

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        (d)  Executive represents to the Company that neither his continuation of employment hereunder nor the performance of his duties hereunder conflicts with any contractual commitment on his part to any third party or violates or interferes with any rights of any third party.

        (e)  The Executive acknowledges and agrees that the conditions contained in this Section are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, that the Company would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Company should the Executive breach any of those provisions. Executive represents and acknowledges that (i) the Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, and, (ii) that the Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with the Executive's counsel. The Executive further acknowledges and agrees that a breach of any of the restrictions in this Section cannot be adequately compensated by monetary damages. The Company agrees to give the Executive written notice of any action taken by the Executive that it believes in good faith to constitute a violation of the Executive's undertakings under Sections 8(a) and (b) and to give the Executive at least 60 days thereafter to cease any such action which, if he complies with such request, will preclude any further action or any recovery by the Company. In the event that the Executive fails to do so, the Executive agrees that the Executive's right to the Section 5 Lump Sum shall be forfeited (but only to the extent of those portions not previously received) and the Executive's right to exercise the Incentive Options and Stock Retention Units (but not to any shares already obtained upon a prior exercise of the Incentive Options and Stock Retention Units or any cash received upon a prior cashless exercise of the Incentive Options, if available) shall cease. In addition, in the case of any violation of the provisions of this Section 8, the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section (with appropriate credit for the amounts forfeited by the Executive and the non-exercisability of the Incentive Options and Stock Retention Units), which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of this Section should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Section, including without limitation any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the United States District Court for the District of Nevada, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Las Vegas, Nevada, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which the Executive may have to the laying of venue of any such suit, action or proceeding in any such court. The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 13 hereof.

9.    Successors.

        (a)  This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

        (b)  This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

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        (c)  The Company shall 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 expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise.

10.    Change of Control.

        (a)  For the purpose of this Agreement, a "Change of Control" shall mean;

          (i)  The acquisition by any person, entity or "group" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this purpose, (A) the Company or its subsidiaries or (B) any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company, of beneficial ownership, (within the meaning of Rule 13d-3 promulgated under the "Exchange Act) of 20% or more of either the then outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or

        (ii)  Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14-a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or

        (iii)  Approval by the stockholders of the Company of (A) a reorganization, merger, consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or (B) a liquidation or dissolution of the Company or (C) the sale of all or substantially all of the assets of the Company.

        (b)  Upon a Change of Control, the right to purchase all shares subject to the Incentive Options and Stock Retention Units shall vest and become exercisable; provided, however, that such immediate vesting and exercisability shall be conditioned upon the Executive not breaching the terms of the covenants contained in Section 8(a) and 8(b).

        (c)  Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Code, the Executive shall be paid an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any excise tax imposed under Section 4999 of the Code, and any federal, state and local income and employment tax and excise tax imposed upon the Gross-Up Payment shall be equal to the Payment. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the

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highest marginal rate of taxation in the state and locality of the Executive's residence (or, if greater, the state and locality in which the Executive is required to file a nonresident income tax return with respect to the Payment) on the Termination Date, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

        (d)  All determinations to be made under this Section 10 shall be made by the Company's independent public accountant immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. Within five days after the Accounting Firm's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement.

        (e)  The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

          (i)  give the Company any information reasonably requested by the Company relating to such claim,

        (ii)  take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

        (iii)  cooperate with the Company in good faith in order to effectively contest such claim, and

        (iv)  permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax, including interest and penalties, with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 10, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearing and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a termination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, however, that if the Company directs the Executive to pay such claim and sue for a refund the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax, income tax or employment tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to

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issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

        (f)    If, after the receipt by the Executive of an amount advanced by the Company pursuant to this Section, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of subsection (d) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to this Section, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

        (g)  All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or wilful misconduct of the Accounting Firm.

        (h)  Following a Change of Control and for a period of not less than three years after the Date of Termination, the Executive be entitled to indemnification and, to the extent available on commercially reasonable terms, insurance coverage therefore, with respect to the various liabilities as to which the Executive has been customarily indemnified prior to the Change of Control.

