EXHIBIT 10(26)
[HARRAH'S LOGO]
ANNUAL MANAGEMENT BONUS PLAN
1995
HARRAH'S ENTERTAINMENT, INC.
ANNUAL MANAGEMENT BONUS PLAN
As a member of management, you can have a major impact on the overall
performance of your property and of Harrah's Entertainment, Inc. (the
Company). The Harrah's Entertainment, Inc. Annual Management Bonus Plan
(the Plan) is designed to reward you for meeting your personal performance
objectives in years when your Operating Unit meets its performance
objectives. The Plan has uniform bonus calculation procedures with
specific objectives for each Operating Unit as well as overall objectives
for the company. This means that although there is one plan, covering all
properties, divisions, and corporate, your specific bonus award is tied to
your individual performance, your Operating Unit's performance, and to the
performance of the entire company.
The purposes of the Plan are to reward you for superior work and motivate
you toward delivering better customer service and achieving better business
results, to tie your goals and interests into those of the company and its
stockholders, and to attract and retain top managers.
This document describes eligibility, personal performance objectives that
are directly tied to the performance planning and evaluation process,
Operating Unit performance objectives, assignment of bonus points, the
bonus pool, the payment of bonus awards, and administrative matters.
Personal Eligibility
To be eligible, you must be a full-time employee of an Operating Unit in a
salary grade 20 or above. An Operating Unit is a business unit identified
for participation in the Plan by the President and Chief Executive Officer
and currently comprises Harrah's Corporate, various Operating Divisions,
and each Harrah's Casino and Riverboat. You may not be a participant in
any other bonus plan of the Company or its subsidiaries. You must have
been employed in an eligible position before October 1 of the Plan year,
have at least a "Successful" performance rating, and be actively working at
the time bonuses are distributed to receive your bonus award.
Prorations/Transfers
If an eligible employee is promoted during the year, pro-rata bonus awards
are calculated based on their earnings, individual performance and grade in
each position.
If, however, an employee is promoted from a grade 5-19 into a grade 20 or
above, the promotion must have taken place on or before October 1 for the
employee to be eligible for a prorated payment under this plan.
In cases of promotions and/or transfers between Operating Units, pro-rata
bonus awards for eligible participants are calculated based on their
earnings, individual performance, operating unit bonus points and grade in
each Operating Unit. The calculation of prorata bonus awards is generally
made following completion of the plan year.
1
Individual Performance Objectives
At the beginning of each year, you and your supervisor will develop
specific performance objectives for you to achieve. These objectives
should be recorded on your performance appraisal document under the
appropriate performance standard. One hundred bonus points are then
assigned by your supervisor to these personal bonus objectives. Your
objectives and bonus points will be approved and retained by your
supervisor. The objectives should be easy to quantify and verify.
Performance objectives should be modified during the year if business
conditions dictate. Objectives that have been revised will also be
retained by your supervisor.
Operating Unit Performance Objectives
Operating Unit bonus objectives are established for each Plan year. These
will generally consist of a combination of measurements related to the
objectives of the Company and each of its Operating Units on items such as
operating income, pre-tax earnings, return on sales and customer
satisfaction ratings. The objectives may change annually to support the
business mission of the company. The objectives are assigned target
points. The objectives and assigned target points are recommended by the
Chairman of the Board and the President and Chief Executive Officer to the
Human Resources Committee of the Board of Directors for approval. Total
target points for each Operating Unit is 100. Additional stretch points
may be awarded according to specific parameters set each year.
Meeting Operating Unit Objectives
Assignment of Bonus Points
At the end of each Plan year, bonus points will be assigned to each
Operating Unit based upon achievement of Plan objectives. The Operating
Unit bonus points will be combined with the points earned by the Company.
The final point total will be used to create the Operating Unit's bonus
pool. Commencing with the plan year 1996, an Operating Unit may qualify
for a limited bonus of 25% of the amount achieved by using bonus points
earned by the Company (Harrah's brand performance) even if the Operating
Unit is not eligible for a bonus based on its own performance.
