-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JGk0vmNY3RNDudS65y5tCL92Dvhgvv/1Jj46LchUDfzAfCnvEjANoiNm5M145njH 3PDXePmKmZBU5q0+RrRCzA== 0000912057-96-022690.txt : 19961015 0000912057-96-022690.hdr.sgml : 19961015 ACCESSION NUMBER: 0000912057-96-022690 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19961011 SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROMUS HOTELS INC CENTRAL INDEX KEY: 0001024723 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 621602678 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-14023 FILM NUMBER: 96642804 BUSINESS ADDRESS: STREET 1: 755 CROSSOVER LANE CITY: MEMPHIS STATE: TN ZIP: 38117 BUSINESS PHONE: 9013745000 MAIL ADDRESS: STREET 1: 755 CROSSOVER LANE CITY: MEMPHIS STATE: TN ZIP: 38117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROMUS HOTEL CORP CENTRAL INDEX KEY: 0000944647 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 621596939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-14023-01 FILM NUMBER: 96642805 BUSINESS ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 BUSINESS PHONE: 9013745103 MAIL ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 S-3 1 S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ PROMUS HOTEL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 62-1596939 (State or other jurisdiction 755 CROSSOVER LANE (I.R.S. Employer of incorporation or MEMPHIS, TENNESSEE 38117 Identification organization) (901) 374-5000 No.)
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------------ PROMUS HOTELS, INC. (Exact name of registrant as specified in its charter) DELAWARE 62-1602678 (State or other jurisdiction 755 CROSSOVER LANE (I.R.S. Employer of incorporation or MEMPHIS, TENNESSEE 38117 Identification organization) (901) 374-5000 No.)
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------------ RALPH B. LAKE, ESQ. SENIOR VICE PRESIDENT AND GENERAL COUNSEL PROMUS HOTEL CORPORATION 755 CROSSOVER LANE MEMPHIS, TENNESSEE 38117 (901) 374-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPIES TO: JOHN M. NEWELL, ESQ. LATHAM & WATKINS 633 WEST FIFTH STREET, SUITE 4000 LOS ANGELES, CALIFORNIA 90071-2007 (213) 485-1234 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective as determined by market conditions and other factors. ------------------------------ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest investment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. /X/ ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE Debt Securities of Promus Hotels, Inc................................. $300,000,000 100% $300,000,000 $90,909 Guarantee of Promus Hotel Corporation......................... (2) (2) (2) (2)
(1) Estimated solely for the purpose of calculating the registration fee. (2) No separate consideration will be received for the Guarantee. ------------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED OCTOBER 11, 1996. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS $300,000,000 PROMUS HOTELS, INC. DEBT SECURITIES ------------------ Promus Hotels, Inc., a Delaware corporation ("PHI"), may offer from time to time in one or more series its debt securities consisting of debentures, notes or other evidence of indebtedness (the "Debt Securities"), in amounts as may be sold for an aggregate public offering price of up to $300,000,000 on terms to be determined at the time of the offering. At the option of PHI, the Debt Securities may be issued as senior secured Debt Securities, as senior unsecured Debt Securities, as senior subordinated Debt Securities or as subordinated Debt Securities, and in any combination thereof. The payment of principal and interest with respect to the Debt Securities will be unconditionally guaranteed by Promus Hotel Corporation ("Promus"), the parent company of PHI. See "Description of Debt Securities--Guarantee." The Debt Securities may be offered separately or together, in separate series, in amounts, at prices and on terms determined by market conditions at the time of sale and to be set forth in one or more supplements to this Prospectus (each, a "Prospectus Supplement"). The specific terms of the Debt Securities for which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement which will include, where applicable: the specific title, aggregate principal amount, authorized denominations, maturity (which may be fixed or extendible), interest rate or rates (which may be fixed or variable) (or manner of calculation thereof), if any, the time of payment of interest, if any, any terms of redemption at the option of PHI or repayment at the option of the holder, any terms for sinking fund payments, any security interest or subordination provisions, additional covenants, initial public offering price, purchase price and other terms with respect to the Debt Securities. The Debt Securities may be issued as Original Issue Discount Securities to be sold at a substantial discount below their principal amount and, if issued, certain terms thereof will be set forth in the Prospectus Supplement related thereto. The Debt Securities will be represented by global notes registered in the name of a nominee of The Depository Trust Company, as Depositary. Beneficial interests in the Debt Securities will be shown on, and transfers thereof will be effected only through, records maintained by the Depositary (with respect to participants' interests) and its participants. Except as described in this Prospectus, Debt Securities in certificated form will not be issued in exchange for the global notes. See "Description of Debt Securities." The applicable Prospectus Supplement will also contain information, where applicable, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Debt Securities covered by such Prospectus Supplement. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The Debt Securities may be offered directly to one or more purchasers, through agents designated from time to time by PHI or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of the Debt Securities, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in the applicable Prospectus Supplement. See "Plan of Distribution." No Debt Securities may be sold without delivery of a Prospectus Supplement describing the method and terms of the offering of such Debt Securities. ------------------------ THE DATE OF THIS PROSPECTUS IS OCTOBER , 1996. AVAILABLE INFORMATION PHI and Promus have filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), for the registration of the Debt Securities offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are contained in exhibits and schedules to, or incorporated by reference in, the Registration Statement as permitted by the rules and regulations of the Commission. For further information with respect to PHI and Promus and the Debt Securities offered hereby, reference is made to the Registration Statement, including the exhibits thereto, and financial statements and notes filed as a part thereof or incorporated by reference therein. Statements made in this Prospectus concerning the contents of any document referred to herein are not necessarily complete. With respect to each such document filed with the Commission as an exhibit to, or incorporated by reference in, the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. PHI and Promus are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance therewith, Promus files consolidated reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by Promus may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60606, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may be obtained by mail from the Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding PHI and Promus. In addition, such material may also be inspected and copied at the offices of the New York, Chicago, Pacific and Philadelphia Stock Exchanges, on which exchanges the Common Stock of Promus is listed. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents have been filed with the Commission and are incorporated by reference in this Prospectus: (i) Annual Report on Form 10-K of Promus (File No. 1-11463), and Promus's Amended Annual Report on Form 10-K/A, for the year ended December 31, 1995 (collectively, the "1995 Promus Form 10-K"), (ii) Promus's Quarterly Report on Form 10-Q for the period ended March 31, 1996, and (iii) Promus's Quarterly Report on Form 10-Q for the period ended June 30, 1996. All documents filed by Promus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Debt Securities shall be deemed to be incorporated herein by reference and to be a part hereof from the respective dates of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of all documents which are incorporated herein by reference (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference in such information) will be provided without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request. Copies of this Prospectus, as amended or supplemented from time to time, and any other documents (or parts of documents) that constitute part of the Prospectus under Section 10(a) of the Securities Act will also be provided without charge to each such person, upon written 2 or oral request. Requests should be directed to Promus, at its principal executive offices at 755 Crossover Lane, Memphis, Tennessee 38117, Attention: Nadine Greenwood, telephone (901) 374-5000. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE DEBT SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY (THE "OFFERING") TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PHI OR PROMUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE DEBT SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. 3 THE COMPANY Promus Hotel Corporation ("Promus") is one of the leading hotel companies in the United States. The Company operates the Embassy Suites, Embassy Vacation Resorts, Hampton Inn, Hampton Inn & Suites and Homewood Suites hotel brands. Promus was incorporated on March 2, 1995 under Delaware law and conducts its business through its wholly-owned subsidiary, Promus Hotels, Inc. ("PHI"), and PHI's subsidiaries. PHI was incorporated on May 10, 1995 under Delaware law. The principal asset of Promus is the stock of PHI, which holds, directly or indirectly through subsidiaries, substantially all of the assets of the Company's businesses. The principal executive offices of Promus and PHI are located at 755 Crossover Lane, Memphis, Tennessee 38117, telephone (901) 374-5000. Unless the context otherwise requires, the "Company" refers to Promus Hotel Corporation, together with its subsidiaries. On June 30, 1995, The Promus Companies Incorporated ("PCI") split into two independent public corporations, one for conducting its casino entertainment business and one for conducting its hotel business. The stockholders of PCI retained their shares of PCI (now known as Harrah's Entertainment, Inc.) and received one share of Promus Hotel Corporation for each two shares of PCI they owned prior to the split. Embassy Suites hotels, of which there were 124 hotels in operation on June 30, 1996, appeal to the traveler who has a need or desire for greater space and more focused services than are available in traditional upscale hotels. Management believes that Embassy Suites hotels compose the largest all-suite upscale hotel system in the United States by number of suites and system revenues. Hampton Inn hotels are moderately priced hotels designed to attract the business and leisure traveler desiring quality accommodations at affordable prices. Since 1984, when the brand was introduced, the system has grown to 563 hotels in operation as of June 30, 1996. Homewood Suites hotels, of which there were 33 in operation