Stock-Based Compensation

We have established a number of employee benefit programs for purposes of attracting, retaining, and motivating our employees. The following is a description of the basic components of these programs as of December 31, 2013.

Stock-Based Compensation Plans

Our stock-based compensation expense consists primarily of time-based and performance based stock options, restricted stock units and restricted stock awards that have been granted to management, other personnel and key service providers.

Stock-Based Compensation Expense



(In millions)	2013		2012		2011
Amounts included in:
Corporate expense	$	24.8	$	29.1	$	13.8
Property, general, administrative, and other	31.7		26.0		8.0
Total stock-based compensation expense	$	56.5	$	55.1	$	21.8

Included in stock-based compensation expense for the years ended December 31, 2013, 2012, and 2011 is $25.4 million, $20.6 million, and $0.2 million, respectively, for share based awards issuable in shares of a consolidated entity. The majority of these awards have been classified as liability awards and are remeasured to fair value at each reporting date.

Management Equity Incentive Plan

The Management Equity Incentive Plan allowed for the granting of performance-based options. The options vest and become exercisable if the return on investment in the Company of TPG, Apollo, and their affiliates (the "Majority Stockholders") achieves a 2.0X return. The options vest on a pro-rata basis from zero to 100% if the Majority Stockholders achieve a return of less than 2.0X but greater than or equal to 1.75X. Upon the adoption of the 2012 Performance Incentive Plan, options may no longer be granted under the Management Equity Incentive Plan. As of December 31, 2013, 25,053 options were outstanding under this plan will expire between years 2018 - 2021.

Performance Incentive Plan

In 2012, we adopted the 2012 Performance Incentive Plan, as amended, (the "2012 Incentive Plan") for directors, employees, officers and consultants or advisors who render services to the Company or its subsidiaries. As of December 31, 2013, a total of 15,449,468 stock-based awards issuable in shares of CZR common stock may be issued under this plan. The 2012 Incentive Plan provided for a one-time stock option exchange program (the "Option Exchange") to permit the Company to cancel certain stock options held by certain of its employees, service providers and directors in exchange for new, replacement options to purchase an equal number of shares of our common stock (the "Replacement Options").

Options eligible for the Option Exchange (the "Eligible Options") were granted on or prior to February 9, 2012, and had an exercise price equal to or greater than $20.09 per share. Replacement Options have an exercise price of $8.22 per share, a 10-year term and a new vesting schedule determined on a grant-by-grant basis, as follows:

Time-Based Options: 20% of the time-based Replacement Options were immediately vested, with the remainder vesting annually in equal amounts over four years.

Performance-Based Options:


•	For options replacing the Eligible Options subject to vesting if funds affiliated with the Sponsors achieve at least a 1.5X return, the Replacement Options will vest on the date that the Company's 30-day trailing average closing common stock price equals or exceeds $35.00 per share.


•	For options replacing the Eligible Options subject to vesting if funds affiliated with the Sponsors achieve at least a 2.0X return, the Replacement Options (prior to the modification described below) vested on the date that the Company's 30-day trailing average closing common stock price equaled or exceeded $57.41 per share.

•

In December 2013, the Company modified the vesting period for its performance-based options that originally vested upon the Company common stock price equaling or exceeding $57.41 per share over a 30-day trailing period. The modification provides for these options to vest on the earlier of the following: (i) 50% on March 15, 2014 and 50% on March 15, 2015 or (ii) the Company's 30-day trailing average closing common stock price equals or exceeds $57.41 per share. There was no incremental compensation relating to such modification; however, the Company will accelerate the amortization of the compensation expense relating to the modified options in accordance with the modified vesting period.

Loveman Performance-Based Option: The Company granted 290,334 options in November 2011 to Gary Loveman, the Company's Chairman of the Board, Chief Executive Officer and President. The options were eligible to vest if funds affiliated with the Sponsors achieve at least a 1.0X return (the "Loveman Performance-Based Option"). The Replacement Options granted in exchange for the Loveman Performance-Based Options (which were modified as described above) vested on the date that the Company's 30‑day trailing average closing common stock price equaled or exceeded $57.41 per share.

As a result of the Option Exchange, incremental stock compensation of $15.2 million was realized and is being amortized to compensation expense over an approximate vesting period of 4 to 5.5 years.

