SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

 

 

 

 

March 14, 2006

Dear Fellow Stockholders:

We cordially invite you to attend our 2006 Annual Meeting of Stockholders, which will be held on Tuesday, April 25, 2006, at 11:00 a.m. in the Scintas Showroom, Rio All-Suite Hotel & Casino, 3700 West Flamingo Road, Las Vegas, Nevada.

At the meeting, we will elect three directors, vote on our Amended and Restated 2004 Equity Incentive Award Plan, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2006.

Whether or not you expect to attend the meeting, please promptly complete, sign, date and return the enclosed proxy card, or grant your proxy electronically over the Internet or by telephone, so that your shares will be represented at the meeting. If you do attend, you may vote in person even if you have sent in your proxy card or voted electronically or by telephone.

We look forward to seeing you at the meeting.

 

HARRAH’S ENTERTAINMENT, INC.
NOTICE OF MEETING

The 2006 Annual Meeting of Stockholders of Harrah’s Entertainment, Inc. will be held in the Scintas Showroom, Rio All-Suite Hotel & Casino, 3700 West Flamingo Road, Las Vegas, Nevada on Tuesday, April 25, 2006, at 11:00 a.m. for the following purposes:

1.                To elect three Class I directors for three-year terms;

2.                To approve our Amended and Restated 2004 Equity Incentive Award Plan;

3.                To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2006 calendar year; and

4.                To transact any other business that properly comes before the meeting or any adjournments or postponements of the meeting.

Stockholders of record owning shares of our common stock at the close of business on February 27, 2006, are entitled to vote at the meeting. A complete list of these stockholders will be available for ten days prior to the meeting at the Company’s executive offices at One Harrah’s Court, Las Vegas, Nevada 89119.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSALS 1, 2, AND 3.

 

March 14, 2006

PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED ADDRESSED ENVELOPE, OR GRANT YOUR PROXY ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE.

TABLE OF CONTENTS

 

PROXY STATEMENT

Introduction

Our Board of Directors is soliciting proxies for the 2006 Annual Meeting of Stockholders. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.

In this Proxy Statement:

·        “we” and “the Company” mean Harrah’s Entertainment, Inc. Our executive offices are located at One Harrah’s Court, Las Vegas, Nevada 89119; and

·        “Annual Meeting” means the 2006 Annual Meeting of Stockholders to be held on April 25, 2006, at 11:00 a.m. in the Scintas Showroom, Rio All-Suite Hotel & Casino, 3700 West Flamingo Road, Las Vegas, Nevada, and any adjournment or postponement thereof.

A copy of our 2005 Annual Report to Stockholders, this Proxy Statement and accompanying proxy card are being mailed to our stockholders beginning on or about March 21, 2006.

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QUESTIONS AND ANSWERS

WHAT IS THE PURPOSE OF THE ANNUAL MEETING? At the annual meeting, stockholders will be asked to vote on the following proposals:

1.                To elect three Class I directors for three-year terms;

2.                To approve our Amended and Restated 2004 Equity Incentive Award Plan; and

3.                To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2006 calendar year.

The stockholders also will transact any other business that properly comes before the meeting.

WHO IS ENTITLED TO VOTE? The record date for the meeting is February 27, 2006. Only stockholders of record at the close of business on that date are entitled to vote at and attend the Annual Meeting. The only class of stock that is currently outstanding and that can be voted at the meeting is our common stock. Each outstanding share of common stock is entitled to one vote on all matters that come before the meeting. At the close of business on the record date, there were 183,666,523 shares of our common stock outstanding. You may also have another person attending the meeting represent you by signing a proxy designating that person to act on your behalf.

WHAT IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER? If you are the beneficial owner of shares held in “street name” by a broker, then your broker, as the record holder of the shares, must vote those shares in accordance with your instructions. If you do not give instructions to your broker, then your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. On non-discretionary items, for which you do not give instructions, the shares will be treated as “broker non-votes.” A discretionary item is a proposal that is considered routine under the rules of the New York Stock Exchange. Shares held in street name may be voted by your broker on discretionary items in the absence of voting instructions given by you. Proposals 1 and 3 to be presented at the Annual Meeting are considered routine and therefore may be voted upon by your broker if you do not give instructions for the shares held by your broker. Proposal 2, however, is not considered routine and, therefore, may not be voted on by your broker absent instructions by you.

WHAT IF I HOLD SHARES IN THE COMPANY STOCK FUND OF THE HARRAH’S ENTERTAINMENT, INC. SAVINGS AND RETIREMENT PLAN, THE HORSESHOE GAMING HOLDING CORP. 401(k) PLAN, THE CAESARS ENTERTAINMENT, INC. 401(k) PLAN, OR THE GRAND CASINOS, INC. 401(k) PLAN? If you are a participant in the Company Stock Fund of any of these plans, you have the right to vote the shares in your account. To do this, you must sign and timely return the proxy card you received with this Proxy Statement, or grant your proxy by telephone or over the Internet by following the instructions on the proxy card. Your proxy card or telephone or Internet instructions will be considered your confidential voting instructions, and the plan trustee will direct your vote in the manner you indicate on the proxy card or in your telephone or Internet instructions. In order to do this, the plan trustee will receive overall vote tallies from our proxy tabulator, The Bank of New York, for all participants in the plans. The overall vote tallies will not show how individual participants voted. The trustee will then register the vote tallies with the Inspector of Elections at the Annual Meeting. If a plan participant’s voting instruction is not received by The Bank of New York before the meeting, or if the proxy is revoked by the participant before the meeting, the shares held by that participant will be

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considered unvoted. All unvoted shares in the plan will be voted at the Annual Meeting by the investment committee under the applicable plan or a delegated member of such committee.

HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING? The holders of a majority of the shares of our common stock outstanding on the record date entitled to vote at the meeting must be present, in person or by a valid proxy, for a quorum to be met and for any business to be conducted. Proxies received but marked as abstentions and broker non-votes will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

WHAT IF A QUORUM IS NOT PRESENT AT THE MEETING? If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the Annual Meeting, either with or without a vote of the stockholders. If we propose to have the stockholders vote whether to adjourn the meeting, the people named in the enclosed proxy will vote all shares of our common stock for which they have voting authority in favor of the adjournment. An adjournment will have no effect on the business that may be conducted at the Annual Meeting.

HOW DO I VOTE?

1.                YOU MAY VOTE BY MAIL. If you properly complete and sign the enclosed proxy card and return it in the enclosed envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed either in the United States or Canada.

2.                YOU MAY VOTE BY TELEPHONE. If you are a registered stockholder (if you hold your common stock in your own name), you may submit your voting instructions by telephone by following the instructions printed on the proxy card. If you submit your voting instructions by telephone, you do not have to mail in your proxy card.

3.                YOU MAY VOTE ON THE INTERNET. If you are a registered stockholder (if you hold your common stock in your own name), you may vote on the Internet by following the instructions printed on the proxy card. If you vote on the Internet, you do not have to mail in your proxy card.