on June 30, 1996, represent the Company's entry in the extended stay market and target the traveler who stays five or more consecutive nights, as well as the traditional business and leisure traveler. Hampton Inn & Suites hotels incorporate the best features of the Hampton Inn and Homewood Suites brands, offering both traditional hotel room accommodations and apartment-style suites within one property. There were nine Hampton Inn & Suites hotels in operation as of June 30, 1996. Embassy Vacation Resorts is Promus's newest brand, marking the Company's entry into the vacation ownership industry. As of June 30, 1996, there were two Embassy Vacation Resorts open, one in Orlando and the other at Poipu Point on the island of Kauai in Hawaii. A third property is under construction at South Lake Tahoe, California. As of June 30, 1996, the Company's hotel brands included 699 properties licensed by the Company, 85 of which are also managed by the Company, and 30 properties owned and operated by the Company. These properties contained 96,087 rooms and suites. In addition, the Company managed nine properties containing 2,325 suites which are to be converted to the Embassy Suites brand. All of the Company's hotel brands are managed by a single senior management team. The Company pursues a strategy of growing its hotel brands by minimizing its ownership of hotel real estate and concentrating on obtaining new franchise or management contracts. As part of this strategy, the Company seeks to sell owned hotels to realize the value of the underlying assets and to increase its return on investment. Following such sales, the hotels typically are operated either by the Company under management contracts or by the purchasers directly. In both cases such hotels receive franchise licenses from the Company. 4 Each of the Company's hotel brands uses a business system that includes centralized reservations and marketing systems, as well as local property management and revenue management systems. This sophisticated business system is fully integrated and linked to the Promus hotels network, a communications network which connects all Promus hotels to the Company's central reservation office and more than 300,000 travel agents worldwide. The Embassy Suites, Hampton Inn, Hampton Inn & Suites and Homewood Suites business systems' reservation modules receive reservation requests entered on terminals located at all of their respective hotels and reservation centers, major domestic and international airlines via their global distribution systems, and direct from consumers via computer access to each brand's Internet site. The systems immediately confirm reservations or indicate accommodations available at alternate Promus hotels. Reservations are transmitted automatically to the hotel for which the reservation is made. A major element of the Company's business strategy is an unconditional 100% guarantee of service satisfaction. All of the Company's hotel brands offer suites/rooms exclusively for non-smoking guests. Promus generates a substantial percentage of its revenues from licensing and management contract operations. LICENSING The Company's revenues from licensing operations for all Embassy Suites, Hampton Inn, Hampton Inn & Suites and Homewood Suites hotels consist of initial license application fees and continuing royalties. Effective April 1, 1996, the initial license application fee for an Embassy Suites hotel is $500 per room, with a minimum of $100,000, and $450 per room, with a minimum of $45,000, for each Hampton Inn, Hampton Inn & Suites and Homewood Suites hotel. The license agreements provide for a four percent royalty based upon gross rooms/suites revenues and also provide for a separate marketing and reservation contribution. In screening applicants for license agreements, the Company evaluates the character, operations ability, experience and financial responsibility of each applicant or its principals; the Company's prior business dealings, if any, with the applicant; the suitability of the proposed hotel location and other factors. The license agreement establishes requirements for service and quality of accommodations. The Company provides certain training for licensee management and makes regular inspections of licensed hotels. License agreements for new hotels generally have a 20-year term. The Company may terminate a license agreement if the licensee fails to cure a breach of the license agreement in a timely manner. In certain instances, a license agreement may be terminated by the licensee, but such termination generally requires a payment to the Company. MANAGEMENT CONTRACTS The Company's revenues from management contracts consist primarily of management fees which are up to five percent of adjusted gross revenues of the hotel. The contract terms governing management fees vary depending on the size and location of the hotel and other factors relative to the property. Under the Company's management contracts, the Company, as the manager, operates or supervises all aspects of the hotel's operations. The hotel owner is generally responsible for all costs, expenses and liabilities incurred in connection with operating the hotel, including the expenses and salaries of all hotel employees. The hotel owner also enters into a license agreement with the Company and pays the royalty and marketing/reservation contribution as provided in the license agreement. In addition, the hotel owner is often required to set aside a certain percentage of hotel revenues for capital replacement. The Company's management contracts typically have a term of ten years and most give the Company specified renewal rights. The management contract may be terminated by either party due to an uncured default by the other party. 5 RATIO OF EARNINGS TO FIXED CHARGES The following are the consolidated ratios of earnings to fixed charges for Promus for the six months ended June 30, 1996 and each of the fiscal years 1995, 1994, 1993, 1992 and 1991.
SIX MONTHS ENDED JUNE 30, 1996 1995 1994 1993 1992 1991 - ------------------------------------------ ----- ----- ----- ----- ----- 4.0x................................... 3.2x 3.0x 1.9x 1.1x 0.8x
For purposes of computing this ratio, earnings consist of income or loss from continuing operations before extraordinary items and before income taxes, plus fixed charges (excluding capitalized interest) and including only the distributed income of less than 50% owned entities accounted for under the equity method. Fixed charges include interest whether expensed or capitalized, amortization of debt expense related to indebtedness and such portion of rental expense deemed by Promus to be representative of interest. USE OF PROCEEDS PHI intends to use the net proceeds from the sale of the Debt Securities for general corporate purposes, including, but not limited to, acquisitions, capital expenditures and working capital requirements; to repay, redeem or repurchase outstanding indebtedness; to repurchase outstanding Promus common stock; or for such other purposes as may be specified in the Prospectus Supplement. A description of any indebtedness to be refinanced with the proceeds of the Debt Securities will be set forth in the applicable Prospectus Supplement. DESCRIPTION OF THE DEBT SECURITIES The following description of the terms of the Debt Securities sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement and the extent to which such general provisions may apply to the Debt Securities will be described in a Prospectus Supplement relating to such Debt Securities. The Debt Securities may constitute senior secured debt ("Senior Secured Debt Securities"), senior unsecured debt ("Senior Unsecured Debt Securities"), senior subordinated debt ("Senior Subordinated Debt Securities") or subordinated debt ("Subordinated Debt Securities"), or any combination thereof, of PHI. Each such class of Debt Securities will be issued under one or more indentures, each dated as of a date on or before the issuance of the Debt Securities to which it relates and in the form that has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, subject to such amendments or supplements as may be adopted from time to time. Each such indenture (collectively, the "Indenture") will be entered into among PHI, as obligor, Promus, as guarantor, and a trustee (the "Trustee"), which may be the same Trustee for different classes of Debt Securities. The terms of the Debt Securities include those stated in the applicable Indenture and those made part of such Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and holders of the Debt Securities are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summaries of certain provisions of the Debt Securities and the Indenture, while including a discussion of all material aspects or features thereof, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Debt Securities and the Indenture, including the definitions therein of certain terms which are not otherwise defined in this Prospectus. Wherever particular provisions or defined terms of the Indenture are referred to, such provisions or defined terms are incorporated herein by reference. 6 GENERAL The Indenture will not limit the aggregate principal amount of Debt Securities of PHI which may be issued thereunder. Debt Securities may be issued thereunder from time to time as a single series or in two or more separate series up to the aggregate principal amount from time to time authorized by PHI for each series. As of the date of this Prospectus, PHI has authorized the issuance under the Indenture of up to $300 million aggregate principal amount of the Debt Securities. The Debt Securities will be secured senior, unsecured senior, senior subordinated or subordinated obligations or any combination thereof of PHI. The Debt Securities may be issued in one or more series with the same or various maturities, at par, at a premium, or with an original issue discount. Reference is made to the Prospectus Supplement relating to the particular series of Debt Securities offered thereby for the following terms of the Debt Securities: (i) the designation of the Debt Securities of the series, which shall distinguish the Debt Securities of the series from the Debt Securities of all other series; (ii) any limit upon the aggregate principal amount of the Debt Securities of the series that may be authenticated and delivered under the Indenture and any limitation on the ability of PHI to increase such aggregate principal amount after the initial issuance of the Debt Securities of that series; (iii) the date or dates on which the principal of the Debt Securities of the series is payable (which date or dates may be fixed or extendible); (iv) the rate or rates (which may be fixed or variable) per annum at which the Debt Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, on which such interest shall be payable and (in the case of Registered Securities (which is defined as any Debt Security registered on the Security Register)) on which a record shall be taken for the determination of Holders to whom interest is payable and/or the method by which such rate or rates or date or dates shall be determined; (v) if other than as provided in the Indenture, the place or places where the principal of and any interest on Debt Securities of the series shall be payable, any Registered Securities of the series may be surrendered for exchange, notices, demands to or upon PHI in respect of the Debt Securities of the series and the Indenture may be served and notice to Holders may be published; (vi) the right, if any, of PHI to redeem Debt Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices at which and any terms and conditions upon which Debt Securities of the series may be so redeemed, pursuant to any sinking fund or otherwise; (vii) the obligation, if any, of PHI to redeem, purchase or repay Debt Securities of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and any of the terms and conditions upon which Debt Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (viii) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Debt Securities of the series shall be issuable; (ix) if other than the principal amount thereof, the portion of the principal amount of Debt Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof; (x) if other than the coin or currency in which the Debt Securities of the series are denominated, the coin or currency in which payment of the principal of or interest on the Debt Securities of the 7 series shall be payable or if the amount of payments of principal of and/or interest on the Debt Securities of the series may be determined with reference to an index based on a coin or currency other than that in which the Debt Securities of the series are denominated, the manner in which such amounts shall be determined; (xi) if other than the currency of the United States of America, the currency or currencies, including composite currencies, in which payment of the principal of and interest on the Debt Securities of the series shall be payable, and the manner in which any such currencies shall be valued against other currencies in which any other Debt Securities shall be payable; (xii) whether the Debt Securities of the series or any portion thereof will be issuable as Registered Securities (and if so, whether such Debt Securities will be issuable as Registered Global Securities (as defined below)) or Unregistered Securities (which is defined as any Security other than a Registered Security) (with or without coupons), or any combination of the foregoing, any restrictions applicable to the offer, sale or delivery of Unregistered Securities or the payment of interest thereon and, if other than as provided herein, the terms upon which Unregistered Securities of any series may be exchanged for Registered Securities of such series and vice versa; (xiii) whether and under what circumstances PHI will pay additional amounts on the Debt Securities of the series held by a person who is not a U.S. person in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether PHI will have the option to redeem such Debt Securities rather than pay such additional amounts; (xiv) if the Debt Securities of the series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Debt Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions; (xv) any trustees, depositaries, authenticating or paying agents, transfer agents or the registrar or any other agents with respect to the Debt Securities of the series; (xvi) provisions, if any, for the defeasance of the Debt Securities of the series (including provisions permitting defeasance of less than all Debt Securities of the series), which provisions may be in addition to, in substitution for, or in modification of (or any combination of the foregoing) the provisions of the Indenture; (xvii) if the Debt Securities of the series are issuable in whole or in part as one or more Registered Global Securities, the identity of the Depositary for such Registered Global Security or Debt Securities (which Depositary shall, at the time of its designation as Depositary and at all times while it serves as Depositary, be a clearing agency registered under the Exchange Act and any other applicable statute or regulation); (xviii) any additions to or changes in events of default or covenants with respect to the Debt Securities of the series; (xix) the subordination provisions, if any, relating to such Debt Securities; (xx) with respect to any series of Senior Secured Debt Securities, the type, amount and other terms of, and provisions relating to, the collateral to be provided as security, and any deletions, additions or modifications to the Indenture to permit the issuance of Senior Secured Debt Securities or the administration thereof; and (xxi) any other terms of the Debt Securities of the series (which terms shall not be inconsistent with the provisions of the Indenture). The Indenture does not contain any restriction on the payment of dividends or any financial ratio covenants. The Indenture does not contain provisions which would afford the Holders of the Debt 8 Securities protection in the event of a transfer of assets to a subsidiary and incurrence of unsecured debt by such subsidiary, or in the event of a decline in PHI's credit quality resulting from highly leveraged or other similar transactions involving PHI. PHI is dependent on the receipt of dividends or other payments from its subsidiaries to make payments on interest and principal on the Debt Securities. Neither the Indenture nor any other material contract restricts subsidiaries of PHI from making dividends or distributions to PHI. GLOBAL SECURITIES Debt Securities, issued in the form of fully registered global Securities (a "Registered Global Security") will be deposited with The Depository Trust Company (the "Depositary") or a nominee thereof. Unless and until it is exchanged in whole or in part for Debt Securities in definitive registered form, a Registered Global Security may not be transferred except as a whole by the Depositary for such Registered Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. The Depositary currently accepts only securities that are denominated in U.S. dollars. Ownership of beneficiary interests in a Registered Global Security will be limited to persons that have accounts with the Depositary for such Registered Global Security ("participants") or persons that may hold interests through participants. Upon the issuance of a Registered Global Security, the Depositary for such Registered Global Security will credit, on its book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the Debt Securities represented by such Registered Global Security beneficially owned by such participants. The accounts to be credited will be designated by any dealers, underwriters or agents participating in the distribution of such Debt Securities. Ownership of beneficial interests in such Registered Global Security will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by the Depositary for such Registered Global Security (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in Registered Global Securities. So long as the Depositary for a Registered Global Security, or its nominee, is the owner of record of such Registered Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Registered Global Security for all purposes under the Indenture. Except as set forth below, owners of beneficial interests in a Registered Global Security will not be entitled to have the Debt Securities represented by such Registered Global Security registered in their names, and will not receive or be entitled to receive physical delivery of such Debt Securities in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in a Registered Global Security must rely on the procedures of the Depositary for such Registered Global Security and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder of record under the Indenture. PHI understands that under existing industry practices, if PHI requests any action of holders or if any owner of a beneficial interest in a Registered Global Security desires to give or take any action which a holder is entitled to give or take under the Indenture, the Depositary for such Registered Global Security would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instruction of beneficial owners holding through them. 9 Payments of principal of, premium, if any, and interest on Debt Securities represented by a Registered Global Security registered in the name of the Depositary or its nominee will be made to such Depositary or its nominee, as the case may be, as the registered owner of such Registered Global Security. None of PHI, Promus, the Trustee or any other agent of PHI or agent of the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in such Registered Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. PHI expects that the Depositary for any Debt Securities represented by a Registered Global Security, upon receipt of any payment of principal, premium, if any, or interest in respect of such Registered Global Security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in such Registered Global Security as shown on the records of such Depositary. PHI also expects that payments by participants to owners of beneficial interests in such Registered Global Security held through such participants will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary for Debt Securities represented by a Registered Global Security notifies PHI that it is at any time unwilling or unable to continue as Depositary or ceases to be eligible under applicable law, and a successor Depositary eligible under applicable law is not appointed by PHI within 90 days, PHI will issue such Debt Securities in definitive form in exchange for such Registered Global Security. In addition, PHI may at any time and in its sole discretion determine not to have any of the Debt Securities of a series represented by one or more Registered Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for all of the Registered Global Security or Registered Global Securities representing such Debt Securities. Any Debt Securities issued in definitive form in exchange for a Registered Global Security will be registered in such name or names as the Depositary shall instruct the Trustee. It is expected that such instructions will be based upon directions received by the Depositary from participants with respect to ownership of beneficial interests in such Registered Global Security. SAME-DAY SETTLEMENT IN RESPECT OF GLOBAL NOTES So long as any Debt Securities are represented by Registered Global Securities registered in the name of the Depositary or its nominee, such Debt Securities will trade in the Depositary's Same-Day Funds Settlement System, and secondary market trading activity in such Debt Securities will therefore be required by the Depositary to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Debt Securities. GUARANTEE Promus irrevocably and unconditionally will guarantee the payment of all obligations of PHI under the Debt Securities. Rights of Holders pursuant to such Guarantee of the Senior Subordinated Debt Securities and the Subordinated Debt Securities will be subordinate to the rights of holders of the Senior Debt of Promus to payment in full in the same manner as the rights of Holders of the Senior Subordinated Debt Securities and the Subordinated Debt Securities, respectively, are subordinate to those of the Senior Debt of PHI. Subject to the subordination provisions of the Indenture, if PHI defaults in the payment of the principal of, premium, if any, or interest on such Debt Securities when and as the same shall become due, whether upon maturity, acceleration, call for redemption or otherwise, without the necessity of action by the Trustee or any Holder of such Debt Securities, Promus shall be required promptly and fully to make such payment. The Indenture provides for the release of the Guarantor in certain circumstances, including (i) PHI ceases to be a wholly owned Subsidiary of Promus, or (ii) a transfer by PHI of all or substantially all of its assets or a merger of PHI which transfer or merger is governed by the "Limitation on Merger, Sale or Consolidation" covenant, and in connection