11.    Arbitration.    The Company and the Executive mutually consent to the resolution by arbitration, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, to be held in Las Vegas, Nevada, of all claims or controversies arising out of the Executive's employment (or its termination) that the Company may have against the Executive or that the Executive may have against the Company or against its officers, directors, shareholders, employees or agents in their capacity as such other than a claim which is primarily for an injunction or other equitable relief. The Company shall pay the fees and costs of the arbitrator and all other costs in connection with any arbitration, including reasonable legal fee and expenses.

12.    Legal Fee.    The Company agrees to pay all legal fees incurred by the Executive in connection with the negotiation and preparation of this Agreement.

13.    Miscellaneous.

        (a)  This Agreement shall be governed by, and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

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        (b)  All notices and other communications under this Agreement shall be in writing and shall be given by hand to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:
222 Arlington Avenue
Linwood, New Jersey 08221

If to the Company:
3930 Howard Hughes Parkway
Las Vegas. NY 89109
Attention: General Counsel

or to such other address as either party furnishes to the other in writing in accordance with this paragraph (b) of Section 13. Notices and communications shall be effective when actually received by the addressee.

        (c)  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

        (d)  Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

        (e)  The Executive's or the Company's failure to insist upon strict compliance with any provision of, or to assert any right under, this Agreement (including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Paragraph (c) or Section 5 of this Agreement) shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.

        (f)    This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.

14.    The respective rights and obligations of the parties hereunder shall survive any termination of the Executive's employment or arrangements to the extent necessary to the intended preservation of such rights and obligations, including, but not by way of limitation, those rights and obligations as set forth in Sections 3, 5, 6, and 10.

15.    The Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death by giving the Company written notice thereof. In the event of the Executive's death or a judicial determination of his incompetence, references in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

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        IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

PARK PLACE ENTERTAINMENT CORPORATION

 

 


By


 


/s/  STEPHEN F. BOLLENBACH      


Stephen F. Bollenbach


 


/s/  WALLACE R. BARR      


Wallace R. Barr

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CHANGE OF CONTROL AGREEMENT

        AGREEMENT by and between Park Place Entertainment Corporation, a Delaware corporation (the "Company"), and Wallace R. Barr (the "Employee"), dated as of the 1st day of November, 2001.

        The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Employee, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage the Employee's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Employee with compensation arrangements upon a Change of Control which provide the Employee with individual financial security and which are competitive with those of other corporations and, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

        NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

        1.    Certain Definitions.    

        (a)  The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated prior to the date on which a Change of Control occurs, and it is reasonably demonstrated by Employee that such termination (1) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination.

        (b)  The "Change of Control Period" is the period commencing on the date hereof and ending on the termination or expiration of the Employment Agreement.

        (c) The "Employment Agreement" shall mean the Employment Agreement by and between the Company and the Employee on the Effective Date.

        2.    Change of Control.    For the purpose of this Agreement, a "Change of Control" shall mean:

        (a)  An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") (a "Control Purchase"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company; (2) any acquisition by the Company, (3) Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (4) any acquisition by any corporation pursuant

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to a transaction which complies with clauses (1), (2) and (3) of subsection (c) of this definition; or (5) any acquisition by Barron Hilton or the Conrad N. Hilton Fund; or

        (b)  A change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to the effective date of this Agreement, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

        (c)  The consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the outstanding Company common stock and outstanding Company voting securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the outstanding Company common stock and outstanding Company voting securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or

        (d)  A complete liquidation or dissolution of the Company.

        3.    Employment Period.    If there is a Change of Control, the Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the expiration of the Term (as set forth in the Employment Agreement) (the "Employment Period").

        4.    Terms of Employment.    

        (a)  Position and Duties.

          (i)  During the Employment Period, (A) the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at

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least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) subject to the provisions of the Employment Agreement, the Employee's services shall be performed at the location where the Employee was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location.

        (ii)  During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Employee hereunder and as provided in the Employment Agreement, to use the Employee's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Employee to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, (C) manage personal investments or (D) participate as a member or consultant to professional associations and to otherwise participate in the activities of associations in such manner as has been historically conducted by the Employee, so long as such activities do not significantly interfere with the performance of the Employee's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Employee prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Employee's responsibilities to the Company.

        (b)  Compensation.