If you are a registered stockholder and attend the Annual Meeting, you may deliver your completed proxy card in person or vote in person by ballot at the meeting. If your shares are held in “street name” and you wish to vote at the Annual Meeting, you will need to obtain a proxy form from the institution that holds your shares.

CAN I VOTE BY TELEPHONE OR ON THE INTERNET IF I AM NOT A REGISTERED STOCKHOLDER? If your shares are held in “street name” by a broker or other nominee, you should check the voting form used by that firm to determine whether you will be able to submit your proxy by telephone or on the Internet. Participants in the Company Stock Fund of the Harrah’s Entertainment, Inc. Savings and Retirement Plan, the Horseshoe Gaming Holding Corp. 401(k) Plan, the Caesars Entertainment, Inc. 401(k) Plan, or the Grand Casinos, Inc. 401(k) Plan can submit their proxy by telephone or on the Internet.

CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY? Yes, you may revoke your proxy at any time before it is voted at the Annual Meeting by:

·        signing and returning another proxy card with a later date;

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·        submitting another proxy by telephone or on the Internet (your latest telephone or Internet voting instructions are followed);

·        giving written notice of revocation to the Company’s Secretary prior to or at the Annual Meeting; or

·        voting at the Annual Meeting.

Your attendance at the meeting will not have the effect of revoking your proxy unless you give written notice of revocation to the Corporate Secretary of the Company before the polls are closed on the date of the Annual Meeting. Any written notice revoking a proxy should be sent to our Corporate Secretary at One Harrah’s Court, Las Vegas, Nevada 89119 and must be received before the polls are closed.

WHO WILL COUNT THE VOTES? The votes will be tabulated and certified by our transfer agent, The Bank of New York. A representative of The Bank of New York will serve as the inspector of elections.

HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSALS? Your Board recommends that you vote:

·        FOR election of the three nominees to the Board of Directors;

·        FOR approval of the Company’s Amended and Restated 2004 Equity Incentive Award Plan; and

·        FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2006.

WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED? If you send in a signed proxy but do not give any voting instructions, your shares will be voted FOR all proposals listed on the proxy card.

WILL ANY OTHER BUSINESS BE CONDUCTED AT THE MEETING? Our Board of Directors does not know of any other business that will be presented at the meeting. If any other proposal properly comes up for a vote at the meeting in which a proxy has discretionary authority, the proxy holders will vote your shares in accordance with their best judgment.

WHAT ARE MY VOTING OPTIONS ON EACH PROPOSAL? You have several choices on each of the matters to be voted upon at the Annual Meeting. On the election of directors, by checking the appropriate box on your proxy card, you may: (a) vote for all of the director nominees as a group; (b) withhold authority to vote for all director nominees as a group; or (c) vote for all director nominees as a group except those nominees you identify as directors voting against. On the other matters, by checking the appropriate box, you may: (a) vote “For” the proposal; (b) vote “Against” the proposal; or (c) ”Abstain” from voting on the proposal.

HOW MANY VOTES ARE REQUIRED TO APPROVE THE PROPOSALS? For Proposal 1, pursuant to our bylaws and Delaware law, directors receiving a plurality of the votes represented and entitled to vote at the meeting shall be required. For Proposal 3, pursuant to our bylaws and Delaware law, an affirmative vote of a majority of shares of common stock represented and entitled to vote at the meeting is required to approve this proposal. Abstentions will have no effect on the outcome of these proposals. Broker non-votes will not result from these proposals. For Proposal 2, in accordance with New York Stock Exchange listing requirements, an affirmative vote of the holders of a majority of shares of common stock

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cast on such proposal, in person or by proxy, is required, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of common stock entitled to vote on the proposal. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares, including broker non-votes, count as shares entitled to vote. Thus, the total sum of votes “for,” plus votes “against,” plus abstentions, which is referred to as the “NYSE Votes Cast,” must be greater than 50% of the total outstanding shares of our common stock. Once satisfied, the number of votes “for” the proposal must be greater than 50% of the NYSE Votes Cast. Thus, broker non-votes can make it difficult to satisfy the NYSE Votes Cast requirement, and abstentions have the effect of a vote against this proposal.

HOW WILL ABSTENTIONS BE TREATED? If you abstain from voting on one or more proposals, we will still include your shares for purposes of determining whether a quorum is present. Pursuant to our bylaws, we will not treat abstentions as votes for or against Proposals 1 and 3. However, the NYSE Votes Cast requirement treats abstentions as a vote against Proposal 2.

WHAT HAPPENS IF A NOMINEE FOR DIRECTOR IS UNABLE TO STAND FOR ELECTION? If a nominee is unable to stand for election, our Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.

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BOARD OF DIRECTORS

General Information—Election of Directors

Our Certificate of Incorporation provides for a Board of Directors of not less than three nor more than seventeen directors and authorizes the Board periodically to set the number of directors within that range by a majority vote. The number of director positions currently set by the Board is thirteen. As of our Annual Meeting, our Board will have eleven director positions, as the number of director positions will be reduced by the Board after the retirements of Joe M. Henson and William Barron Hilton.

Our Certificate of Incorporation also divides our Board of Directors into three classes with staggered terms. Each class of directors is elected for a term of three years. Three Class I directors are to be elected at the 2006 Annual Meeting for a three-year term ending in 2009.

Our Board has nominated the following individuals for election to Class I positions with their term in office expiring in 2009: Charles L. Atwood, R. Brad Martin, and Gary G. Michael.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THESE NOMINEES.

In the event that any of these nominees becomes unable or decides not to serve as a director at the time of the Annual Meeting, our Board will either reduce the number of directors to be elected or select a substitute nominee, and the proxy will be voted for the substitute, unless authority has been withheld. We presently have no reason to believe that the nominees listed above will be unable or will decide not to serve if elected, and each nominee has informed us that he or she consents to serve and will serve if elected.

Nominees: Class I, Term to Expire 2009

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The terms of the Company’s four Class II directors expire at the annual meeting of stockholders to be held in 2007, and the terms of the Company’s four Class III directors expire at the annual meeting of stockholders to be held in 2008. Following is information about each Class II and Class III director.

Directors: Class II, Term Expires 2007

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Directors: Class III, Term to Expire 2008

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The terms of Joe M. Henson and William Barron Hilton, both Class I directors, expire at the 2006 Annual Meeting. Messrs. Henson and Hilton are retiring from the Board in accordance with the Board’s policy on retirement and, therefore, are not standing for re-election. Upon their retirements, the number of director positions on the Board will be reduced to eleven.

 

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The Board of Directors and Committees of the Board

The Company has adopted Corporate Governance Guidelines governing the conduct of its Board of Directors. The charters of our Audit Committee, Human Resources Committee and Nominating/Corporate Governance Committee are attached as exhibits to the Guidelines. The Company has approved a Code of Conduct applicable to each director, officer and employee of the Company and has also approved a process by which stockholders may communicate with the Board. The Corporate Governance Guidelines, our Code of Conduct, the process for communicating with the Board of Directors, and the charter for each of these Committees are posted on the Company’s web site at www.harrahs.com under the “Investor Relations” link on our home page. The Company will provide a copy of its Corporate Governance Guidelines, including charters of each of these committees, our Code of Conduct and the process by which stockholders may communicate with our Board , upon receipt of a written request addressed to Harrah’s Entertainment, Inc., Attn: Corporate Secretary, One Harrah’s Court, Las Vegas, Nevada 89119.