with which the transferee entity assumes PHI's obligations 10 under the Indenture and such transfer or merger otherwise complies with the requirements of such covenant. Promus conducts substantially all of its business through PHI and its Subsidiaries and does not own any material assets other than all of the stock of PHI. Promus's obligations under the Guarantee are as a secondary obligor, and (in the case of Senior Subordinated Debt Securities or Subordinated Debt Securities) such obligations will be subordinated to all present and future Senior Debt of Promus, as described above. Promus is presently dependent on the receipt of dividends or other payments from PHI to make payments on the Guarantee of the Debt Securities. SUBORDINATION The indebtedness evidenced by the Senior Subordinated Debt Securities and the Subordinated Debt Securities (including principal, premium, if any, and interest) will be subordinated in right of payment, as set forth in the Indenture and any Prospectus Supplement, to the rights of holders of all Senior Debt of PHI to prior payment in full, whether outstanding on the date of such Indenture or thereafter created, incurred, assumed or guaranteed. Because the Debt Securities will not be guaranteed by any of PHI's Subsidiaries, the Debt Securities (and the Guarantees thereof, in the case of Promus) also effectively will be subordinated by operation of law to all liabilities, including trade payables and capitalized lease obligations, if any, of PHI's Subsidiaries (and, with respect to Promus, Promus's Subsidiaries). Any right of PHI or Promus to receive the assets of any of their Subsidiaries upon such Subsidiary's liquidation or reorganization (and the consequent right of the Holders of such Debt Securities to participate in those assets) effectively will be subordinated to the claims of any such Subsidiary's creditors (including trade creditors), except to the extent that PHI (or Promus, as applicable) is itself recognized as a creditor of such Subsidiary, in which case the claims of PHI (or Promus, as applicable) would still be subordinate to any indebtedness of such Subsidiary senior to that held by PHI (or Promus, as applicable). CERTAIN COVENANTS The following covenants apply to Debt Securities that are Senior Unsecured Debt Securities. RESTRICTIONS ON LIENS. The Indenture provides that PHI will not, and will not permit any Restricted Subsidiary (as defined herein) to, create or incur any Lien (as defined herein) on any shares of stock, indebtedness or other obligations of a Restricted Subsidiary (as defined herein) or any Principal Property (as defined herein) of PHI or a Restricted Subsidiary, whether such shares of stock, indebtedness or other obligations of a Restricted Subsidiary or Principal Property are owned at the date of the Indenture or thereafter acquired, unless PHI secures or causes such Restricted Subsidiary to secure the outstanding Debt Securities equally and ratably with all indebtedness secured by such Lien, so long as such indebtedness shall be so secured. This covenant shall not apply in the case of: (i) the creation of any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property acquired after the date of the Indenture (including acquisitions by way of merger or consolidation) by PHI or a Restricted Subsidiary contemporaneously with such acquisition, or within 24 months thereafter, to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any Lien upon any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property acquired after the date of the Indenture existing at the time of such acquisition, or the acquisition of any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property subject to any Lien without the assumption thereof; (ii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property existing at the date of the Indenture; (iii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property in favor of PHI or any Restricted Subsidiary; (iv) any Lien on any Principal Property being constructed or improved securing loans to finance such construction or improvements; (v) any Lien on shares of stock, indebtedness or other 11 obligations of a Subsidiary or any Principal Property incurred in connection with the issuance of tax-exempt governmental obligations (including, without limitation, industrial revenue bonds and similar financings); (vi) any mechanics', material-men's, carriers' or other similar Liens arising in the ordinary course of business with respect to obligations which are not yet due or which are being contested in good faith; (vii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property for taxes, assessments or governmental charges or levies not yet delinquent, or already delinquent but the validity of which is being contested in good faith; (viii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property arising in connection with legal proceedings being contested in good faith, including any judgment Lien so long as execution thereon is stayed; (ix) any landlord's Lien on fixtures located on premises leased by PHI or a Restricted Subsidiary in the ordinary course of business, and tenants' rights under leases, easements and similar Liens not materially impairing the use or value of the property involved; (x) any Lien arising by reason of deposits necessary to qualify PHI or any Restricted Subsidiary to conduct business, maintain self-insurance, or obtain the benefit of, or comply with, any law; (xi) Liens resulting from the deposit of funds or evidences of indebtedness in trust for the purpose of defeasing indebtedness of PHI or of any of its Subsidiaries; (xii) Liens existing on property or indebtedness of, or an equity interest in, any corporation, partnership or any other entity at the time such corporation, partnership or other entity becomes a Restricted Subsidiary; (xiii) Liens on the stock, partnership or other equity interest of PHI or any Subsidiary in any Joint Venture or any Subsidiary which owns an equity interest in such Joint Venture, to secure Debt, provided the amount of such Debt is contributed and/or advanced solely to such Joint Venture; and (xiv) any renewal of or substitution for any Lien permitted by any of the preceding clauses (i) through (xiii), PROVIDED, in the case of a Lien permitted under clause (i), (ii) or (iv), the principal amount of indebtedness secured thereby does not exceed (x) the greater of (i) the principal amount secured thereby at the time of such renewal or substitution, and (ii) 80% of the fair market value (in the opinion of the Company's Board of Directors) of the properties subject to such renewal or substitution plus (y) any costs incurred in connection with such renewal or substitution. Notwithstanding the foregoing, PHI or any Restricted Subsidiary may create or assume Liens in addition to those permitted by the preceding sentence of this paragraph, and renew, extend or replace such Liens, provided that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt (as defined herein) does not exceed the greater of (x) $50 million, or (y) 15% of Consolidated Net Tangible Assets (as defined herein). RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS. The Indenture provides that PHI will not, and will not permit any Restricted Subsidiary to, sell or transfer, directly or indirectly, except to PHI or a Restricted Subsidiary, any Principal Property as an entirety, or any substantial portion thereof, with the intention of taking back a lease of such property, except a lease for a period of three years or less at the end of which it is intended that the use of such property by the lessee will be discontinued; PROVIDED that, notwithstanding the foregoing, PHI or any Restricted Subsidiary may sell any such Principal Property and lease it back for a longer period (i) if PHI or such Restricted Subsidiary would be entitled, pursuant to the provisions described above under "--Restrictions on Liens," to create a Lien on the property to be leased securing Funded Debt (as defined herein) in an amount equal to the Attributable Debt (as defined herein) with respect to such sale and lease-back transaction without equally and ratably securing the outstanding Debt Securities or (ii) if (A) PHI promptly informs the Trustee of such transaction, and (B) PHI causes an amount equal to the fair value (as determined by Board Resolution of PHI) of such property to be applied: (1) to the purchase of other property that will constitute Principal Property having a fair value at least equal to the fair value of the property sold, or (2) to the retirement within 240 days after receipt of such proceeds, of Funded Debt incurred or assumed by PHI or a Restricted Subsidiary (including the Debt Securities); PROVIDED further that, in lieu of applying all of or any part of such net proceeds to such retirement, PHI may, within 240 days after such sale, deliver or cause to be delivered to the applicable Trustee for cancellation either debentures or notes evidencing Funded Debt of PHI (which may include the Debt Securities) or of a Restricted Subsidiary previously authenticated and delivered by the applicable Trustee, and not theretofore tendered for sinking fund purposes or called for a sinking fund or otherwise 12 applied as a credit against an obligation to redeem or retire such notes or debentures, and a certificate of an officer of PHI (which shall be delivered to the Trustee) stating that PHI elects to deliver or cause to be delivered such debentures or notes in lieu of retiring Funded Debt as hereinabove provided. If PHI shall so deliver debentures or notes to the applicable Trustee and PHI shall duly deliver such officer's certificate, the amount of cash which PHI shall be required to apply to the retirement of Funded Debt under this provision of the Indenture shall be reduced by an amount equal to the aggregate of the then applicable optional redemption prices (not including any optional sinking fund redemption prices) of such debentures or notes, or, if there are not such redemption prices, the principal amount of such debentures or notes; PROVIDED, that in the case of debentures or notes which provide for an amount less than the principal amount thereof to be due and payable upon a declaration of the maturity thereof, such amount of cash shall be reduced by the amount of principal of such debentures or notes that would be due and payable as of the date of such application upon a declaration of acceleration of the maturity thereof pursuant to the terms of the indenture pursuant to which such debentures or notes were issued. Notwithstanding the foregoing, PHI or any Restricted Subsidiary may enter into sale and lease-back transactions in addition to those permitted by this paragraph without any obligation to retire any outstanding Debt Securities or other Funded Debt, PROVIDED that at the time of entering into such sale and lease-back transactions and after giving effect thereto, Exempted Debt does not exceed the greater of (x) $50 million, or (y) 15% of Consolidated Net Tangible Assets. CERTAIN DEFINITIONS The term "Attributable Debt" as defined in the Indenture means when used in connection with a sale and lease-back transaction referred to above under "--Restrictions on Sale and Lease-Back Transactions," on any date as of which the amount thereof is to be determined, the product of (a) the net proceeds from such sale and lease-back transaction multiplied by (b) a fraction, the numerator of which is the number of full years of the term of the lease relating to the property involved in such sale and lease-back transaction (without regard to any options to renew or extend such