Meeting Operating Unit Objectives
The Bonus Pool
A payout pool for each Operating Unit will be established according to the
unit's combined bonus point total. The bonus pool is calculated by
multiplying all eligible participants' eligible earnings by the appropriate
bonus percentage as shown on the Bonus Matrix. The appropriate bonus
percentage is determined by both the participants' salary grades and bonus
points earned by the Operating Unit.
For example, at 100 bonus points for the Operating Unit, the bonus for pool
calculations for a grade 23 is 15 percent of eligible earnings.
An Operating Unit's total bonus pool is calculated by summing all
appropriate bonus percentages of the Operating Unit's eligible
participants.
2
Meeting Individual Objectives
Shortly after the end of the Plan year, you will meet with your supervisor
to compare your individual performance against the performance standards on
the appraisal document and with your previously established objectives.
The assessment determines how many of your personal 100 assigned objective
points have been met.
The supervisor will then recommend a bonus award for you and other eligible
employees reporting to him or her, in relation to the individual
performance bonus points earned. The supervisor must keep in mind that the
total bonus pool must not be exceeded. When an Operating Unit's
performance rises above the "100" point target, the available bonus dollars
contributed to the pool will increase; this is called "stretch bonus."
However, even when an Operating Unit is in stretch, individual awards
should not automatically rise above the "100" point line. Only those
eligible participants whose performance contributed to the achievement of
stretch bonus should be considered for stretch awards. Calculation is up
to the discretion of your supervisor and the Operating Unit's senior
managers. The maximum individual award is found on the 150 point line of
the Stretch Bonus matrix (see page 7).
When Operating Unit performance falls short of objectives, the Bonus Pool
will be accordingly reduced. Individual awards should be scaled back to
reflect the available pool dollars. For example, at 90 bonus points for
the Operating Unit, the bonus for pool calculations for a grade 23 is 14
percent of eligible earnings.
Approval and Payment of Annual Bonus Plan Awards
Each supervisor will submit bonus award recommendations to the Memphis
Compensation department with two levels of approval unless the next level
of supervision is a Corporate Senior Vice President or a Division
President. In these cases, no further approvals are required. The Memphis
Compensation department will accumulate overall bonus recommendations and
submit them for appropriate approvals. The Chairman of the Board and the
President and Chief Executive Officer review and approve bonus
recommendations and recommend Operating Unit bonus points to the Human
Resources Committee. The Human Resources Committee approves total bonus
points achieved for performance against Operating Unit objectives and the
individual bonus awards of the Chairman of the Board and the President and
Chief Executive Officer. Bonus awards are generally distributed to
employees by March 15 of the year following the Plan year dependent on the
eligibility of both the Operating Unit and the employee. Bonus awards may
be distributed earlier with the approval of the Chairman of the Board, the
President and Chief Executive Officer and the Human Resources Committee.
3
Miscellaneous
The Human Resources Committee may approve a discretionary pro-rata bonus if
active employment was terminated during the Plan year by death, disability,
or retirement (age 55 with 10 or more years of service).
Employees who have been on Leave of Absence are eligible to participate in
the Plan if their Operating Unit qualifies. Employees who are on Leave of
Absence at the time of bonus payments are eligible to receive their award,
if any, when they return to active employment. If they do not return to
active employment, their payment is forfeited.
The eligible earnings used in bonus calculations excludes imputed income
and previous bonuses.
Eligibility for this Plan does not provide anyone a right to continued
employment.
Administrative Matters
The Plan is completely discretionary. No legal rights or obligations are
created by the Plan. Accordingly, the Company may terminate the Plan or
amend its provisions at any time, and no interest is created that can be
assigned, encumbered, or transferred by an employee. No rights in any
specific funds or assets will exist by reason of this Plan.
The Memphis Compensation department administers the Plan and has full power
to adopt and enforce administrative rules and procedures to make
administrative interpretations. The Human Resources Committee has full
power to decide substantive issues, to make amendments to the Plan and to
terminate the Plan. The Human Resources Committee may adjust any
objectives or bonus points if it determines such adjustment is necessary or
appropriate.
No member of the Memphis Compensation department, the Human Resources
Committee, or other persons involved in administering this Plan or making
decisions concerning bonuses will have any personal liability to any
employee.