          (i)  Base Salary.    During the Employment Period, the Employee shall receive an annual base salary ("Base Salary") at a monthly rate at least equal to the highest monthly base salary paid or payable to the Employee by the Company during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other key employees of the Company and its subsidiaries. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Employee under this Agreement. Base Salary shall not be reduced after any such increase.

        (ii)  Annual Bonus.    In addition to Base Salary, the Employee shall be awarded, for each fiscal year during the Employment Period, an annual bonus (an "Annual Bonus") (either pursuant to the incentive compensation plan of the Company or otherwise) in cash at least equal to the average bonus payable to the Employee from the Company and its subsidiaries in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs.

        (iii)  Incentive, Savings and Retirement Plans.    In addition to Base Salary and Annual Bonus payable as hereinabove provided, the Employee shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs applicable to other key employees of the Company and its subsidiaries (including the Company's employee benefit plans, in each case providing benefits which are the economic equivalent to those in effect on the Effective Date or as

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subsequently amended for employees generally). Such plans, practices, policies and programs, in the aggregate, shall provide the Employee with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided by the Company for the Employee under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as provided at any time thereafter with respect to other key employees of the Company and its subsidiaries.

        (iv)  Welfare Benefit Plans.    During the Employment Period and as extended as provided in the Employment Agreement, the Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its subsidiaries (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs), at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries.

        (v)  Expenses.    During the Employment Period, the Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable policies, practices and procedures of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries.

        (vi)  Fringe Benefits.    During the Employment Period, the Employee shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries.

        (c)  Office and Support Staff.    During the Employment Period, the Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Employee by the Company and its subsidiaries at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as provided at any time thereafter with respect to other similarly situated key employees of the Company and its subsidiaries.

        (d)  Vacation.    During the Employment Period, the Employee shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its subsidiaries as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries.

        (e)  Indemnification.    During the term of the Employee's employment with the Company and for a period of not less than three years (or, if applicable, such longer period as the Company then provides coverage for its executives generally) after the Date of Termination (as defined below) the Employee shall be entitled to indemnification and, to the extent available on commercially reasonable terms, insurance coverage therefor, with respect to the

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various liabilities as to which the Employee has been customarily indemnified during the Change of Control Period.

        5.    Termination.    

        (a)  Death or Disability.    This Agreement shall terminate automatically upon the Employee's death. If the Company determines in good faith that the Disability of the Employee has occurred (pursuant to the definition of "Disability" set forth below), it may give to the Employee written notice of its intention to terminate the Employee's employment. In such event, the Employee's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Employee (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Employee shall not have returned to full-time performance of the Employee's duties. For purposes of this Agreement, "Disability" means disability which, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be withheld unreasonably).

        (b)  Cause.    During the Employment Period, the Company may terminate the Employee's employment for Cause (as provided in the Employment Agreement).

        (c)  Good Reason.    During the Employment Period, the Employee's employment may be terminated by the Employee for Good Reason. For purposes of this Agreement, "Good Reason" means:

          (i)  the assignment to the Employee of any duties inconsistent in any respect with the Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement or the Employment Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee;

        (ii)  any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee;

        (iii)  the Company's requiring the Employee to be based at any office or location other than that described in Section 4(a)(i)(B) hereof, except for travel reasonably required in the performance of the Employee's responsibilities;

        (iv)  any purported termination by the Company of the Employee's employment otherwise than as expressly permitted by this Agreement or the Employment Agreement; or

        (v)  any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.

        For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Employee shall be conclusive.

        Anything in this Agreement to the contrary notwithstanding, a termination of employment by the Employee for any reason during the 30-day period immediately following the first anniversary of the

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Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.

        (d)  Notice of Termination.    During the Employment Period, any termination by the Company for Cause or by the Employee for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice). The failure by the Employee to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder.

        (e)  Date of Termination.    During the Employment Period, "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that (i) if the Employee's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Employee of such termination and (ii) if the Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be.