Stock Option Activity



	Shares		Weighted Average Exercise Price		Fair Value ⁽¹⁾		Weighted Average Remaining Contractual Term (years)
Outstanding as of December 31, 2012	8,478,148		$	12.22	$	3.51
Granted	550,812		13.65		5.95
Exercised	(143,109	)	8.38		7.33
Forfeited	(344,656	)	10.64		3.01
Expired	(77,384	)	16.42		5.40
Outstanding as of December 31, 2013	8,463,811		$	12.09	$	2.68	8.5
Vested and expected to vest as of December 31, 2013	7,975,096		$	11.96	$	2.84	8.5
Exercisable as of December 31, 2013	2,314,229		$	15.53	$	4.58	8.3

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⁽¹⁾	Represents the weighted-average grant date fair value per option, using the Monte Carlo simulation option-pricing model for performance-based options, and the Black-Scholes option-pricing model for time-based options.

Stock Option Grants and Exercises



	Years Ended December 31,
(Dollars in millions, except per share data)	2013	2012	2011
Options Granted:
Number of options granted	550,812	8,173,944	2,252,457
Weighted Average Grant-Date Fair Value per share ⁽¹⁾	$5.95	$3.50	$10.55
Weighted Average Exercise Price per Share ⁽¹⁾⁽²⁾	$13.65	$8.44	$26.23

Option Exercises:
Number of options exercised	143,109	—	—
Cash received for options exercised	$1.2	—	—
Intrinsic value of options exercised	$1.5	—	—

Intrinsic Value of Options Vested and Expected to Vest:	$86.1	$0.1	—

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⁽¹⁾	Represents the weighted-average grant date fair value per option, using the Monte Carlo simulation option-pricing model for performance-based options, and the Black-Scholes option-pricing model for time-based options.


⁽²⁾	Adjusted for the February 2012 1.742-for-1 stock split.

The Company utilized historical optionee behavioral data to estimate the option exercise and termination rates used in the option-pricing models. The expected term of the options represents the period of time the options were expected to be outstanding based on historical trends and/or derived from a numerical pricing model, such as the Monte Carlo simulation model. Expected volatility was based on the historical volatility of the common stock of Caesars Entertainment and its competitor peer group for a period approximating the expected life. The Company does not expect to pay dividends on common stock. The risk-free interest rate within the expected term was based on the U.S. Treasury yield curve in effect at the time of grant. Valuation assumptions for the indicated periods are presented below:



	Years Ended December 31,
	2013		2012		2011
Expected volatility	57.4	%	55.8	%	65.8	%
Expected dividend yield	—	%	—	%	—	%
Expected term (in years)	3.8		4.9		4.8
Risk-free interest rate	1.0	%	0.9	%	1.1	%

As of December 31, 2013, there was $50.9 million of total unrecognized compensation cost related to Caesars Entertainment Corporation share-based compensation plans, which is expected to be recognized over a remaining weighted-average period of 3.3 years.

Restricted Stock Units

On June 28, 2013, the Company granted restricted stock units (the "RSUs") to employees of the Company with an aggregate fair value of $21.7 million. Each RSU represents the right to receive payment in respect of one share of the Company's common stock. The majority of the RSUs will vest 25% annually beginning January 2, 2014. The following table summarizes the activity of RSUs during the fiscal year ended December 31, 2013. There were no RSUs outstanding during 2012.

Restricted Stock Unit Activity



	Units		Fair Value
Outstanding as of December 31, 2012	—		—
Granted	1,579,837		$13.74
Forfeited	(76,303	)	$13.70
Outstanding as of December 31, 2013	1,503,534		$13.74

In addition to the RSU activity presented above, during the fiscal year ended December 31, 2013 there were 5,260 RSUs granted and 7,991 RSUs outstanding as of December 31, 2013 relating to a consolidated entity. The weighted-average grant date fair value per RSU granted and outstanding during and as of December 31, 2013 was $5,470 and $3,853, respectively.

Restricted Common Stock Awards

For the year ended December 31, 2012, the Company granted 50,000 shares of restricted common stock to an executive officer of the Company under the Company's 2012 Incentive Plan. The restricted common stock vests annually in equal amounts over two years. As of December 31, 2013 and 2012, 25,000 shares and 50,000 shares of restricted common stock were outstanding, respectively. For the years ended December 31, 2013 and 2011, there were no shares of restricted common stock granted.