4
EXAMPLES 1 THROUGH 4
Assume: Calculation
- --------------------------------------------- ---------------
EXAMPLE 1: Grade 21 employee
Eligible earnings $59,000
Combination of Operating unit and (10%) = $ 5,900
Company earns 100 bonus points
Employee earns 100 points - Actual Award (10%) = $ 5,900
EXAMPLE 2: Grade 23 employee
Eligible earnings $69,000
Combination of Operating unit and (14%) = $9,660
Company earns 95 bonus points
Employee earns 80 points - Actual Award (12%) = $ 8,280
EXAMPLE 3:
Grade 26 employee promoted/transfers into a Grade 27 position in a different
operating unit during the plan year. Bonus is prorated based on earnings,
individual performance and grade for each operating unit.
Step 1: Grade 26 employee - Operating Unit #1
Eligible pro-rata earnings $48,000
Combination of Operating unit and (28%) = $13,440
Company earns 110 bonus points
Employee earns 115 points - pro-rata #1 (29%) = $13,920
Step 2: Grade 27 employee - Operating Unit #2
Eligible pro-rata earnings $55,000
Combination of Operating unit and (30%) = $16,500
Company earns 100 bonus points
Employee earns 100 points - pro-rata #2 (30%) = $16,500
Step 3: Actual Award
Pro-rata #1 + pro-rata #2 $30,420
5
1995 TARGET BONUS MATRIX
------------------------
ANNUAL MANAGEMENT PLAN
----------------------
1995 Salary Grade
Bonus ---------------------------------------------------------
Points 29 28 27 26 25 24 23 22 21 20
------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
100 40% 35% 30% 25% 22% 20% 15% 10% 10% 10%
99 36 32 28 24 22 20 15 10 10 10
98 33 30 26 24 22 20 15 10 10 10
97 30 28 25 23 21 19 15 10 10 10
96 29 27 25 23 21 19 14 10 10 10
95 29 27 25 23 21 19 14 10 10 10
94 28 26 24 22 21 19 14 9 9 9
93 28 26 24 22 20 19 14 9 9 9
92 28 26 24 22 20 18 14 9 9 9
91 27 25 24 22 20 18 14 9 9 9
90 27 25 23 21 20 18 14 9 9 9
89 27 25 23 21 20 18 13 9 9 9
88 26 25 23 21 19 18 13 9 9 9
87 26 24 23 21 19 17 13 9 9 9
86 26 24 22 20 19 17 13 9 9 9
85 26 24 22 20 19 17 13 9 9 9
84 25 24 22 20 18 17 13 8 8 8
83 25 23 22 20 18 17 12 8 8 8
82 25 23 21 19 18 16 12 8 8 8
81 24 23 21 19 18 16 12 8 8 8
80 24 22 21 19 18 16 12 8 8 8
79 24 22 21 19 17 16 12 8 8 8
78 23 22 20 18 17 16 12 8 8 8
77 23 22 20 18 17 15 12 8 8 8
76 23 21 20 18 17 15 11 8 8 8
75 23 21 20 18 17 15 11 8 8 8
74 22 21 19 18 16 15 11 7 7 7
73 22 20 19 17 16 15 11 7 7 7
72 22 20 19 17 16 14 11 7 7 7
71 21 20 18 17 16 14 11 7 7 7
70 21 20 18 17 15 14 11 7 7 7
69 21 19 18 16 15 14 10 7 7 7
68 20 19 18 16 15 14 10 7 7 7
67 20 19 17 16 15 13 10 7 7 7
66 20 18 17 16 15 13 10 7 7 7
65 20 18 17 16 14 13 10 7 7 7
64 19 18 17 15 14 13 10 6 6 6
63 19 18 16 15 14 13 9 6 6 6
62 19 17 16 15 14 12 9 6 6 6
61 18 17 16 15 13 12 9 6 6 6