Our Board of Directors met five times during 2005. During the year, overall attendance by incumbent directors averaged 93% at Board meetings and 96% at Committee meetings. With the exception of Mr. Martin, all of the members of our Board of Directors attended our 2005 Annual Meeting of Stockholders.

The non-management members of our Board of Directors regularly meet in executive sessions in conjunction with each regularly scheduled meeting of the Board. Mr. Miller has been chosen to preside over all executive sessions of the non-management directors.

A majority of our directors are independent directors. Our Board of Directors determines whether a director is independent through a broad consideration of all relevant facts and circumstances, including an assessment of the materiality of any relationship between the Company and a director not merely from the director’s standpoint, but also that of persons or organizations with which the director has an affiliation. In making its determination, the Board of Directors adheres to the standards of the New York Stock Exchange (“NYSE”) and has adopted and employed the categorical standards described on Annex A in determining whether a relationship is material and, thus, would disqualify a director from being independent. Using these standards, the Board of Directors has affirmatively determined that none of the following directors have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and therefore they each qualify as independent directors: Ms. Alexander and Messrs. Biondi, Bollenbach, Henson, Hilton, Horn, Michael, Miller, Sells and Williams. Messrs. Atwood and Loveman, officers of the Company, have not been determined to be independent. The Board has not determined Mr. Martin to be independent due to a previous landlord/tenant relationship with the Company that ended in all material respects in 2003. However, the Board has determined that Mr. Martin would be independent except for the application of the “look-back” periods included within the NYSE’s corporate governance rules and our categorical standards regarding director independence.

Our Board committees include standing Audit, Human Resources, and Nominating/Corporate Governance committees.

The Audit Committee is comprised of five members, each of whom has been determined to be independent as set forth in our categorical standards, the listing requirements of the NYSE, and the

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rules and regulations of the Securities and Exchange Commission. Additionally, our Board of Directors has determined that each of the members of our Audit Committee is an “audit committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission. The Audit Committee met fifteen times during 2005. The responsibilities of the Audit Committee are outlined in a written charter which is available on our website. We limit the number of public company audit committees on which members of our Audit Committee may serve to four other public company audit committees. Mr. Michael, a member of the Committee, serves on the audit committee of three other public companies. The Board of Directors has determined that such service does not impair his ability to serve as a member of the Company’s Audit Committee.

The Human Resources Committee is comprised of five members, each of whom has been determined to be independent as set forth in our categorical standards and the listing requirements of the NYSE. Each member is a non-employee director pursuant to Section 16b under the Securities Exchange Act of 1934 and an “outside director” pursuant to Section 162(m) of the Internal Revenue Code of 1986. The Human Resources Committee met five times during 2005. This Committee serves as the Company’s compensation committee and has overall responsibility for approving and evaluating the director and officer compensation plans, programs and policies of the Company. It reviews and approves the Chief Executive Officer’s objectives and compensation, and also approves the annual compensation of the Chief Operating Officer, Chief Financial Officer and other executive officers. The Human Resources Committee also administers the Company’s bonus and other incentive compensation plans.

The Nominating/Corporate Governance Committee is comprised of five members, each of whom has been determined to be independent as set forth in our categorical standards and in the listing requirements of the NYSE. The Nominating/Corporate Governance Committee met four times during 2005. It acts as the nominating committee of the Board. It considers and makes recommendations concerning the Board’s size and composition, the number of non-management directors, the qualifications of members and potential nominees for membership, including nominees recommended by stockholders, and membership of committees of the Board. The Nominating/Corporate Governance Committee is also responsible for identifying criteria for Board membership. Such criteria shall ensure that directors are chosen based on perspective, experience, knowledge, and independence of judgment, enabling them to contribute most effectively to the functioning of the Board and the meeting of its responsibilities. Directors will be selected without regard to race, religion, sex, or national origin. Age shall be a consideration in selecting new directors so as to maintain a sound age balance on the Board and so that turnover through retirement at reasonable intervals can be expected. There should be a predominance of business backgrounds, balanced by qualified individuals who can bring additional sets of experiences and perspectives to the Board. Regional balance is desirable, and a high degree of interest and involvement are prime requisites. The Nominating/Governance Committee is also responsible for the development and recommendation to the Board of corporate governance guidelines applicable to the Company and oversight of the annual review of the Board’s performance.

In addition to its standing committees described above, the Board also has an ad hoc Finance Committee that is currently comprised of three members. It met three times during 2005 and is authorized to determine and approve transactions that will allow the Company to incur additional indebtedness within the limits established by the Board of Directors.

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Stockholders who wish to communicate with the Nominating/Corporate Governance Committee concerning potential candidates for our Board of Directors should do so by corresponding with our Corporate Secretary addressed to Harrah’s Entertainment, Inc., Attn: Corporate Secretary, One Harrah’s Court, Las Vegas, Nevada 89119. Any such communication should be made in accordance with our bylaws. Our bylaws provide that any stockholder entitled to vote at the annual meeting may nominate a person for election to the Board by complying with the procedures set forth in Article III, Section 1, of the bylaws. In general, these procedures provide as follows:

·        the notice from a stockholder must be received by the Company between 60 and 90 days before the annual meeting;

·        if the Company has given less than 70 days notice or prior public disclosure of the date of the meeting, the notice from the stockholder must be received by the close of business on the 10th day following the date the Company’s notice for the meeting was mailed or such public disclosure was made, whichever occurs first;

·        the stockholder’s notice must state the proposed nominee’s name, age, business address, residence address, principal occupation, number of shares of common stock of the Company owned, and other information about the person as required under Securities and Exchange Commission rules and regulations for director nominees to be named in a proxy statement;

·        the name, record address and number of shares of common stock of the Company owned by the stockholder recommending the proposed nominee; and

·        the Company may require other information as may be reasonably required to determine the eligibility of the proposed nominee to serve as a director.

A copy of our bylaws is available to a stockholder by sending a written request to our Corporate Secretary. The Nominating/Corporate Governance Committee follows the procedures in our bylaws and accordingly will consider candidates recommended by stockholders who comply with our bylaws. The Committee also considers the current composition of the Board and the criteria and guidelines for Board membership set forth in the Corporate Governance Guidelines and in the charter of the Nominating/Corporate Governance Committee, both of which documents are available on our website. Service on our Board of Directors also requires the receipt of certain regulatory approvals. Proposed nominees recommended by stockholders in accordance with the above procedures, including our bylaw requirements, will receive the same consideration as nominees of the Nominating/Corporate Governance Committee.

