Note 18—Employee Benefit Plans

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, 2011.

Share-based Compensation Plans

Our stock-based compensation expense consists primarily of time-based and performance-based options that have been granted to management, other personnel and key service providers. The Company has recognized compensation expense associated with its stock-based employee compensation programs

In 2010 the Human Resources Committee of the Board of Directors of the Company adopted an amendment to the Company's Management Equity Incentive Plan (the "Plan") to revise the vesting hurdles for performance-based options under the Plan. The performance options vest if the return on investment in the Company of TPG, Apollo, and their respective affiliates and co-investors (the "Majority Stockholders") achieves a specified return. Previously, 50.0% of the performance-based options vested upon a 2.0X return and 50.0% vested upon a 3.0X return. The triggers were revised to 1.5X and 2.5X, respectively. In addition, a pro-rata portion of the 2.5X options will vest if the Majority Stockholders achieve a return on their investment that is greater than 2.0X, but less than 2.5X. The pro-rata portion will increase on a straight line basis from zero to a participant's total number of 2.5X options depending upon the level of returns that the Majority Stockholders realize between 2.0X and 2.5X.

In July 2011, the Human Resources Committee of the Board of Directors of the Company approved amendments to the Plan and to outstanding stock options which were granted pursuant to the Plan. Performance-based options will vest and become exercisable if the return on investment in the Company of the Majority Stockholders reaches at least 2.0X (rather than 2.5X, which applied prior to the amendments), and if the Majority Stockholders realize a return of less than 2.0X but equal to or greater than 1.75X, a pro-rata portion of such performance based options will vest based on straight line interpolation (collectively, the "Vesting Adjustment"). The exercise price of outstanding 1.5X performance-based options was reduced to $35 per share (pre-split per share exercise price). All outstanding 2.5X performance options were amended to reflect the Vesting Adjustment; however, the exercise price for the outstanding 2.5X, now 2.0X, performance options was not reduced to $35 per share (pre-split per share exercise price). Additionally, the exercise price for all outstanding time-based options was reduced to $35 per share (pre-split per share exercise price), with the reduced exercise price being phased in between a four- to six-year period, depending on grant date, as set forth in each individual award agreement. Prior to the phase in, any vested options may still be exercised at the original exercise price, subject to the terms of the Plan. As a result of these amendments, additional expense of $3.2 million was recognized in 2011.

In November 2011, an amendment was approved to increase the available number of shares of the Company's common stock for which options may be granted to 4,927,024 shares.

As disclosed in Note 22, "Subsequent Events" the Company declared a 1.742-for-one stock split in conjunction with the February 2012 public offering transaction. The stock split revised the number of options that may be granted under the Plan to 8,582,876 shares and adjusted the reduced per share exercise price under the July 2011 option repricing from $35 to $20.09. In conjunction with the subsequent events described above, the Board of Directors adopted the 2012 Performance Incentive Plan; therefore, no more options may be issued pursuant to the Plan.

The following is a summary of share-based option activity, adjusted for the stock split, including options under the Plan and warrants to purchase common stock, for the years ended December 31, 2011 and 2010:


	Shares⁽¹⁾			Weighted Average Exercise Price⁽¹⁾		Fair Value⁽¹⁾⁽²⁾		Weighted Average Remaining Contractual Term (years)
Outstanding at December 31, 2009		5,564,884		$	52.54	$	19.20
Granted		2,372,919		$	33.04	$	15.41
Exercised		(426	)	$	29.73	$	10.44
Cancelled		(547,186	)	$	50.61	$	19.04

Outstanding at December 31, 2010		7,390,191		$	46.35	$	18.06		7.7

Exercisable at December 31, 2010		1,399,052		$	48.46	$	19.18		6.1

Outstanding at December 31, 2010		7,390,191		$	46.35	$	18.06
Granted ⁽³⁾		2,252,457		$	26.23	$	10.55
Exercised		—			—		—
Cancelled		(897,999	)	$	42.67	$	16.67

Outstanding at December 31, 2011		8,744,649		$	38.15	$	16.48		7.3

Vested and expected to vest at December 31, 2011		7,149,140		$	36.84	$	16.18		7.4

Exercisable at December 31, 2011		1,780,770		$	43.69	$	19.53		5.4

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

⁽²⁾	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.

⁽³⁾	There are no provisions in the Equity Plan for the issuance of SARs or restricted shares.