60 18 17 16 14 13 12 9 6 6 6
59 18 17 15 14 13 12 9 6 6 6
58 17 16 15 14 13 12 9 6 6 6
57 17 16 15 14 13 11 9 6 6 6
56 17 16 15 13 12 11 8 6 6 6
55 17 15 14 13 12 11 8 6 6 6
54 16 15 14 13 12 11 8 5 5 5
53 16 15 14 13 12 11 8 5 5 5
52 16 15 14 12 11 10 8 5 5 5
51 15 14 13 12 11 10 8 5 5 5
50 15 14 13 12 11 10 8 5 5 5
6
1995 STRETCH BONUS MATRIX
-------------------------
ANNUAL MANAGEMENT PLAN
----------------------
1995 Salary Grade
Bonus -----------------------------------------------------------
Points 29 28 27 26 25 24 23 22 21 20
------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
150 60% 53% 45% 38% 33% 30% 23% 15% 15% 15%
149 59 52 44 37 33 30 22 15 15 15
148 58 51 44 37 33 30 22 15 15 15
147 57 51 43 36 32 29 22 15 15 15
146 57 50 43 36 32 29 22 15 15 15
145 56 50 43 36 32 29 22 15 15 15
144 56 50 43 36 32 29 22 14 14 14
143 55 49 42 35 31 29 21 14 14 14
142 55 49 42 35 31 28 21 14 14 14
141 55 49 42 35 31 28 21 14 14 14
140 54 48 41 35 31 28 21 14 14 14
139 54 48 41 35 31 28 21 14 14 14
138 53 47 40 34 30 28 21 14 14 14
137 53 47 40 34 30 27 21 14 14 14
136 53 47 40 34 30 27 20 14 14 14
135 53 47 40 34 30 27 20 14 14 14
134 53 46 39 33 29 27 20 13 13 13
133 52 46 39 33 29 27 20 13 13 13
132 52 46 39 33 29 26 20 13 13 13
131 52 45 39 33 29 26 20 13 13 13
130 51 45 39 33 29 26 20 13 13 13
129 51 45 39 32 28 26 19 13 13 13
128 50 44 38 32 28 26 19 13 13 13
127 50 44 38 32 28 25 19 13 13 13
126 50 44 38 32 28 25 19 13 13 13
125 49 44 38 32 28 25 19 13 13 13
124 49 43 37 31 27 25 19 12 12 12
123 48 43 37 31 27 25 18 12 12 12
122 48 43 37 31 27 24 18 12 12 12
121 47 42 37 31 27 24 18 12 12 12
120 47 42 37 31 26 24 18 12 12 12
119 47 42 36 30 26 24 18 12 12 12
118 46 41 36 30 26 24 18 12 12 12
117 46 41 36 30 26 23 18 12 12 12
116 46 41 36 30 26 23 17 12 12 12
115 45 40 35 29 25 23 17 12 12 12
114 45 40 35 29 25 23 17 11 11 11
113 44 39 34 29 25 23 17 11 11 11
112 44 39 34 29 25 22 17 11 11 11
111 44 39 33 28 24 22 17 11 11 11
110 43 38 33 28 24 22 17 11 11 11
109 43 38 33 28 24 22 16 11 11 11
108 43 38 33 28 24 22 16 11 11 11
107 43 38 33 28 24 21 16 11 11 11
106 42 37 32 27 23 21 16 11 11 11
105 42 37 32 27 23 21 16 11 11 11
104 41 36 31 26 23 21 16 10 10 10
103 41 36 31 26 23 21 15 10 10 10
102 40 35 30 25 22 20 15 10 10 10
101 40 35 30 25 22 20 15 10 10 10
7
1995 SENIOR EXECUTIVE TARGET BONUS MATRIX
-----------------------------------------
ANNUAL MANAGEMENT PLAN
----------------------
1995 Salary Grade
Bonus ----------------------------------------
Points 36 35 34 33 32 31 30
------ ---- ---- ---- ---- ---- ---- ----
100 60% 60% 55% 50% 50% 50% 45%
99 56 56 52 47 47 46 43
98 52 52 49 44 44 43 41
97 48 48 46 42 42 40 39