term) remaining on the date of the making of such computation and the denominator of which is the number of full years of the term of such lease measured from the first day of such term. The term "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of the Company and its Restricted Subsidiaries for the total assets (including investments in Joint Ventures) (less accumulated depletion, depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, after giving effect to purchase accounting and after deducting therefrom, to the extent included in total assets, in each case as determined on a consolidated basis in accordance with GAAP (without duplication): (i) the aggregate amount of liabilities of the Company and its Restricted Subsidiaries that may properly be classified as current liabilities (including taxes accrued as estimated); (ii) current indebtedness and current maturities of long-term indebtedness; (iii) minority interests in the Company's Restricted Subsidiaries held by Persons other than the Company or a wholly-owned Restricted Subsidiary of the Company; and (iv) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items. The term "Exempted Debt" as defined in the Indenture means the sum, without duplication, of the following items outstanding as of the date Exempted Debt is being determined: (i) indebtedness of PHI and its Restricted Subsidiaries incurred after the date of the Indenture and secured by liens created or assumed or permitted to exist pursuant to the provision of the Indenture described above under "-- Restrictions on Liens" and (ii) Attributable Debt of PHI and its Restricted Subsidiaries in respect of all sale and lease-back transactions with regard to any Principal Property entered into pursuant to the provision of the Indenture described above under "--Restrictions on Sale and Lease-Back Transactions." 13 The term "Funded Debt" as defined in the Indenture means all indebtedness for money borrowed, including purchase money indebtedness, having a maturity of more than one year from the date of its creation or having a maturity of less than one year but by its terms being renewable or extendible, at the option of the obligor in respect thereof, beyond one year from the date of its creation. The terms "Holder" or "Securityholder" as defined in the Indenture mean the registered holder of any Debt Security with respect to registered Debt Securities and the bearer of any unregistered Debt Security or any coupon appertaining thereto, as the case may be. The term "Joint Venture" is defined in the Indenture to mean any partnership, corporation or other entity, in which up to and including 50% of the partnership interests, outstanding voting stock or other equity interests is owned, directly or indirectly, by PHI and/or one or more subsidiaries. The term "Lien" as defined in the Indenture means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. The term "Original Issue Discount Security" as defined in the Indenture means any Debt Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to the Indenture. The term "Principal Property" as defined in the Indenture means land, land improvements, buildings and associated equipment owned or leased pursuant to a capital lease and used by PHI or a Restricted Subsidiary primarily in the hotel business which exceeds 2% of Consolidated Net Tangible Assets, but shall not include any such property financed through the issuance of tax exempt governmental obligations (including, without limitation, industrial revenue bonds and similar financings). The term "Restricted Subsidiary" as defined in the Indenture means any Subsidiary organized and existing under the laws of the United States of America and the principal business of which is carried on within the United States of America which owns or is a lessee pursuant to a capital lease of any Principal Property other than: (i) each Subsidiary the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination thereof; and (ii) each Subsidiary formed or acquired after the date hereof for the purpose of acquiring the business or assets of another Person and which does not acquire all or any substantial part of the business or assets of the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that any Subsidiary may be declared a Restricted Subsidiary by Board Resolution, effective as of the date such Board Resolution is adopted; PROVIDED, FURTHER, that any such declaration may be rescinded by further Board Resolution, effective as of the date such further Board Resolution is adopted. The term "Subsidiary" as defined in the Indenture means with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding Voting Stock (as defined in the Indenture) is owned directly or indirectly, by such Person and one or more other Subsidiaries of such Person. RESTRICTIONS ON MERGERS AND SALES OF ASSETS Under the Indenture, PHI shall not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person (other than a consolidation with or merger with or into a Subsidiary or a sale, conveyance, transfer, lease or other disposition to a Subsidiary) or permit any Person to merge with or into PHI unless: (a) either (i) PHI shall 14 be the continuing Person or (ii) the Person (if other than PHI) formed by such consolidation or into which PHI is merged or that acquired or leased such property and assets of PHI shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the obligations of PHI on all of the Debt Securities and under the Indenture, and PHI shall have delivered to the Trustee an opinion of counsel stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with and that such supplemental indenture constitutes the legal, valid and binding obligation of PHI or such successor enforceable against such entity in accordance with its terms, subject to customary exceptions; and (b) an officers' certificate to the effect that immediately after giving effect to such transaction, no Default (as defined in the Indenture) shall have occurred and be continuing and an opinion of counsel as to the matters set forth in clause (a) shall have been delivered to the Trustee. The meaning of the term "all or substantially all of the assets" has not been definitely established and is likely to be interpreted by reference to applicable state law if and at the time the issue arises, and will be dependent on the facts and circumstances existing at the time. Accordingly, there may be uncertainty as to whether a Holder of Debt Securities can determine whether a sale of "all or substantially all of the assets" has occurred and exercise any remedies such Holder may have as a result thereof. EVENTS OF DEFAULT Events of Default defined in the Indenture with respect to the Debt Securities of any series are: (a) PHI defaults in the payment of the principal of any Debt Security of such series when the same becomes due and payable at maturity, upon acceleration, redemption or mandatory repurchase, including as a sinking fund installment, or otherwise; (b) PHI defaults in the payment of interest on any Debt Security of such series when the same becomes due and payable, and such default continues for a period of 30 days; (c)(i) default by PHI or any Restricted Subsidiary in the payment when due at maturity of any Funded Debt (other than Funded Debt that is non-recourse to PHI and its Restricted Subsidiaries) in excess of the greater of $15,000,000 or 5% of Consolidated Net Tangible Assets, whether such Funded Debt is outstanding at the date of the Indenture or is thereafter outstanding, and the continuation of such default for the greater of any period of grace applicable thereto or ten days from the date of such default and the holder thereof shall have taken affirmative action to enforce the payment thereof, or (ii) an event of default, as defined in any indenture, agreement or instrument evidencing or under which PHI and/or any Restricted Subsidiary has at the date of the Indenture or shall thereafter have outstanding at least the greater of $15,000,000 or 5% of Consolidated Net Tangible Assets aggregate principal amount of Funded Debt, shall happen and be continuing and such Funded Debt shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled or such indebtedness shall not be discharged, within ten days; (d) PHI defaults in the performance of or breaches any other covenant or agreement of PHI in the Indenture with respect to any Debt Securities of such series and such default or breach continues for a period of 90 consecutive days after written notice to PHI by the Trustee or to PHI and the Trustee by the Holders of 25% or more in aggregate principal amount of the Debt Securities of all series affected thereby; (e) an involuntary case or other proceeding shall be commenced against PHI or any Restricted Subsidiary with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against PHI or any Restricted Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (f) PHI or any Restricted Subsidiary (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of PHI or any Restricted 15 Subsidiary or for all or substantially all of the property and assets of PHI or any Restricted Subsidiary or (iii) effects any general assignment for the benefit of creditors; or (g) any other Event of Default established with respect to any series of Debt Securities issued pursuant to the Indenture occurs. The Indenture provides that if an Event of Default described in clauses (a) or (b) of the immediately preceding paragraph with respect to the Debt Securities of any series then outstanding occurs and is continuing, then, and in each and every such case, except for any series of Debt Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Debt Securities of any such affected series then outstanding under the Indenture (each such series treated as a separate class) by notice in writing to PHI (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Debt Securities of any such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series established pursuant to the Indenture) of all Debt Securities of such affected series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default described in clauses (c), (d) or (g) of the immediately preceding paragraph with respect to the Debt Securities of one or more but not all series then outstanding or with respect to the Debt Securities of all series then outstanding occurs and is continuing, then, and in each and every such case, except for any series of Debt Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount (or, if the Debt Securities of any such series are Original Issue Discount Securities, the amount thereof accelerable as described in this paragraph) of the Debt Securities of all such affected series then outstanding under the Indenture (treated as a single class) by notice in writing to PHI (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Debt Securities of any such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series established pursuant to the Indenture) of all Debt Securities of all such affected series, and the interest accrued thereof, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default described in clause (e) or (f) of the immediately preceding paragraph occurs and is continuing, then the principal amount (or, if any Debt Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof established pursuant to the Indenture) of all the Debt Securities then outstanding and interest accrued thereon, if any, shall be and become immediately due and payable, without any notice or other action by any Holder or the Trustee to the full extent permitted by applicable law. Upon certain conditions such declarations may be rescinded and annulled and past defaults may be waived by the Holders of a majority in principal of the then outstanding Debt Securities of all such series that have been accelerated (voting as a single class). Subject to such provisions in the Indenture for the indemnification of the Trustee and certain other limitations, the Holders of at least a majority in aggregate principal amount (or, if any Debt Securities are Original Issue Discount Securities, such portion of the principal as is then accelerable under the Indenture) of the outstanding Debt Securities of all series affected (voting as a single class), may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of such series by the Indenture; PROVIDED, that the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction; and PROVIDED FURTHER, that the Trustee may take any other action it deems proper that is not inconsistent with any directions received from Holders of Debt Securities pursuant to this paragraph. 