        6.    Obligations of the Company upon Termination.    

        (a)  Death.    If the Employee's employment is terminated during the Employment Period by reason of the Employee's death, this Agreement shall terminate without further obligations to the Employee's legal representatives under this Agreement, other than those obligations specifically provided for in this Agreement or the Employment Agreement (which shall be paid in accordance with their terms) and obligations accrued or earned and vested (if applicable) by the Employee as of the Date of Termination, which shall include for this purpose (i) the Employee's full Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time from the start of the 90-day period preceding the Effective Date through the Date of Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus paid to the Employee for the last full fiscal year and a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (iii) any compensation previously deferred by the Employee (together with any accrued interest thereon) and not yet paid by the Company and any accrued vacation pay not yet paid by the Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations shall be paid to the Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. In the event that the benefits hereunder are greater than those provided in the Employment Agreement in the event of death, the benefits hereunder shall be paid superceding the provisions of the Employment Agreement, otherwise the provisions of the Employment Agreement shall govern. Anything in this Agreement to the contrary notwithstanding, the Employee's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its subsidiaries to surviving families of employees of the Company and such subsidiaries under such plans, programs, practices and policies relating to family death benefits, if any, in accordance with the most favorable plans, programs, practices and policies of the Company and its subsidiaries in effect

6


at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect on the date of the Employee's death with respect to the Employee.

        (b)  Disability.    If the Employee's employment is terminated by reason of the Employee's Disability, this Agreement shall terminate without further obligations to the Employee, other than those obligations accrued or earned and vested (if applicable) by the Employee as of the Date of Termination, including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination. In the event that benefits payable hereunder in the event of termination due to Employee's Disability are greater than those payable under the Employment Agreement, the provisions of this Agreement shall govern and supercede the provisions of the Employment Agreement; otherwise, the provisions of the Employment Agreement shall govern. Anything in this Agreement to the contrary notwithstanding, the Employee shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its subsidiaries to disabled employees and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, in accordance with the most favorable plans, programs, practices and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect at any time thereafter prior to the Disability Effective Date with respect to the Employee.

        (c)  Cause; Other than for Good Reason. If the Employee's employment shall be terminated for Cause, this Agreement shall terminate without further obligations to the Employee. If the Employee terminates employment other than for Good Reason, this Agreement shall terminate without further obligations to the Employee, other than those obligations accrued or earned and vested (if applicable) by the Employee through the Date of Termination, including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination.

        (d)  Good Reason; Other Than for Cause or Disability. If, during the Employment Period, the Company shall terminate the Employee's employment other than for Cause, Disability, or death (including termination without cause as provided in the Employment Agreement), or if the Employee shall terminate his employment for Good Reason and the Employee executes, and does not revoke, a written release, substantially in the form then used by the Company for its executives generally, of any and all claims against the Company and all related parties with respect to all matters arising out of the Employee's employment by the Company (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which the Employee participated and under which the Employee has accrued a benefit), or the termination thereof,

        (i)    the Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

        (A)  to the extent not theretofore paid, the Employee's Highest Base Salary through the Date of Termination; and

        (B)  the product of (x) the Annual Bonus paid to the Employee for the last full fiscal year (if any) ending during the Employment Period or, if higher, the Annual Bonus paid to the Employee for the last full fiscal year prior to the Effective Date (as applicable, the "Recent Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365; and

7


 

        (C)  the product of (x) 1.49 and (y) the sum of (i) the Highest Base Salary and (ii) the Recent Bonus; and

        (D)  in exchange for the Employee's obligations under Section 10 of this Agreement, the product of (x) 1.5 and (y) the sum of (i) the Highest Base Salary and (ii) the Recent Bonus; and

        (E)  in the case of compensation previously deferred by the Employee, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and

        (F)  the Employee shall be entitled to receive a lump-sum cash payment equal to the amount which the Company would have credited to the Employees Company Contribution Account under the Company's Executive Deferred Compensation Plan (the "Deferred Compensation Plan") during the remainder of the Employment Period if during the remainder of the Employment Period the Employee had deferred under the Deferred Compensation Plan the average amount of deferral the Employee had elected with respect to the Employee's Compensation for the 12 months immediately preceding the Date of Termination and if the Employee's annual Compensation during the Employment Period were equal to the sum of the Employee's Highest Base Salary and Recent Bonus.

        (ii)  for the remainder of the Employment Period, or such longer period as the Employment Agreement or any plan, program, practice or policy may provide, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Sections 4(b)(iv) and (vi) of this Agreement if the Employee's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its subsidiaries during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter prior to termination with respect to the Employee and for purposes of eligibility for retiree benefits pursuant to such plans, practices, programs and policies, the Employee shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period.