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Compensation of Directors

Directors who are not employees of the Company or any of our subsidiaries earn a monthly fee of $14,583.33 plus $1,500 for each non-regularly scheduled committee meeting they attend as a committee member. Committee chairpersons receive an additional monthly retainer as follows: Audit Committee receives $1,666.67, Human Resources Committee receives $833.33, and Nominating/Corporate Governance Committee receives $416.67. Directors are reimbursed for expenses reasonably incurred in connection with their service on the Board.

Pursuant to a director stock program, each director automatically receives 50% of his or her director fees in our common stock in lieu of cash fees. Each director has the right to make an annual election to receive the remaining 50% of his or her director fees in all common stock in lieu of cash fees for the duration of the program.

Grants of our common stock pursuant to the director stock program are made quarterly for an amount of our common stock, based on the market value on the grant date, equal in value to 50% of the fees that the director earned during the previous three-month grant period (or 100% of the fees if the director elected to receive the remaining 50% of fees in our common stock). Shares that are granted cannot be disposed of until at least six months after the date of grant. A director may make an annual election to defer the grant of shares to be made the ensuing fiscal year. Deferred shares are then granted 30 days after the director’s retirement from our Board in a lump sum or in up to ten annual installments, as he or she may elect. In certain circumstances, the grant date of these deferred shares will be not less than six months after the directors retirement from our board. These elections are made prior to each fiscal year. However, a director may request the modification of his or her choice as to a lump sum or installments by following specific procedures required by law. This request is subject to approval of the Human Resources Committee. We have created a trust to assure the payment of benefits pursuant to the directors stock program.

The following table sets forth the compensation provided by the Company to non-employee Directors during 2005:

(1)          From January 1, 2005 through June 30, 2005, the annual retainer for non-employee directors was $120,000. On July 1, 2005, the annual retainer was increased to $175,000.

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(2)          From January 1, 2005 through June 30, 2005, the annual retainer for the Audit Committee chairman was $15,000. On July 1, 2005, the annual retainer for the Audit Committee chairman was increased to $20,000.

(3)          Messrs. Bollenbach and Hilton became members of our board of directors in June 2005.

(4)   Mr. Michael is a member of our Compliance Committee, which oversees our compliance programs for gaming and other laws and regulations we are subject to. For his services on the Compliance Committee, Mr. Michael receives a per meeting fee, currently $1,000 per meeting, and an annual retainer, currently $30,000 per year. In 2005, Mr. Michael received $27,500 for his service on the Compliance Committee, which was paid in cash.

Until May 1, 1996, directors were eligible to participate in another unfunded compensation deferral program, the Executive Deferred Compensation Plan. Four current non-management directors deferred part of their cash fees pursuant to the Executive Deferred Compensation Plan prior to May 1, 1996 and currently have account balances in the Plan. See “Employment Arrangements” for more information about the Executive Deferred Compensation Plan.

Each non-management director is also provided with travel accident insurance of $500,000 while traveling on behalf of the Company. Incumbent non-management directors who served on the Board as of February 21, 2001, are entitled to participate in the Company’s standard group health insurance plans while serving as a director. This program is not available to directors elected or appointed after February 21, 2001. The Company pays the premium cost for this insurance. Each director receiving these benefits incurred taxable income equal to the premium cost of the group insurance.

Non-management directors elected prior to February 21, 2001 received a grant of 1,000 shares of restricted stock vesting in ten annual installments over ten years. Directors who served a full ten years under this program received another ten-year grant of 1,000 shares. Current directors who have these grants are Messrs. Horn, Martin, Miller, and Sells. This program was terminated on February 21, 2001, with respect to further grants to new directors. Non-management directors who were initially elected between February 2001 and January 2004 received a non-qualified stock option grant of 5,000 shares upon being elected or appointed to the Board. Directors serving during that same time period received an annual nonqualified stock option grant of 2,000 shares. These particular stock option programs have been discontinued.

Pursuant to the Company’s 2004 Equity Incentive Award Plan, directors are eligible for grants of equity awards as may be approved by the Human Resources Committee from time to time.

In November 2003, our Board of Directors implemented stock ownership guidelines for its non-management members. Within two years of first being elected, a director is expected to own and maintain a number of shares of the Company’s common stock having a minimum value equal to two times his or her annual retainer. Shares granted to a director for his or her service on the Company’s Board of Directors are included in determining the value of the director’s holdings. Each of our non-management directors was in compliance with these stock ownership guidelines as of December 31, 2005.

Except as provided in the governing plan document and any administrative regulations thereunder governing the options, or unless otherwise approved by the Human Resources Committee, all unvested options granted to a non-management director will be forfeited and returned to the plan when the director leaves the Board.

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Ownership of Harrah’s Entertainment Common Stock

The following table lists the beneficial ownership of our common stock as of January 31, 2006, for all current directors, our five executive officers named in the Summary Compensation Table and all directors and executive officers as a group.

*                    Indicates less than 1%

(a)           Shares listed in the table include shares allocated to accounts under the Harrah’s Entertainment, Inc. Savings and Retirement Plan as of January 31, 2006. The amounts shown also include the following shares that may be acquired within 60 days pursuant to outstanding stock options: Ms. Alexander, 4,500 shares; Mr. Atwood, 132,667 shares; Mr. Biondi, 6,000 shares; Mr. Bollenbach, 0 shares; Mr. Boushy, 135,468 shares; Mr. Brammell, 152,132 shares; Mr. Henson, 4,000 shares; Mr. Hilton, 0 shares; Mr. Horn, 4,000 shares; Mr. Loveman, 1,153,614 shares; Mr. Martin, 4,000 shares; Mr. Michael, 6,500 shares; Mr. Miller, 4,000 shares; Mr. Sells, 4,000 shares; Mr. Williams, 1,500 shares; Mr. Wilmott, 418,521 shares; all directors and executive officers as a group, 2,201,369 shares.

(b)          The amounts shown include the following rights to shares pursuant to our 1996 Non-Management Directors Stock Incentive Plan or our 2004 Equity Incentive Award Plan (including shares that may be acquired within 60 days pursuant to outstanding stock options) and deferred at the election of the directors: Mr. Biondi, 3,669 shares; Mr. Bollenbach, 627 shares; Mr. Henson, 23,124 shares; Mr. Hilton, 1,137 shares; Mr. Horn, 22,545 shares; Mr. Martin, 16,618 shares; Mr. Michael, 4,227 shares; Mr. Sells, 20,892 shares; Mr. Williams, 5,194 shares.

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PROPOSAL TO APPROVE THE COMPANY’S
AMENDED AND RESTATED 2004 EQUITY INCENTIVE AWARD PLAN

General

The Board of Directors of the Company (the “Board”) and the stockholders previously adopted and approved the Harrah’s Entertainment, Inc. 2004 Equity Incentive Award Plan (the “2004 Plan”) for members of the Board, employees and consultants of the Company and its subsidiaries. Upon the recommendation of the Human Resources Committee of the Board, the Board has adopted an amendment and restatement of the 2004 Equity Incentive Award Plan (the “Amended and Restated 2004 Plan”), subject to stockholder approval. The 2004 Plan was amended to:

·        increase by 11,500,000 the number of shares of Common Stock available for grant;

·        permit transfers of awards (other than incentive stock options) to trusts or other entities whose beneficiaries or beneficial owners include the Participant; and

·        allow the Committee to adopt amendments to the Amended and Restated 2004 Plan and any applicable award agreement, or to adopt policies and procedures, or take any other actions that the Committee deems necessary to exempt an award from Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”), as adopted by The American Jobs Creation Act of 2004, or to comply with the requirements of Section 409A of the Code.