16 Subject to various provisions in the Indenture, the Holders of at least a majority in principal amount (or, if the Debt Securities are Original Issue Discount Securities, such portion of the principal as is then accelerable under the Indenture) of the outstanding Debt Securities of all series affected (voting as a single class) by notice to the Trustee, may waive, on behalf of the Holders of all the Debt Securities of such series, an existing Default or Event of Default with respect to the Debt Securities of such series and its consequences, except a Default in the payment of principal of or interest on any Debt Security as specified above or in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default with respect to the Debt Securities of such series arising therefrom shall be deemed to have been cured, for every purpose of the Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides with respect to each series of Debt Securities that, except as otherwise provided in this paragraph, PHI may terminate its obligations under the Debt Securities of a series and the Indenture with respect to Debt Securities of such series if: (i) all Debt Securities of such series previously authenticated and delivered, with certain exceptions, have been delivered to the Trustee for cancellation and PHI has paid all sums payable by it under the Indenture; or (ii)(A) the Debt Securities of such series mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) PHI irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders of such Debt Securities, for that purpose, money or U.S. Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment, to pay principal of and interest on the Debt Securities of such series to maturity or redemption, as the case may be, and to pay all other sums payable by it under the Indenture, and (C) PHI delivers to the Trustee an officers' certificate and an opinion of counsel, in each case stating that all conditions precedent provided for in the Indenture relating to the satisfaction and discharge of the Indenture with respect to the Debt Securities of such series have been complied with. With respect to the foregoing clause (i), only PHI's obligations to compensate and indemnify the Trustee under the Indenture shall survive. With respect to the foregoing clause (ii), only PHI's obligations to execute and deliver Debt Securities of such series for authentication, to set the terms of the Debt Securities of such series, to maintain an office or agency in respect of the Debt Securities of such series, to have moneys held for payment in trust, to register the transfer or exchange of Debt Securities of such series, to deliver Debt Securities of such series for replacement or to be canceled, to compensate and indemnify the Trustee and to appoint a successor Trustee, and its right to recover excess money held by the Trustee shall survive until such Debt Securities are no longer outstanding. Thereafter, only PHI's obligations to compensate and indemnify the Trustee, and its right to recover excess money held by the Trustee shall survive. The Indenture provides that, except as otherwise provided in this paragraph, PHI (i) will be deemed to have paid and will be discharged from any and all obligations in respect of the Debt Securities of any series, and the provisions of the Indenture will no longer be in effect with respect to the Debt Securities of such series ("legal defeasance") and (ii) may omit to comply with any term, provision or condition of the Indenture described above under "--Certain Covenants" (or any other specific covenant relating to such series provided for in a Board Resolution or supplemental indenture which may by its terms be defeased pursuant to the Indenture), and such omission shall be deemed not to be an Event of Default under clauses (c), (d) or (g) of the first paragraph of "--Events of Default" with respect to the outstanding Debt Securities of a series ("covenant defeasance"); PROVIDED that the following conditions shall have been satisfied: (A) PHI has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the Holders of the Debt Securities of such series, for payment of the principal of and interest on the Debt 17 Securities of such series, money or U.S. Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof deliver to the Trustee) without consideration of any reinvestment and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the principal of and accrued interest on the outstanding Debt Securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be; (B) such deposit will not result in a breach or violation of, or constitute a default under, the Indenture or any other material agreement or instrument to which PHI is a party or by which it is bound; (C) no Default with respect to such Debt Securities of such series shall have occurred and be continuing on the date of such deposit; (D) PHI shall have delivered to the Trustee an opinion of counsel that (1) the Holders of the Debt Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of PHI's exercise of its option under this provision of the Indenture and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (which opinion, in the case of a legal defeasance, shall be based upon a change in law) and (2) the Holders of the Debt Securities of such series have a valid security interest in the trust funds subject to no prior liens under the Uniform Commercial Code, and (E) PHI has delivered to the Trustee an officers' certificate and an opinion of counsel, in each case stating that all conditions precedent provided for in the Indenture relating to the defeasance contemplated have been complied with. In the case of legal defeasance under clause (i) above, the opinion of counsel referred to in clause (D)(1) above may be replaced by a ruling directed to the Trustee received from the Internal Revenue Service to the same effect. Subsequent to legal defeasance under clause (i) above, PHI's obligations to execute and deliver Debt Securities of such series for authentication, to set the terms of the Debt Securities of such series, to maintain an office or agency in respect of the Debt Securities of such series, to have moneys held for payment in trust, to register the transfer or exchange of Debt Securities of such series, to deliver Debt Securities of such series for replacement or to be canceled, to compensate and indemnify the Trustee and to appoint a successor Trustee, and its right to recover excess money held by the Trustee shall survive until such Debt Securities are no longer outstanding. After such Debt Securities are no longer outstanding, in the case of legal defeasance under clause (i) above, only PHI's obligations to compensate and indemnify the Trustee and its right to recover excess money held by the Trustee shall survive. MODIFICATION OF THE INDENTURE The Indenture provides that PHI and the Trustee may amend or supplement the Indenture or the Debt Securities of any series without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in the Indenture; PROVIDED that such amendments or supplements shall not materially and adversely affect the interests of the Holders; (2) to comply with Article 5 (which relates to the covenant regarding "--Restrictions on Mergers and Sales of Assets") of the Indenture; (3) to comply with any requirements of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act; (4) to evidence and provide for the acceptance of appointment under the Indenture with respect to the Debt Securities of any or all series by a successor Trustee; (5) to establish the form or forms or terms of Debt Securities of any series or of the coupons appertaining to such Debt Securities as permitted under the Indenture; (6) to provide for uncertificated or unregistered Debt Securities and to make all appropriate changes for such purpose; (7) to change or eliminate any provisions of the Indenture with respect to all or any series of the Debt Securities not then outstanding (and, if such change is applicable to fewer than all such series of the Debt Securities, specifying the series to which such change is applicable), and to specify the rights and remedies of the Trustee and the Holders of such Debt Securities in connection therewith; and (8) to make any change that does not materially and adversely affect the rights of any Holder. 18 The Indenture also contains provisions whereby PHI and the Trustee, subject to certain conditions, without prior notice to any Holders, may amend the Indenture and the outstanding Debt Securities of any series with the written consent of the Holders of a majority in principal amount of the Debt Securities then outstanding of all series affected by such supplemental indenture (all such series voting as one class), and the Holders of a majority in principal amount of the outstanding Debt Securities of all series affected thereby (all such series voting as one class) by written notice to the Trustee may waive future compliance by PHI with any provision of the Indenture or the Debt Securities of such series. Notwithstanding the foregoing provisions, without the consent of each Holder affected thereby, an amendment or waiver may not: (i) extend the stated maturity of the principal of, or any sinking fund obligation or any installment of interest on, such Holder's Debt Security, or reduce the principal amount thereof or the rate of interest thereon (including any amount in respect of original issue discount), or any premium payable with respect thereto, or adversely affect the rights of such Holder under any mandatory redemption or repurchase provision or any right of redemption or repurchase at the option of such Holder, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon the acceleration of the maturity thereof or the amount thereof provable in bankruptcy, or change any place of payment where, or the currency in which, any Debt Security or any premium or the interest thereof is payable, or impair the right to institute suit for the enforcement of any such payment on or after the due date therefor; (ii) reduce the percentage in principal amount of outstanding Debt Securities of the relevant series the consent of whose Holders is required for any such supplemental indenture, for any waiver of compliance with certain provisions of the Indenture; (iii) waive a Default in the payment of principal of or interest on any Debt Security of such Holder; or (iv) modify any of the provisions of this section of the Indenture, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Debt Security affected thereby. A supplemental indenture which changes or eliminates any covenant or other provision of the Indenture which has expressly been included solely for the