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. 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:


	2011			2010			2009
Expected volatility		65.8	%		71.4	%		65.9	%
Expected dividend yield		—			—			—
Expected term (in years)		4.8			6.6			6.8
Risk-free interest rate		1.1	%		2.4	%		2.5	%
Weighted average fair value per share of options granted⁽¹⁾	$	10.55		$	15.41		$	10.27

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

As of December 31, 2011, there was approximately $61.0 million of total unrecognized compensation cost related to stock option grants. This cost is expected to be recognized over a remaining weighted-average period of 2.9 years. For the years ended December 31, 2011, 2010, and 2009, the compensation cost that has been charged against income for stock option grants was approximately $21.8 million, $18.0 million, and $16.4 million, respectively, of which, for the year ended December 31, 2011, $13.8 million was included in corporate expenses and $8.0 million was included in property, general, administrative, and other in the Consolidated Statements of Operations. For the year ended December 31, 2010, $9.4 million of compensation cost was included in corporate expense and $8.6 million was included in property, general, administrative, and other in the Consolidated Statements of Operations. For the year ended December 31, 2009, $7.6 million of compensation cost was included in corporate expense and $8.8 million was included in property, general, administrative, and other in the Consolidated Statements of Operations.

Savings and Retirement Plan

We maintain a defined contribution savings and retirement plan, which, among other things, allows pre-tax and after-tax contributions to be made by employees to the plan. Under the plan, participating employees may elect to contribute up to 50% of their eligible earnings. Prior to February 2009, the Company matched 50% of the first six percent of employees' contributions. In February 2009, Caesars Entertainment announced the suspension of the employer match for all participating employees, where allowed by law or not in violation of an existing agreement. The Acquisition was a change in control under the savings and retirement plan, and, therefore, all unvested Company match as of the Acquisition became vested. Amounts contributed to the plan are invested, at the participant's direction, in up to 19 separate funds. Participants become vested in the matching contribution over five years of credited service. Our contribution expense for this plan was $38,000, $0.1 million, and $3.2 million, respectively, for the years ended December 31, 2011, 2010, and 2009. A modified matching program with a $600 annual cap per participant was approved by the Human Resources Committee in November 2011 and will be reinstated beginning in April 2012.

Deferred Compensation Plans

The Company has one currently active deferred compensation plan, the Executive Supplemental Savings Plan II ("ESSP II"); although, there are five other plans that contain deferred compensation assets: Harrah's Executive Deferred Compensation Plan ("EDCP"), the Harrah's Executive Supplemental Savings Plan ("ESSP"), Harrah's Deferred Compensation Plan ("HDCP"), the Restated Park Place Entertainment Corporation Executive Deferred Compensation Plan, and the Caesars World, Inc. Executive Security Plan. The deferred compensation plans are collectively referred to as "DCP."

Amounts deposited into DCP are unsecured liabilities of the Company. The EDCP and HDCP earn interest at rates approved by the Human Resources Committee of the Board of Directors. The other plans, including the ESSP II are variable investment plans, which allow employees to direct their investments by choosing from several investment alternatives. In connection with the 2005 acquisition of Caesars Entertainment, Inc., we assumed the outstanding liability for Caesars Entertainment, Inc.'s deferred compensation plan; however, the balance was frozen and former Caesars employees may no longer contribute to that plan. The total liability included in deferred credits and other for DCP at December 31, 2011 and 2010 was $85.2 million and $95.1 million, respectively. In connection with the administration of one of these plans, we have purchased company-owned life insurance policies insuring the lives of certain directors, officers, and key employees.

Beginning in 2005, we implemented the ESSP II for certain executive officers, directors, and other key employees of the Company to replace the ESSP. Eligible employees may elect to defer a percentage of their salary and/or bonus under ESSP II. Prior to February 2009, the Company had the option to make matching contributions with respect to deferrals of salary to those participants who are eligible to receive matching contributions under the Company's 40l(k) plan. In February 2009, the Company eliminated matching contributions with respect to deferrals of salary. Employees immediately vest in their own deferrals of salary and bonus and vest in Company funded matching and discretionary contributions over five years.

The Acquisition was a change in control under our deferred compensation plans, and, therefore, all unvested Company match as of the Acquisition became vested. The change in control also required that the pre-existing trust and escrow funds related to our deferred compensation plans be fully funded.

Subsequent to the Acquisition, contributions by the Company have been segregated in order to differentiate between the fully-funded trusts and escrows prior to the Acquisition and the post-acquisition contributions. In January 2010, the Company funded $5.6 million into the trust in order to increase the security of the participants' deferred compensation plan benefits.