The Amended and Restated 2004 Plan will become effective when approved by our stockholders at the 2006 Annual Meeting of Stockholders. The Amended and Restated 2004 Plan is being submitted to our stockholders to allow for performance-based cash and equity compensation that is paid thereunder to be deductible by the Company for federal income tax purposes under Section 162(m) of the Code. Section 162(m) places a $1 million annual limit on the amount of compensation paid to each of the Company’s named executive officers that may be deducted by the Company for federal income tax purposes, generally, unless such compensation constitutes “qualified performance-based compensation,” which is based on the achievement of pre-established performance goals set by a committee of the Board pursuant to an incentive plan that has been approved by our stockholders. Stockholder approval of the Amended and Restated 2004 Plan will constitute stockholder reapproval of the performance criteria in the 2004 Plan (which have not been amended under the Amended and Restated 2004 Plan and which are described below) and will satisfy the stockholder approval requirements of Section 162(m) for five additional years.

If the Amended and Restated 2004 Plan is not approved by our stockholders, the 2004 Plan will continue in full force in accordance with its terms as they were in effect immediately prior to the adoption of the Amended and Restated 2004 Plan, and the Amended and Restated 2004 Plan will not take effect.

The Board believes that the Amended and Restated 2004 Plan will continue to promote the success and enhance the value of the Company by continuing to link the personal interest of participants to those of Company stockholders and by providing participants with an incentive for outstanding performance. The Board believes it is in the best interest of the Company and its stockholders to approve the Amended and Restated 2004 Plan as proposed.

The Amended and Restated 2004 Plan authorizes an additional 11,500,000 shares of Common Stock for awards. As of January 31, 2006, 327,481 shares remained available for new awards under the 2004 Plan, plus any shares that might be returned to the 2004 Plan after such date due to a termination, expiration or lapse of an award issued under the 2004 Plan. As of February 27, 2006, the record date, the closing price of

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the Common Stock on the NYSE was $72.75 per share. The 2004 Plan initially reserved 5,000,000 shares of Common Stock, plus approximately 1,959,960 shares authorized for prior plans.

If the stockholders approve the Amended and Restated 2004 Plan, the Company will amend the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan to not allow the issuance of any award after the date of such amendment. As of January 31, 2006, this plan had 4,915,022 shares of Common Stock available for issuance.

The Amended and Restated 2004 Plan provides for the grant of stock options, both incentive stock options and nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards to eligible individuals. A summary of the principal provisions of the 2004 Plan is set forth below. The summary is qualified by reference to the full text of the Amended and Restated 2004 Plan, which is attached as Annex B to this Proxy Statement.

Administration

The Amended and Restated 2004 Plan is administered by the Human Resources Committee of the Board. The Human Resources Committee may delegate to a committee of one or more members of the Board the authority to grant or amend awards to participants other than senior executives of the Company who are subject to Section 16 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) or employees who are “covered employees” within the meaning of Section 162(m) of the Code. The Human Resources Committee currently includes and will include in the future at least two directors, each of whom qualifies as a non-employee director pursuant to Rule 16b of the Exchange Act, and an “outside director” pursuant to Section 162(m) of the Code.

The Human Resources Committee has the exclusive authority to administer the Amended and Restated 2004 Plan, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction. However, the Human Resources Committee will not have the authority to accelerate vesting or waive the forfeiture of any performance-based awards.

Eligibility

Persons eligible to participate in the Amended and Restated 2004 Plan include all members of the Board and approximately 875 officers and employees. Although consultants of the Company and its subsidiaries are eligible to participate in the Amended and Restated 2004 Plan, as determined by the Human Resources Committee, the Company has not in the past issued awards under the 2004 Plan to consultants and currently does not have any plans to issue awards under the Amended and Restated 2004 Plan to consultants.

Shares Subject to the Plan

The payment of dividend equivalents in conjunction with outstanding awards will not be counted against the shares available for issuance under the Amended and Restated 2004 Plan. The shares of Common Stock covered by the Amended and Restated 2004 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market. To the extent that an award terminates, expires or lapses for any reason, any shares subject to the award may be used again for new grants under the Amended and Restated 2004 Plan. In addition, shares tendered or withheld to satisfy the grant or exercise

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price or tax withholding obligation may be used for grants under the Amended and Restated 2004 Plan. To the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any of its subsidiaries will not be counted against the number of shares available for issuance under the Amended and Restated 2004 Plan.

The maximum number of shares of Common Stock that may be subject to one or more awards to a participant pursuant to the Amended and Restated 2004 Plan during any rolling three calendar-year period is 3,000,000.

Plan Benefits

During the fiscal year ended December 31, 2005, we granted options under the 2004 Plan covering 4,278,700 shares, and restricted stock for 12,742 shares, which does not include restricted stock issued to non-executive officer directors pursuant to our director stock program in lieu of cash fees. In February 2006, we granted stock appreciation rights under the 2004 Plan covering 70,559 shares, and restricted stock for 30,745 shares.

Because awards under the Amended and Restated 2004 Plan are determined by the Human Resources Committee (or its designee), we cannot determine the benefits or amounts that will be received or allocated in the future under the Amended and Restated 2004 Plan. The table below shows stock options and restricted stock granted in the fiscal year ended December 31, 2005 to the individuals and groups indicated. These awards are not necessarily indicative of awards that we may make in the future.

(1)          Market-priced options that vest 1/3 on the January 1 after the grant date, and 1/3 on each January 1 for the next 2 years and have a seven-year term. The grant noted above for Mr. Loveman occurred in June 2005 and vested 20% on January 1, 2006, and vests 20% each January 1 thereafter.

(2)          The shares of restricted stock vests 1/3 on the January 1 after the grant date, and 1/3 on each January 1 for the next 2 years.

(3)          Does not include stock issued to non-executive officer directors pursuant to our director stock program in lieu of cash fees.

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Equity Compensation Plan Information

The table below sets froth information regarding our equity compensation plans as of the record date, February 27, 2006.

(1)   The weighted average remaining contract life for the options, warrants and rights set forth in this column is 5.0 years.

(2)   Excluding securities reflected in column (a). Includes 4,901,052 shares available for issuance under the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan. If our stockholders approve the Amended and Restated 2004 Equity Incentive Award Plan, the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan will be amended to not allow the issuance of any awards effective as of the date of our Annual Meeting.

(3)   Includes the Company’s 2004 Equity Incentive Award Plan, 2001 Executive Stock Incentive Plan, 1996 Non-Management Directors Stock Incentive Plan, 1990 Restricted Stock Plan, 1990 Stock Option Plan, Park Place Entertainment Corporation 1998 Stock Incentive Plan, Park Place Entertainment Corporation 1998 Independent Director Stock Option Plan, and the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan

(4)   Includes the Harrah’s Entertainment, Inc. 2001 Broad-Based Stock Incentive Plan. The 2001 Broad-Based Stock Incentive Plan was not required to be approved by stockholders pursuant to rules of the New York Stock Exchange in existence at that time.