96 46 46 44 40 38 37 36
95 44 44 42 38 36 34 33
94 43 43 41 38 36 34 32
93 43 43 41 37 35 33 32
92 42 42 40 37 35 33 31
91 42 42 40 36 35 33 31
90 41 41 40 36 34 32 31
89 41 41 39 36 34 32 30
88 40 40 39 35 33 32 30
87 40 40 38 35 33 31 30
86 40 40 38 34 33 31 29
85 39 39 37 34 32 31 29
84 39 39 37 34 32 30 29
83 38 38 37 33 32 30 28
82 38 38 36 33 31 30 28
81 37 37 36 32 31 29 28
80 37 37 35 32 30 29 27
79 36 36 35 32 30 28 27
78 36 36 34 31 30 28 27
77 35 35 34 31 29 28 26
76 35 35 33 30 29 27 26
75 35 35 33 30 29 27 26
74 34 34 33 30 28 27 25
73 34 34 32 29 28 26 25
72 33 33 32 29 27 26 24
71 33 33 31 28 27 26 24
70 32 32 31 28 27 25 24
69 32 32 30 28 26 25 23
68 31 31 30 27 26 24 23
67 31 31 29 27 25 24 23
66 30 30 29 26 25 24 22
65 30 30 29 26 25 23 22
64 29 29 28 26 24 23 22
63 29 29 28 25 24 23 21
62 29 29 27 25 24 22 21
61 28 28 27 24 23 22 21
60 28 28 26 24 23 22 20
59 27 27 26 24 22 21 20
58 27 27 26 23 22 21 19
57 26 26 25 23 22 21 19
56 26 26 25 22 21 20 19
55 25 25 24 22 21 20 19
54 25 25 24 22 21 19 18
53 24 24 23 21 20 19 18
52 24 24 23 21 20 19 18
51 23 23 22 20 19 18 17
50 23 23 22 20 19 18 17
8
1995 SENIOR EXECUTIVE STRETCH BONUS MATRIX
------------------------------------------
ANNUAL MANAGEMENT PLAN
----------------------
1995 Salary Grade
Bonus ----------------------------------------
Points 36 35 34 33 32 31 30
------ ---- ---- ---- ---- ---- ---- ----
150 120% 120% 110% 100% 100% 100% 90%
149 119 119 109 99 99 99 89
148 118 118 108 98 98 98 88
147 117 117 107 97 97 97 87
146 116 116 106 96 96 96 86
145 114 114 104 95 95 95 85
144 113 113 103 94 94 94 84
143 112 112 102 93 93 93 83
142 111 111 101 92 92 92 82
141 110 110 100 91 91 91 81
140 108 108 99 90 90 90 81
139 107 107 97 89 89 89 80
138 106 106 96 88 88 88 79
137 105 105 95 87 87 87 78
136 104 104 94 86 86 86 77
135 102 102 93 85 85 85 76
134 101 101 92 84 84 84 75
133 100 100 91 83 83 83 74
132 99 99 90 82 82 82 73
131 98 98 89 81 81 81 72
130 96 96 88 80 80 80 72
129 95 95 86 79 79 79 71
128 94 94 85 78 78 78 70
127 93 93 84 77 77 77 69
126 92 92 83 76 76 76 68
125 90 90 82 75 75 75 67
124 89 89 81 74 74 74 66
123 88 88 80 73 73 73 65
122 87 87 79 72 72 72 64
121 86 86 78 71 71 71 63
120 84 84 77 70 70 70 63
119 83 83 75 69 69 69 62
118 82 82 74 68 68 68 61
117 81 81 73 67 67 67 60
116 80 80 72 66 66 66 59
115 78 78 71 65 65 65 58
114 77 77 70 64 64 64 57
113 76 76 69 63 63 63 56
112 75 75 68 62 62 62 55
111 74 74 67 61 61 61 54
110 72 72 66 60 60 60 54
109 71 71 64 59 59 59 53
108 70 70 63 58 58 58 52
107 69 69 62 57 57 57 51
106 68 68 61 56 56 56 50
105 66 66 60 55 55 55 49
104 65 65 59 54 54 54 48
103 64 64 58 53 53 53 47
102 63 63 57 52 52 52 46
101 62 62 56 51 51 51 46
9