        7.    Non-exclusivity of Rights. During and after the Employment Period, nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company or any of its subsidiaries and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any stock option or other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or for which the Employee is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its subsidiaries at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program.

        8.    Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others except as specifically provided herein. In no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement and it is agreed that the Company shall not have any right of set-off for amounts due hereunder should Employee obtain such other employment. The Company and Employee mutually consent to the resolution by arbitration, in

8


 

accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, to be held in Atlantic City, New Jersey, of all claims or controversies arising out of this Agreement other than a claim for equitable relief or seeking an injunction. The Company shall pay the fees and costs of the arbitrator and all other costs in connection with any arbitration, including reasonable legal fees and expenses, unless the arbitrator shall determine that such claim or controversy was without reasonable basis or that payment of such legal fees and expenses would otherwise be unfair to the Company.

        9.    Certain Additional Payments by the Company.

        (a)  Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Code, the Employee shall be paid an additional amount (the "Gross-Up Payment") such that the net amount retained by the Employee after deduction of any excise tax imposed under Section 4999 of the Code, and any federal, state and local income and employment tax and excise tax imposed upon the Gross-Up Payment shall be equal to the Payment. For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment 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 the Employee's residence (or, if greater, the state and locality in which the Employee is required to file a nonresident income tax return with respect to the Payment) on the Termination Date, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

        (b)  All determinations to be made under this Section 9 shall be made by the Company's independent public accountant immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. Within five days after the Accounting Firm's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement.

        (c)  The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment (taking into account any amounts theretofore already paid by the Company). Such notification shall be given as soon as practicable but no later than ten business days after the Employee knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the thirty-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:

        (i)    give the Company any information reasonably requested by the Company relating to such claim;

        (ii)  take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;

9


 

        (iii)  cooperate with the Company in good faith in order to effectively contest such claim; and

        (iv)  permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax, including interest and penalties, with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, however, that if the Company directs the Employee to pay such claim and sue for a refund the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax, income tax or employment tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

        (d)  If, after the receipt by the Employee of an amount advanced by the Company pursuant to this Section, the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of subsection (b)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this Section, a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

        (e)  All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.

        10.  Confidential Information; Non-solicitation; Non-competition. In exchange for the Company agreeing to the payment to the Employee provided under subsection (d)(i)(D) of Section 6, the Employee agrees as follows:

        (a)  The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data, customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and programs, computer

10


programs and software and financial information relating to the Company or any of its affiliated companies and their respective businesses that the Employee obtains during the Employee's employment by the Company or any of its affiliated companies and that is not public knowledge (other than as a result of the Employee's violation of this subsection (a) of Section 10) ("Confidential Information"). The Employee shall not communicate, divulge or disseminate Confidential Information at any time during or after the Employee's employment with the Company, except in the good faith performance of his duties hereunder, with the prior written consent of the Company or as otherwise required by law or legal process. In no event shall an asserted violation of the provisions of this paragraph (a) of Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Employee under this Agreement.

        (b)  For a period of one year after the expiration or termination of the Employee's employment with the Company, the Employee will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise which is engaged in any gaming venture, Indian gaming, river boat gaming or other gaming, casino or similar business within any foreign country or any state of the United States (or any metropolitan area involving multiple jurisdictions) in which there is located any gaming facility owned, managed or under development to be owned or managed by the Company at the Date of Termination or expiration of the Employment Period. In addition, the Employee agrees that he will not, for a period of two years after the expiration or termination of the Employee's employment with the Company, without the prior written consent of the Company, whether directly or indirectly, employ, whether as an employee, officer, director, agent, consultant or independent contractor, or solicit the employment of, any managerial or higher level person who is or at any time during the previous twelve months was an employee, representative, officer or director of the Company or any of its subsidiaries.