Awards

The Amended and Restated 2004 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards. Since adoption, the Human Resources Committee has only awarded options, restricted stock and stock appreciation rights under the 2004 Plan. No determination has been made as to the types or amounts of awards that will be granted in the future to specific individuals pursuant to the Amended and Restated 2004 Plan. In addition to the above, see the Summary Compensation Table and Option Grants in fiscal year ended December 31, 2005, for information on prior awards to named executive officers.

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Stock options, including incentive stock options, as defined under Section 422 of the Code, and nonqualified stock options, may be granted pursuant to the Amended and Restated 2004 Plan. The option exercise price of all stock options granted pursuant to the 2004 Plan will not be less than 100% of the fair market value of the Common Stock on the date of grant. Stock options may be exercised as determined by the Human Resources Committee, but in no event after the tenth anniversary date of grant, provided that a vested nonqualified stock option may be exercised up to 12 months after the optionee’s death. The aggregate fair market value of the shares with respect to which options intended to be incentive stock options are exercisable for the first time by an employee in any calendar year may not exceed $100,000, or such other amount as the Code provides.

Upon the exercise of a stock option, the purchase price must be paid in full in either cash or its equivalent, by delivering a promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code, by tendering previously acquired shares of Common Stock with a fair market value at the time of exercise equal to the exercise price or by delivering other property acceptable to the Human Resources Committee. If tendering previously issued shares, such shares must have been held for such period of time as may be required by the Human Resources Committee in order to avoid adverse accounting consequences and have a fair market value on the date of delivery equal to the aggregate exercise price of the option or exercised portion thereof (including through the delivery of a notice that the participant has placed a market sell order with a broker with respect to shares then issuable upon exercise of the option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the option exercise price, provided that payment of such proceeds is then made to the Company upon settlement of such sale). However, no participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act will be permitted to pay the exercise price of an option in any method which would violate Section 13(k) of the Exchange Act.

Restricted stock may be granted pursuant to the Amended and Restated 2004 Plan. A restricted stock award is the grant of shares of Common Stock at a price determined by the Human Resources Committee (including zero), that is nontransferable and may be subject to substantial risk of forfeiture until specific conditions are met. Conditions may be based on continuing employment or achieving performance goals. During the period of restriction, participants holding shares of restricted stock may have full voting and dividend rights with respect to such shares. The restrictions will lapse in accordance with a schedule or other conditions determined by the Human Resources Committee.

A stock appreciation right (a “SAR”) is the right to receive payment of an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise of the SAR over the fair market value of a share of Common Stock on the date of grant of the SAR.

The other types of awards that may be granted under the 2004 Plan include performance shares, performance stock units, dividend equivalents, deferred stock, restricted stock units, and other stock-based awards. The shares of Common Stock under the Amended and Restated 2004 Plan may also be used as a tool to provide long-term compensation to our officers and employees, similar to the Time Accelerated Restricted Stock Award Plans, or TARSAP’s, that we have used previously under other equity plans.

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The Human Resources Committee may grant awards to employees who are or may be “covered employees,” as defined in Section 162(m) of the Code, that are intended to be qualified performance-based compensation within the meaning of Section 162(m) of the Code in order to preserve the deductibility of these awards for federal income tax. Participants are only entitled to receive payment for a performance-based award for any given performance period to the extent that pre-established performance goals set by the Human Resources Committee for the period are satisfied. These pre-established performance goals must be based on one or more of the following performance criteria:

·      net earnings (either before or after interest, taxes, depreciation and amortization),

·      economic value-added (as determined by the Human Resources Committee),

·      sales or revenue,

·      net income (either before or after tax),

·      operating earnings,

·      cash flow (including, but not limited to, operating cash flow, and free cash flow),

·      cash flow return on capital,

·      return on net assets,

·      return on shareholders’ equity,

·      return on assets,

·      return on capital,

·      shareholder returns,

·      return on sales,

·      gross or net profit margin,

·      productivity,

·      expense,

·      margins,

·      operating efficiency,

·      customer satisfaction,

·      working capital,

·      earnings per share,

·      price per share, and

·       market share.

These performance criteria may be measured in absolute terms or as compared to any incremental increase or as compared to results of a peer group. With regard to a particular performance period, the Human Resources Committee shall have the discretion to select the length of the performance period, the type of performance-based awards to be granted, and the goals that will be used to measure the performance for the period. In determining the actual size of an individual performance-based award for a performance period, the Human Resources Committee may reduce or eliminate (but not increase) the

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award. Generally, a participant will have to be employed on the date the performance-based award is paid to be eligible for a performance-based award for any period.

Change In Control

In the event of a Change in Control of the Company, as defined below, in which awards made pursuant to the Amended and Restated 2004 Plan are converted, assumed or replaced by a successor, and upon termination of a Participant’s employment with the Company without cause within 24 months following such Change in Control, all of such Participant’s outstanding awards will become fully exercisable and all forfeiture restrictions on awards will lapse.

A “Change of Control” is defined as:

(1)   the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors of the Company that represent 25% or more of the combined voting power of the Company’s then outstanding voting securities, other than

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

(B)   an acquisition of voting securities by the Company, or

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

(2)   during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

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

(A)  which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent, directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and

(B)   after which no person or group beneficially owns voting securities representing 25% or more of the combined voting power of the successor entity; or

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

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Transferability of Awards

Generally, awards granted under the Amended and Restated 2004 Plan may not be transferred or encumbered by a participant, other than by will or the laws of descent and distribution. The Committee by express provision in the award or an amendment thereto may permit an award (other than incentive stock option) to be transferred to certain persons or entities related to the participant, including but not limited to members of the participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions. Unlike the 2004 Plan, the Amended and Restated 2004 also permits awards to be transferred to trusts or other entities whose beneficiaries or beneficial owners include the participant. In addition, all transfers shall be made without consideration.

Amendment and Termination

The Human Resources Committee, subject to approval of the Board, may terminate, amend, or modify the Amended and Restated 2004 Plan at any time; provided that stockholder approval will be obtained for any amendment:

·      to the extent necessary and desirable, to comply with any applicable law, regulation or stock exchange rule,

·      to increase the number of shares available under the Amended and Restated 2004 Plan,

·       to permit the Human Resources Committee to grant options with a price below fair market value on the date of grant, or

·       to extend the exercise period for an option beyond ten years from the date of grant.

In addition, absent stockholder approval, no option may be amended to reduce the per share exercise price of the shares subject to such option below the per share exercise price as of the date the option was granted and, except to the extent permitted by the Amended and Restated 2004 Plan in connection with certain changes in capital structure, no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.