Multiemployer Pension Plan

The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from a single-employer plan in the following aspects:

Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company's participation in these plans for the annual period ended December 31, 2011, is outlined in the table below. The "EIN/Pension Plan Number" column provides the Employer Identification Number ("EIN") and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act ("PPA") zone status available in 2011 and 2010 is for the plan years beginning January 1, 2011, and January 1, 2010, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. All plans detailed in the table below utilized extended amortization provisions to calculate zone status except Southern Nevada Culinary and Bartenders Pension Plan and Pension Plan of the UNITE HERE National Retirement Fund. The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending or has been implemented. With the exception of the Pension Plan of the UNITE HERE National Retirement Fund and the Southern Nevada Culinary and Bartenders Pensions Plan, all plans listed in the table below utilized the extended amortization provisions that affect the calculation of zone status. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.

Pension Protection
Act Zone Status

Contributions of CEOC
($ in millions)

Pension Fund

EIN/Pension
Plan Number

2011

2010

FIP/RP Status
Pending/Implemented

2011

2010

2009

Surcharge
Imposed

Expiration
Date of
Collective-
Bargaining
Agreement

Southern Nevada Culinary and Bartenders Pension Plan

88-6016617/001

Green

16.3

14.6

12.1

Various up to
July 2013

Pension Plan of the UNITE HERE National Retirement Fund

13-6130178/001

Red

Yes

12.8

12.3

11.8

Yes

Various up to
Sept. 2014

Western Conference of Teamsters Pension Plan

91-6145047/001

Green

4.7

4.1

4.0

Various up to
Sept. 2014

Nevada Resort Association IATSE Local 720 Retirement Plan

51-0144767/001

Green

Red

1.0

0.8

0.6

Various up to
June 2014

Central Pension Fund of the IUOE & Participating Employers⁽¹⁾

36-6052390/001

Green

5.6

5.7

4.4

Various up to
March 2013

Local 68 Engineers Union Pension Plan⁽²⁾

51-0176618/001

Green

Red

5.3

5.2

5.1

Various up to
June 2014

NJ Carpenters Pension Fund

22-6174423/001

Yellow

Red

Yes

1.2

1.1

1.3

Various up to
April 2014

Southwest Carpenters Pension Trust

95-6042875/001

Green

0.9

0.8

0.5

Various up to
April 2014

Other Funds

1.8

1.6

1.4

Total Contributions

49.6

46.2

41.2

⁽¹⁾	Plan years begin 2/1/11 and 2/1/10.

⁽²⁾	Plan years begin 7/1/11 and 7/1/10.

The Company was listed in its plans' Forms 5500 as providing more than 5% of the total contributions for the following plans and plan years:


Pension Fund		Year Contributions to Plan Exceeded More Than 5% of Total Contributions (as of December 31 of the Plan's Year End)

Pension Plan of the UNITE HERE National Retirement Fund		2010 and 2009

Southern Nevada Culinary and Bartenders Pension Plan		2010 and 2009

Local 68 Engineers Union Pension Plan		2010 and 2009

Nevada Resort Association IATSE Local 720 Retirement Plan		2010 and 2009

At the date these financial statements were issued, Forms 5500 were not available for the plan year ending in 2011.

Pension Commitments

With the acquisition of London Clubs in December 2006, we assumed a defined benefit plan, which provides benefits based on final pensionable salary. The assets of the plan are held in a separate trustee-administered fund and death-in-service benefits, professional fees, and other expenses are paid by the pension plan. The most recent actuarial valuation of the plan showed a deficit of approximately $56.4 million, which is recognized as a liability in our Consolidated Balance Sheet at December 31, 2011.

As discussed within Note 14, "Commitments and Contingent Liabilities", with our acquisition of Caesars Entertainment, Inc., we assumed certain obligations related to the Employee Benefits and Other Employment Matters Allocation Agreement by and between Hilton Worldwide, Inc. (formerly Hilton Hotels Corporation) and Caesars Entertainment, Inc. dated December 31, 1998, pursuant to which we shall retain or assume, as applicable, all liabilities and excess assets, if any, related to the Hilton Hotels Retirement Plan based on the ratio of accrued benefits of Hilton employees and the Company's employees covered under the plan. Based on this ratio, our share of any benefit or obligation would be approximately 30% of the total. The Hilton Hotels Retirement Plan is a defined benefit plan that provides benefits based on years of service and compensation, as defined. Since December 31, 1996, employees have not accrued additional benefits under this plan. The plan is administered by Hilton Worldwide, Inc. Hilton Worldwide, Inc. has informed the Company that, as of December 31, 2011, the plan benefit obligations exceeded the fair value of the plan assets by $90.1 million, of which $28.6 million is our share. We did not make contributions to the plan in 2011. Expected contributions for 2012 are $13.1 million, of which $4.2 million is our share.