        (c)  The Employee acknowledges and agrees that the restrictions contained in this Section are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, that the Company would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Company should the Employee breach any of those provisions. Employee represents and acknowledges that (i) the Employee has been advised by the Company to consult Employee's own legal counsel in respect of this Agreement, and (ii) that the Employee has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with the Employee's counsel. The Employee further acknowledges and agrees that a breach of any of the restrictions in this Section cannot be adequately compensated by monetary damages. The Employee agrees that the Employee's right to the payments specified above in consideration for his undertakings under this Section shall be forfeited and Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits in the event of any violation of this Section, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled; provided, however, that the foregoing remedies shall be conditioned upon the Company providing the Employee with at least 30 days written notice of its good faith belief that a violation of the Employee's undertakings hereunder has occurred and Employee failing to cease any such prohibited activity within 30 days after such written notice is given. In the event that any of the provisions of this Section should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the

11


 

jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Section, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the United States District Court for the District of New Jersey, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Atlantic City, New Jersey, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which the Employee may have to the laying of venue of any such suit, action or proceeding in any such court. The Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 12 hereof.

        11.  Successors.

        (a)  This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives.

        (b)  This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

        (c)  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 assume expressly 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. 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.

        12.  Miscellaneous.

        (a)  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

        (b)  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employee:

Wallace R. Barr
222 Arlington Avenue
Linwood, NJ 08221

If to the Company:

Park Place Entertainment Corporation
3930 Howard Hughes Parkway
Las Vegas, NV 89109
Attention: General Counsel

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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

        (c)  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

        (d)  The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        (e)  The Employee's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof.

        (f)    The Employee and the Company acknowledge that, except as may be otherwise provided in the Employment Agreement, the employment of the Employee by the Company is "at will", and, prior to the Effective Date, may be terminated by either the Employee or the Company at any time. Upon a termination of the Employee's employment or upon the Employee's ceasing to be an officer of the Company, in each case, prior to the Effective Date, there shall be no further rights under this Agreement.

        (g)  The Company represents and warrants that: (i) it is fully authorized and empowered to enter into this Agreement; (ii) its Board of Directors has approved this Agreement; and (iii) the performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm or organization.

        (h)  This Agreement may be executed in two or more counterparts and by facsimile, all of which when taken together shall constitute a signed agreement.

        IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

EMPLOYEE:

 

 


Wallace R. Barr


 


 


PARK PLACE ENTERTAINMENT CORPORATION


 


 


By:


 

 


 

 

Name: Thomas E. Gallagher
Title: President and CEO

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                            LETTER OF UNDERSTANDING
 
         This Letter of Understanding among Caesars Entertainment, Inc. (the
"Company"), Harrah's Entertainment, Inc. ("Harrah's") and Wallace R. Barr (the
"Executive" and, together with the Company and Harrah's, the "Parties") is
entered into as of October 6, 2004. The Parties acknowledge that the Executive
is party to an Employment Agreement with the Company, dated November 19, 2002
(the "Employment Agreement"), and a Change of Control Agreement with the
Company, dated November 1, 2001 (the "Change of Control Agreement"). Except as
otherwise defined herein, any capitalized terms used herein shall have the
meaning ascribed to such term in the Employment Agreement.
 
         The Parties desire to set forth their understanding regarding the
severance payments and benefits to which the Executive shall be entitled if,
during the Employment Period and on or following consummation of the merger
contemplated by the Merger Agreement by and among the Company, Harrah's
Operating Company, Inc. and Harrah's, dated as of July 14, 2004, (i) the
Executive terminates his employment for Good Reason or (ii) the Company
terminates his employment other than for death, Disability or Cause (a
termination described in clause (i) or (ii) above being referred to as a
"Qualifying Termination").
 
         The Parties hereby agree as follows:
 
         1. Upon a Qualifying Termination, the Executive shall not be entitled
to receive any payments or benefits under the Change of Control Agreement.
 