Unlike the 2004 Plan, the Amended and Restated 2004 Plan also provides that if the Human Resources Committee determines that any award may be subject to Section 409A of the Code and related Department of Treasury guidance, the Human Resources Committee may adopt amendments to the Plan and the applicable award agreement, or adopt other policies and procedures, or take any other actions that the Human Resources Committee deems necessary to exempt the award from Code Section 409A or to comply with the requirements of Code Section 409A.

In no event may an award be granted pursuant to the Amended and Restated 2004 Plan on or after the tenth anniversary of the date the stockholders approve the Amended and Restated 2004 Plan.

Federal Income Tax Consequences

With respect to nonqualified stock options, the Company is generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. A participant receiving incentive stock

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options will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the Common Stock received over the option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will be treated as one which does not meet the requirements of the Code for incentive stock options and the tax consequences described for nonqualified stock options will apply.

The current federal income tax consequences of other awards authorized under the Amended and Restated 2004 Plan generally follow certain basic patterns:

·       SARs are taxed and deductible in substantially the same manner as nonqualified stock options;

·       nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant);

·       stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment; and

·       compensation otherwise effectively deferred is taxed when paid.

In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income, subject to Code Section 162(m) with respect to covered employees.

Vote Required

In accordance with New York Stock Exchange listing requirements, adoption of the Amended and Restated 2004 Plan requires an affirmative vote of the holders of a majority of shares of common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of common stock entitled to vote on the proposal. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares, including broker non-votes, count as shares entitled to vote. Thus, the total sum of votes “for,” plus votes “against,” plus abstentions, which is referred to as the “NYSE Votes Cast,” must be greater than 50% of the total outstanding shares of our common stock. Once satisfied, the number of votes “for” the proposal must be greater than 50% of NYSE Votes Cast. Abstentions will have the effect of a vote against this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2004 EQUITY INCENTIVE AWARD PLAN.

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EQUITY COMPENSATION PLAN INFORMATION
(as of December 31, 2005)

(1)          The weighted average remaining contract life for the options, warrants and rights set forth in this column is 5.1 years.

(2)          Excluding securities reflected in column (a). Includes 4,895,736 shares available for issuance under the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan. If our stockholders approve the Amended and Restated 2004 Equity Incentive Award Plan, the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan will be amended to not allow the issuance of any awards effective as of the date of our Annual Meeting.

(3)          Includes the Company’s 2004 Equity Incentive Award Plan, 2001 Executive Stock Incentive Plan, 1996 Non-Management Directors Stock Incentive Plan, 1990 Restricted Stock Plan, 1990 Stock Option Plan, Park Place Entertainment Corporation 1998 Stock Incentive Plan, Park Place Entertainment Corporation 1998 Independent Director Stock Option Plan, and the Caesars Entertainment, Inc. 2004 Long-Term Incentive Plan.

(4)          Includes the Harrah’s Entertainment, Inc. 2001 Broad-Based Stock Incentive Plan. The 2001 Broad-Based Stock Incentive Plan was not required to be approved by stockholders pursuant to rules of the New York Stock Exchange in existence at that time.

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors, acting on the recommendation of its Audit Committee, has appointed Deloitte & Touche LLP, as our independent registered public accounting firm to examine and report to stockholders on the consolidated financial statements of our Company and its subsidiaries for the year 2006. Representatives of Deloitte & Touche LLP will be present at the Annual Meeting and will be given an opportunity to make a statement. They also will be available to respond to appropriate questions.

The action of the Board of Directors in appointing Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year 2006 will be ratified upon an affirmative vote of the holders of a majority of shares of our common stock present in person or represented by proxy at the Annual Meeting. Abstentions will not be treated as votes for or against this proposal.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR 2006.

Stockholder ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm is not required by the Company’s bylaws or otherwise. However, the Board of Directors is submitting the selection of Deloitte & Touche LLP to the stockholders for ratification as a matter of corporate practice. If the stockholders fail to ratify the selection, the Board of Directors will reconsider the retention of that firm. Even if the selection is ratified, the Board of Directors, in its discretion, may direct the appointment of a different independent public accounting firm at any time during the year if the Board of Directors determines that such a change would be in the best interests of the Company and its stockholders.

Other Matters at the Meeting

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

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REPORT OF THE AUDIT COMMITTEE

To the Board of Directors of Harrah’s Entertainment, Inc.:

Our role is to assist the Board of Directors in its oversight of the Company’s financial reporting process. As set forth in our charter, the Company’s management is responsible for the preparation, presentation and integrity of our financial statements, and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for auditing our financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

We have reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2005.

We have discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, by the Auditing Standards Board of the American Institute of Certified Public Accountants.

We have received and discussed with the independent auditors the written disclosures and the letter from the independent auditors required by Independence Standard No. 1, Independence Discussions with Audit Committees, as amended, by the Independence Standards Board, and have discussed with the independent auditors their firm’s independence.

Based on the review and discussion referred to above, we recommend to the Board of Directors that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

		Barbara T. Alexander, Chairperson
		Stephen F. Bollenbach Joe M. Henson Gary G. Michael Christopher J. Williams

 

The above Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.

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FEES PAID TO DELOITTE & TOUCHE LLP

The following table summarizes the aggregate fees paid or accrued by the Company to Deloitte & Touche LLP during 2005 and 2004:

(a)           Audit Fees—Fees for audit services billed in 2005 and 2004 consisted of:

·  Audit of the Company’s annual financial statements, including the audits of the various subsidiaries conducting gaming operations as required by the regulations of the respective jurisdictions;

·  Sarbanes-Oxley Act, Section 404 attestation services;

·  Reviews of the Company’s quarterly financial statements; and

·  Comfort letters, statutory and regulatory audits, consents and other services related to Securities and Exchange Commission (“SEC”) matters.

(b)          Audit-Related Fees—Fees for audit-related services billed in 2005 and 2004 consisted of:

·  Quarterly revenue and compliance audits performed at certain of our properties as required by state gaming regulations;

·  Financial accounting and reporting consultations;

·  Sarbanes-Oxley Act, Section 404 advisory services;

·  Internal control reviews;

·  Employee benefit plan audits; and

·  Agreed-upon procedures engagements.

(c)           Tax Fees—Fees for tax services paid in 2005 and 2004 consisted of tax compliance and tax planning and advice:

·  Fees for tax compliance services totaled $61,000 and $19,500 in 2005 and 2004, respectively. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, and obtain government approval for amounts to be included in tax filings and consisted of:

             i.  Federal, state and local income tax return assistance

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         ii.  Requests for technical advice from taxing authorities

     iii.  Assistance with tax audits and appeals

·  Fees for tax planning and advice services totaled $291,000 and $234,400 in 2005 and 2004, respectively. Tax planning and advice are services rendered with respect to proposed transactions or that alter a transaction to obtain a particular tax result. Such services consisted of:

             i.  Purchase and installation of tax return preparation software

         ii.  Tax advice related to structuring certain proposed mergers, acquisitions and disposals

     iii.  Tax advice related to the alteration of employee benefit plans

       iv.  Tax advice related to an intra-group restructuring

(d)          All Other Fees—These fees consisted of the purchase of market data reports during 2004 and 2005.