benefit of one or more particular series of Debt Securities, or which modifies the rights of Holders of Debt Securities of such series with respect to such covenant or provision, shall be deemed not to affect the rights under the Indenture of the Holders of Debt Securities of any other series or of the coupons appertaining to such Debt Securities. It shall not be necessary for the consent of any Holder under this section of the Indenture to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this section of the Indenture becomes effective, PHI or, at the request of PHI, the Trustee shall give to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. PHI or, at the request of PHI, the Trustee will mail supplemental indentures to Holders upon request. Any failure of PHI to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS No stockholder, officer or director, as such, past, present or future of PHI or Promus or any successor corporation shall have any personal liability in respect of the obligations of PHI or Promus under the Indenture, the Debt Securities or the Guarantees thereof by reason of his, her or its status as such stockholder, officer or director. PLAN OF DISTRIBUTION PHI may offer the Debt Securities directly to purchasers or to or through underwriters, dealers or agents. Any such underwriter(s), dealer(s) or agent(s) involved in the offer and sale of the Debt Securities in respect of which this Prospectus is delivered will be named in the Prospectus Supplement. The Prospectus Supplement with respect to such Debt Securities will also set forth the terms of the offering of such Debt Securities, including the purchase price of such Debt Securities and the proceeds to PHI from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial 19 public offering price and any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such Debt Securities may be listed. The distribution of the Debt Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Prospectus Supplement will describe the method of distribution of the Debt Securities. If underwriters are used in an offering of Debt Securities, the name of each managing underwriter, if any, and any other underwriters and terms of the transaction, including any underwriting discounts and other items constituting compensation of the underwriters and dealers, if any, will be set forth in the Prospectus Supplement relating to such offering, and the Debt Securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. It is anticipated that any underwriting agreement pertaining to any Debt Securities will (1) entitle the underwriters to indemnification by PHI against certain civil liabilities under the Securities Act, or to contribution with respect to payments which the underwriters may be required to make in respect thereof, (2) provide that the obligations of the underwriters will be subject to certain conditions precedent and (3) provide that the underwriters will be obligated to purchase all Debt Securities offered in a particular offering if any such Debt Securities are purchased. If a dealer is used in an offering of Debt Securities, PHI will sell such Debt Securities to the dealer, as principal. The dealer may then resell such Debt Securities to the public at varying prices to be determined by such dealer at the time of resale. The name of the dealer and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. If an agent is used in an offering of Debt Securities, the agent will be named, and the terms of the agency will be set forth, in the Prospectus Supplement relating thereto. Unless otherwise indicated in such Prospectus Supplement, an agent will act on a best efforts basis for the period of its appointment. Dealers and agents named in a Prospectus Supplement may be deemed to be underwriters (within the meaning of the Securities Act) of the Debt Securities described therein and, under agreements which may be entered into with PHI, may be entitled to indemnification by PHI against certain civil liabilities under the Securities Act. Underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, PHI in the ordinary course of business. Offers to purchase securities may be solicited, and sales thereof may be made, by PHI directly to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resales thereof. The terms of any such offer will be set forth in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, PHI will authorize underwriters or other agents of PHI to solicit offers by certain institutional investors to purchase Debt Securities from PHI pursuant to contracts providing for payment and delivery at a future date. Institutional investors with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such purchasers must be approved by PHI. The obligations of any purchaser under any such contract will not be subject to any conditions except that (1) the purchase of the Debt Securities shall not at the time of delivery be prohibited under the laws of any jurisdiction to which such purchaser is subject and (2) if the Debt Securities are also being sold to underwriters, PHI shall have sold to such underwriters the Debt Securities not subject to delayed delivery. Underwriters and other agents will not have any responsibility in respect of the validity or performance of such contracts. 20 The anticipated date of delivery of Debt Securities will be set forth in the Prospectus Supplement relating to each offering. LEGAL MATTERS Certain legal matters with respect to the Debt Securities offered hereby will be passed upon for Promus and PHI by Latham & Watkins and Ralph B. Lake, Senior Vice President and General Counsel of Promus and PHI. EXPERTS The audited financial statements and schedules incorporated by reference in this Prospectus and elsewhere in the Registration Statement, to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 21 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION All expenses other than the Securities and Exchange Commission filing fees are estimated. SEC registration fee................................... $ 90,909 Accountants' fees and expenses......................... 10,000 Legal fees and expenses................................ 35,000 Printing and engraving expenses........................ 50,000 Rating agency fees..................................... 110,000 Trustee's and registrar's fees and expenses............ 22,000 Miscellaneous.......................................... 32,091 --------- Total................................................ $ 350,000 --------- --------- ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of Delaware empowers Promus and PHI to indemnify, subject to the standards set forth therein, any person who is a party in any action in connection with any action, suit or proceeding brought or threatened by reason of the fact that the person was a director, officer, employee or agent of such company, or is or was serving as such with respect to another entity at the request of such company. The General Corporation Law of Delaware also provides that Promus and PHI may purchase insurance on behalf of any such director, officer, employee or agent. Article Tenth of the Certificate of Incorporation of Promus provides for indemnification of the officers and directors of Promus to the full extent permitted by the Delaware General Corporation Law. Article VI of the Bylaws of PHI provides, in effect, for the indemnification by PHI of each director and officer of PHI to the fullest extent permitted by applicable law. Promus has entered into Indemnification Agreements with its directors, executive officers and certain other officers. Generally, the Indemnification Agreements provide that Promus will indemnify such persons against any and all expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect to such expenses, judgments, fines, penalties or amounts paid in settlement) of any Claim by reason of (or arising in part out of) an Indemnifiable Event. "Claim" is defined as any threatened, pending or completed action, suit or proceeding or any inquiry or investigation, whether conducted by Promus or any other party, that the indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other. "Indemnifiable Event" is defined as any event or occurrence related to the fact that the indemnitee is or was a director, officer, employee, trustee, agent or fiduciary of Promus, or is or was serving at the request of Promus or a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by the indemnitee in any such capacity. Notwithstanding the foregoing, (i) the obligations of Promus shall be subject to the condition that the reviewing party (as defined) shall not have determined (in a written opinion, in any case in which special, independent counsel is involved) that the indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of Promus to make an expense advance shall be subject to the condition that, if, when and to the extent that the reviewing party determines that the indemnitee would not be permitted to be so indemnified under applicable law, Promus shall be entitled to be reimbursed by the indemnitee (who has agreed to reimburse Promus, for any amounts theretofore paid; provided, that if the indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a II-1 determination that the indemnitee should be indemnified under applicable law, any determination made by the reviewing party that the indemnitee would not be permitted to be indemnified under applicable law shall not be binding and the indemnitee shall not be required to reimburse Promus for any expense advance until a final judicial determination is made with respect thereto as to which all rights of appeal therefrom have been exhausted or lapsed). Section 102(b)(7) of the Delaware General Corporation Law enables a Delaware corporation to provide in its certificate of incorporation for the elimination or limitation of the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any such provision cannot eliminate or limit a director's liability (1) for any breach of the director's duty of loyalty to the corporation or its stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) under Section 174 of the Delaware General Corporation Law (which imposes liability on directors for unlawful payment of dividends or unlawful stock purchase or redemption); or (4) for any transaction from which the director derived an improper personal benefit. Article Thirteenth of the Certificate of Incorporation of Promus eliminates the liability of a director of Promus to Promus or its stockholders for monetary damages for breach of fiduciary duty as a director to the full extent permitted by the Delaware General Corporation Law. ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION - ------------------------------------------------------------------------------------------ 3(1) Amended and Restated Certificate of Incorporation of Promus Hotel Corporation dated June 30, 1995. (14) 3(2) Bylaws of Promus Hotel Corporation, as amended and restated, dated May 26, 1995. (15) *3(3) Certificate of Incorporation of Promus Hotels, Inc. *3(4) Bylaws of Promus Hotels, Inc. 4(1) Form of Rights Agreement, dated as of June 30, 1995, between Promus Hotel Corporation and Continental Stock Transfer & Trust Company. (12) *4(2) Form of Debt Securities Indenture *5(1) Opinion of Latham & Watkins 10(1) Form of Indemnification Agreement entered into by Promus Hotel Corporation and each of its directors and executive officers. (15) 10(2) Promus Hotel Corporation 1995 Stock Option Plan. (5) 10(3) Promus Hotel Corporation 1995 Restricted Stock Plan. (6) *10(4)(a) The Restatement of the Promus Hotel Corporation Savings and Retirement Plan-A, dated as of June 30, 1995 *10(4)(b) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-A, dated as of March 11, 1996 *10(4)(c) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-A, dated as of September 10, 1996 *10(5)(a) The Restatement of the Promus Hotel Corporation Savings and Retirement Plan-B, dated as of June 30, 1995