         2. Upon a Qualifying Termination, the Executive shall be entitled to
receive from the Company or its successor:
 
                  (a) in full satisfaction of the Executive's rights to
         severance payable pursuant to the first sentence of the third
         paragraph of Section 5(a) of the Employment Agreement, a lump-sum cash
         payment equal to the sum of (1) the product of 2.99 times the
         Executive's current Annual Base Salary plus (2) the product of 2.99
         times the greater of the Executive's annual bonus in respect of fiscal
         year 2003 or fiscal year 2004, such lump-sum payment to be made not
         later than 30 days following the date of the Qualifying Termination;
         provided, that such payment shall be conditioned upon the Executive's
         (i) execution and non-revocation of the Release, (ii) compliance with
         Section 8(a) of the Employment Agreement and (iii) compliance with
         Paragraph 3 below;
 
                  (b) a lump-sum cash payment in respect of all Accrued
         Obligations, such lump-sum payment to be made not later than 30 days
         following the date of the Qualifying Termination;
 
                  (c) payment in respect of brokerage commissions, transfer
         taxes and closing costs incurred in selling the Executive's current
         Las Vegas, Nevada residence, and, if the Executive is unable to sell
         such property within 90 days of placing it on the market, payment
         equal to its appraised fair market value (as determined in accordance
         with the Company's normal policy for senior level executives) but
         which in no event shall be at a price less than the Executive's
         documented cost for such residence including all renovations and
         improvements;
 
                  (d) continued benefits referred to in the fourth sentence of
         the third paragraph of Section 5(a) of the Employment Agreement;
 
                  (e) lifetime benefits for himself and his family, as
         described in Section 5(d) of the Employment Agreement;
 
                  (f) the indemnification benefits and insurance coverage set
         forth in Section 10(h) of the Employment Agreement for a period of not
         less than three years following the date of the Qualifying
         Termination;
 
                  (g) if necessary, payments pursuant to Section 10(c) of the
         Employment Agreement; and
 
                  (h) a fully vested and nonforfeitable Supplemental Benefit,
         as described in Section 3(j) of the Employment Agreement.
 
         3. In lieu of the restrictions set forth in Section 8(b) of the
Employment Agreement, for a period of one year following the date of the
Qualifying Termination, except as set forth in the immediately succeeding
sentence, the Executive shall not be associated with Ameristar Casinos, Inc.,
Argosy Gaming Company, Pinnacle Entertainment, Inc., Penn National Gaming,
Inc., or Isle of Capri Casinos, Inc., LLC or any affiliate of the foregoing
companies, or any company that in the future operates any of the assets of the
foregoing companies (the "Restricted Competitors"). Notwithstanding the
foregoing, the Executive may (i) own up to 1% of the stock of any Restricted
Competitor that is a publicly-traded corporation; (ii) serve on the board of
directors of any Restricted Competitor; or (iii) serve as a part-time
consultant to any Restricted Competitor. The Executive shall not be restricted
from associating with any entity that is not a Restricted Competitor.
 
         4. Except as set forth in Paragraph 5 below, nothing herein shall be
construed as effecting or limiting in any way the compensation or benefits to
which the Executive may become entitled under the Employment Agreement upon the
occurrence of a Change of Control or any compensation or benefits to which he
may become entitled under the Employment Agreement in connection with any
termination of his employment that does not constitute a Qualifying
Termination.
 
         5. All outstanding equity awards held by the Executive immediately
prior to a Change of Control shall vest, become exercisable and/or become free
of restrictions upon such Change of Control; provided, however, that
notwithstanding anything to the contrary in the Employment Agreement, for
purposes of applying this Paragraph 5 to the stock options and restricted stock
units granted to the Executive on September 23, 2004 (the "2004 Grant"), the
"Change of Control" definition in the Change of Control Agreement shall apply.
In all other respects, the 2004 Grant shall be governed by the Employment
Agreement and applicable award agreements.
 
<PAGE>
 
         IN WITNESS WHEREOF, the Parties have duly executed this Letter of
Understanding effective as of the date first referred to above.
 
 
 
 
                                 Caesars Entertainment, Inc.
 
 
 
 
                                 By: /s/ Steven J. Bell
                                    -------------------------------------
                                    Name: Steve Bell
                                    Title: Exec. V.P. Human Resources &
                                           Admin., Authorized Signator
                                           for Caesars Entertainment
 
 
                                 Harrah's Entertainment, Inc.
 
 
 
                                 By: /s/ Jerry Boone
                                    -------------------------------------
                                    Name: Jerry Boone
                                    Title: Sr. Vice President Human Resources
                                           Harrah's Entertainment, Inc.
 
 
 
                                 WALLACE R. BARR
 
 
 
                                     /s/ Wallace R. Barr
                                 ----------------------------------------
 
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