 

In considering the nature of the services provided by the independent auditor, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with the independent auditor and Company management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

The services performed by Deloitte & Touche LLP in 2005 and 2004 were pre-approved in accordance with the pre-approval policy and procedures adopted by the Audit Committee at its February 26, 2003, meeting, and amended at its April 15, 2004, meeting. This policy describes the permitted audit, audit-related, tax and other services that Deloitte & Touche may perform. Any requests for audit services must be submitted to the Audit Committee for specific pre-approval and cannot commence until such approval has been granted. Except for such services which fall under the de minimis provision of the pre-approval policy, any requests for audit-related, tax or other services also must be submitted to the Audit Committee for specific pre-approval and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been delegated to the Chairperson of the Audit Committee. The Chairperson must update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre-approval.

In addition, although not required by the rules and regulations of the SEC, the Audit Committee generally requests a range of fees associated with each proposed service. Providing a range of fees for a service incorporates appropriate oversight and control of the independent auditor relationship, while permitting the Company to receive immediate assistance from the independent auditor when time is of the essence.

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The policy contains a de minimis provision that operates to provide retroactive approval for permissible non-audit, tax and other services under certain circumstances. The provision allows for the pre-approval requirement to be waived if all of the following criteria are met:

1.                The service is not an audit, review or other attest service;

2.                The estimated fees for such services to be provided under this provision do not exceed a defined amount of total fees paid to the independent auditor in a given fiscal year;

3.                Such services were not recognized at the time of the engagement to be non-audit services; and

4.                Such services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee or its designee.

The fees approved under the de minimis provision were as follows:

 

 

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EXECUTIVE OFFICER COMPENSATION

The Summary Compensation Table below sets forth certain compensation information concerning the Company’s Chief Executive Officer and our four additional most highly compensated executive officers during 2005.

SUMMARY COMPENSATION TABLE

 

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(1)           Other Annual Compensation includes the amounts in the following table:

 

Other Annual Compensation for perquisites for Messrs. Atwood, Boushy and Brammell in 2005 aggregated more than $10,000; however, no individual perquisite amount exceeded $10,000. Perquisites for Messrs. Loveman and Wilmott in 2005 are detailed in the table above only to the extent the individual perquisite amount exceeds $10,000.

The Company does not provide a fixed benefit pension plan for its executives. The amounts set forth above for deferred compensation earnings are a function of deferred income voluntarily contributed by the executives.

In past proxy statements, we reported personal use of Company aircraft using the Standard Industry Fare Level (SIFL) tables published by the Internal Revenue Service. The SIFL tables are used to determine the amount of compensation income that is imputed to the executive for tax purposes for personal use of corporate aircraft. Beginning with this Proxy Statement, for all three years in the table above, we are using a revised methodology that calculates the incremental cost to us based on the cost of fuel, trip-related maintenance, crew travel expenses, on-board catering, landing fees, trip-related hangar/parking costs and other miscellaneous variable costs. Since our aircraft are used primarily for business travel, we do not include the fixed costs that do not change based on usage, such as pilots’ salaries, depreciation of the purchase costs of the Company-owned aircraft, and the cost of maintenance not specifically related to trips. For security reasons, Mr. Loveman is required to use Company aircraft for personal and commuter travel. Mr. Loveman’s aircraft usage was $361,734, $253,325 and $317,720 for commuting travel and $99,479, $34,150, and $19,093 for personal travel for 2005, 2004, and 2003, respectively.

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The amount allocated to Mr. Loveman for company lodging while in Las Vegas and the associated taxes is based on his taxable earnings for company provided lodging in these years.

(2)          Mr. Atwood was awarded 20,000 shares of restricted stock in 2002 pursuant to a Time Accelerated Restricted Stock Award Program (“TARSAP”). These shares will vest on January 1, 2007, provided he remains in active employment with the Company. Mr. Loveman received a grant in 2002 of 108,378 shares of restricted stock in connection with his promotion to Chief Executive Officer. 25% of these shares vested on January 1, 2006, the remaining shares will vest in increments of 25% on January 1, 2007, and 50% on January 1, 2008. The number of unvested shares held by Messrs. Loveman, Wilmott, Atwood, Boushy and Brammell as of December 31, 2005 was 108,378, 80,000, 60,000, 40,000 and 40,000, respectively. The market value of the unvested restricted stock awards granted to Messrs. Loveman, Wilmott, Atwood, Boushy and Brammell as of December 31, 2005 was $7,726,268, $5,703,200, $4,277,400, $2,851,600 and $2,851,600, respectively. Dividends are payable when declared on restricted stock in the same manner and to the same extent as dividends are payable on other shares of common stock.

(3)          All Other Compensation consists of the amounts in the following table:

 

As stated in note (1) above, the Company does not provide a fixed benefit pension plan for its executives but maintains deferred compensation plans (collectively, “DCP”) and an Executive Supplemental Savings Plan II (“ESSP II”) under which the executives may defer a portion of their compensation. ESSP II replaced our Executive Supplemental Savings Plan (“ESSP”) for future deferrals

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beginning on January 1, 2005. Amounts deposited into DCP earn interest at rates approved by the Human Resources Committee. The ESSP II is a variable investment plan that allows the executives to direct their investments by choosing among several investment alternatives. In 2005, Messrs. Loveman, Wilmott, Boushy and Brammell received an interest enhancement related to their conversion of retirement benefits from the DCP to the ESSP II, with payment of a portion of these amounts contingent on meeting certain requirements related to age and length of tenure with the Company. In 2004 and 2003, Messrs. Loveman, Wilmott, Boushy and Brammell received an interest enhancement related to their conversion of retirement benefits from the DCP to the ESSP, with payment of a portion of these amounts contingent on meeting certain requirements related to age and length of tenure with the Company.

The following table gives information regarding grants of stock options made during 2005 to our executive officers named in the Summary Compensation Table, including information concerning the potential value of such options based on assumed annual rates of stock price appreciation for the seven-year option terms. The Human Resources Committee makes annual grants to employees in June of each year. The Committee has authority to change the annual grant date and to make option grants at other times.

OPTION GRANTS IN THE LAST FISCAL YEAR

(1)          The dollar amounts under these columns are the result of calculations at five percent and ten percent rates set by the Securities and Exchange Commission and therefore are not intended to forecast possible future appreciation, if any, of the Company’s stock price. In the above table, we did not use an alternative formula for a grant date valuation, as we are not aware of any formula which will determine with reasonable accuracy a present value based on future unknown or volatile factors. There is no assurance that the value realized by an officer will be at or near the value estimated above.

(2)          Employees vest 1/3 in the right to exercise these options on the January 1 after the grant date, and 1/3 on each January 1 for the next 2 years, other than Mr. Loveman’s grant noted above, which vested 20% on January 1, 2006, and vests 20% each January 1 thereafter. Options are subject to certain conditions, including compliance with terms and conditions of the options as approved by the Human Resources Committee. Generally, options are nontransferable except by will or the laws of descent and distribution. See “Report of the Human Resources Committee on Executive Compensation” for more information concerning stock option awards.

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