II-2
EXHIBIT NO. DESCRIPTION - ------------------------------------------------------------------------------------------ *10(5)(b) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-B, dated as of March 11, 1996 *10(5)(c) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-B, dated as of September 10, 1996 *10(6) The Promus Hotel Corporation Employee Stock Ownership Plan, dated as of June 30, 1995 10(7) Promus Hotel Corporation 1996 Non-Management Directors Stock Incentive Plan. (8) 10(8) Promus Hotel Corporation Key Executive Officer Annual Incentive Plan. (7) 10(9) Promus Hotel Corporation Executive Deferred Compensation Plan. (9) 10(10) Promus Hotel Corporation Deferred Compensation Plan. (9) 10(11) Promus Hotel Corporation Savings and Retirement Plan Trust Agreement, dated as of May 26, 1995, among Promus Hotel Corporation and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells, as trustees. (9) 10(12) Form of Severance Agreement, dated as of June 30, 1995, entered into with Donald H. Dempsey, Thomas L. Keltner, Ralph B. Lake, David C. Sullivan and Mark C. Wells. (10) 10(13) Form of Severance Agreement, dated June 30, 1995, entered into with Michael D. Rose and Raymond E. Schultz. (10) 10(14) Employment Agreement, dated as of June 30, 1995, between Michael D. Rose and Promus Hotel Corporation. (10) 10(15) Employment Agreement, dated as of July 1, 1995, between Raymond E. Schultz and Promus Hotel Corporation. (11) 10(16) Form of Letter of Amendment, dated February 22, 1996, to the Employment Agreement between Raymond E. Schulz and Promus Hotel Corporation. (15) 10(17) Financial Counseling Plan of The Promus Companies Incorporated, as amended February 25, 1993, as adopted by Promus Hotel Corporation on April 5, 1995. (2) 10(18) Summary Plan Description of Executive Term Life Insurance Plan adopted by Promus Hotel Corporation on April 5, 1995. (4) 10(19) Administrative Regulations, Long Term Compensation Plan (Restricted Stock Plan and Stock Option Plan), dated as of January 1, 1992, adopted by Promus Hotel Corporation on April 5, 1995. (3) 10(20) Plan of Reorganization and Distribution Agreement, dated as of June 30, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (10) 10(21) Tranche A Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. (9) 10(22) First Amendment to Tranche A Credit Agreement, dated as of June 30, 1995, by and among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation and NationsBank, N.A. (Carolinas). (10) 10(23) Tranche A Assignment and Assumption Agreement, dated as of June 30, 1995, among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated and NationsBank, N.A. (Carolinas). (10)
II-3
EXHIBIT NO. DESCRIPTION - ------------------------------------------------------------------------------------------ 10(24) Tranche B Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. (9) 10(25) First Amendment to Tranche B Credit Agreement, dated as of June 30, 1995, by and among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation and NationsBank, N.A. (Carolinas). (10) 10(26) Tranche B Assignment and Assumption Agreement, dated as of June 30, 1995, by and among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated and NationsBank, N.A. (Carolinas). (10) 10(27) Pledge Agreement, dated as of June 30, 1995, by and among Promus Hotel Corporation, Promus Hotels, Inc., certain subsidiaries which may now be owners of Credit Parties and NationsBank, N.A. (Carolinas). (10) 10(28) Escrow Agreement, dated as of June 30, 1995, among Promus Hotel Corporation, Promus Hotels, Inc. and NationsBank. (9) 10(29) Employee Benefits and Other Employment Matters Allocation Agreement, dated as of June 30, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (10) 10(30) Risk Management Allocation Agreement, dated as of June 30, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (10) 10(31) Tax Sharing Agreement, dated as of June 30, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (10) 10(32) International Swap Dealers Association, Inc. Master Agreement, dated as of June 30, 1995, among Promus Hotels, Inc. and NationsBank, N.A. (Carolinas). (10) 10(33) Transfer Agreement, dated as of June 30, 1995, among Embassy Suites, Inc., Promus Hotels, Inc., and NationsBank, N.A. (Carolinas). (10) 10(34) Subscription Agreement, dated as of October 17, 1995, by and among Promus Hotels, Inc. and FelCor Suites Hotels, Inc. and FelCor Suites Limited Partnership. (11) 10(35) Management Agreement, dated as of December 17, 1986, between Hampton Inns, Inc. and Hampton/GHI Associates No. 1. (1) 10(36) Form of Management Agreement between Embassy Suites, Inc. and affiliates of General Electric Pension Trust. (1) 10(37) Form of Assignment and Assumption of Manager's Interest in Management Agreement (General Electric Pension Trust), dated June 30, 1995, between Embassy Suites, Inc. and Promus Hotels, Inc. (15) 10(38) Form of Aircraft Agreement, dated August 4, 1995, between Promus Hotels, Inc. and Harrah's Operating Company, Inc. (15) 10(39) Form of Interest Swap Confirmations, between NationsBank, N.A. and Promus Hotels, Inc., dated December 11, 1995. (15) 10(40) Form of Interest Swap Confirmation between NationsBank, N.A. and Promus Hotels, Inc., dated January 24, 1995, as amended on December 6, 1995. (15) 10(41) Form of Interest Swap Confirmations, dated January 22, 1996, between NationsBank, N.A. and Promus Hotels, Inc. (16)
II-4
EXHIBIT NO. DESCRIPTION - ------------------------------------------------------------------------------------------ 10(42) Form of Unwind Interest Swap Confirmation, dated January 22, 1996, between NationsBank, N.A. and Promus Hotels, Inc. (16) 10(43) Form of Guarantee Agreement, dated February 6, 1996, among Promus Hotel Corporation, and Promus Hotels, Inc., Canadian Imperial Bank of Commerce, as agent for the Lenders, FelCor Suites Limited Partnership, FelCor/CSS Holdings, L.P., and FelCor Suite Hotels, Inc. (16) 10(44) Second Amendment to Tranche A Credit Agreement, dated as of May 15, 1996, by and among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and NationsBank, N.A. (Carolinas). (17) 10(45) Second Amendment to Tranche B Credit Agreement, dated as of May 15, 1996, by and among Embassy Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and NationsBank, N.A. (Carolinas). (17) *12(1) Computations of ratios. 21(1) List of subsidiaries of Promus Hotel Corporation. (15) *23(1) Consent of Arthur Andersen LLP. *23(2) Consent of Latham & Watkins (to be included in Exhibit 5(1)) *24(1) Power of attorney (included on signature pages). *25(1) Statement of Eligibility of Trustee on Form T-1 by SouthTrust Bank of Alabama, National Association, as Trustee.
- ------------------------ *Filed herewith Footnotes (1) Incorporated by reference from Holiday Corporation's Annual Report on Form 10-K for the fiscal year ended January 2, 1987, filed March 27, 1987, File No. 1-8900. (2) Incorporated by reference from The Promus Companies Incorporated Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410. (3) Incorporated by reference from The Promus Companies Incorporated Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410. (4) Incorporated by reference from The Promus Companies Incorporated Annual Report on Form 10-K for the fiscal year ended December 31, 1992, filed March 17, 1993, File No. 1-10410. (5) Incorporated by reference from The Promus Companies Incorporated Proxy Statement, Annex III-A, dated April 25, 1995, File No. 1-10410. (6) Incorporated by reference from The Promus Companies Incorporated Proxy Statement, Annex III-B, dated April 25, 1995, File No. 1-10410. (7) Incorporated by reference from The Promus Companies Incorporated Proxy Statement, Annex VII, dated April 25, 1995, File No. 1-10410. (8) Incorporated by reference from The Promus Companies Incorporated Proxy Statement, Annex VIII, dated April 25, 1995, File No. 1-10410. (9) Incorporated by reference from the Promus Hotel Corporation Current Report on Form 8-K, filed June 15, 1995, File No. 1-11463. II-5 (10) Incorporated by reference from the Promus Hotel Corporation Quarterly Report on Form 10-Q, for the quarter ended June 30, 1995, filed August 11, 1995, File No. 1-11463. (11) Incorporated by reference from the Promus Hotel Corporation Quarterly Report on Form 10-Q, for the quarter ended September 30, 1995, filed November 13, 1995, File No. 1-11463. (12) Incorporated by reference from the Promus Hotel Corporation Form 8-A, filed June 6, 1995, File No. 1-11463. (13) Incorporated by reference from the Promus Hotel Corporation Registration Statement No. 33-59997 on Form S-8 for The Promus Hotel Corporation Savings & Retirement Plan, filed June 6, 1995, as amended by Post-Effective Amendment No. 1 filed on December 29, 1995. (14) Incorporated by reference from The Promus Companies Incorporated Proxy Statement, Annex II-A, dated April 25, 1995, File No. 1-11463. (15) Incorporated by reference from the Promus Hotel Corporation Annual Report on Form 10-K, for the year ended December 31, 1995, filed March 12, 1996, File No. 1-11463. (16) Incorporated by reference from the Promus Hotel Corporation Quarterly Report on Form 10-Q, for the quarter ended March 31, 1996, filed May 7, 1996, File No. 1-11463. (17) Incorporated by reference from the Promus Hotel Corporation Quarterly Report on Form 10-Q, for the quarter ended June 30, 1996, filed August 12, 1996, File No. 1-11463. ITEM 17. UNDERTAKINGS (a) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the Form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrants pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. II-6 (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrants' annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy is expressed in the Act and will be governed by the final adjudication of such issue. II-7 PROMUS HOTEL CORPORATION SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Promus Hotel Corporation has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized at Memphis, Tennessee on October 11, 1996. PROMUS HOTEL CORPORATION By: /s/ RALPH B. LAKE ------------------------------------------ Name: Ralph B. Lake Title: Secretary and General Counsel Dated: October 11, 1996 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Donald H. Dempsey, Jeffery M. Jarvis, and Ralph B. Lake and each of them, any one of whom may act without joinder of the other, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all pre- and post-effective amendments to this Registration Statement or any registration statement for the same offering that is to be effective upon filing pursuant to 462(b) under the Securities Act, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or the substitute or substitutes of any or all of them, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in their respective capacities with Promus on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------ --------------------------------------- ---------------------- /s/ U. BERTRAM ELLIS, JR. -------------------------------------- Director October 11, 1996 (U. Bertram Ellis, Jr.) /s/ DEBRA J. FIELDS -------------------------------------- Director October 11, 1996 (Debra J. Fields) /s/ CHRISTOPHER W. HART -------------------------------------- Director October 11, 1996 (Christopher W. Hart) /s/ C. WARREN NEEL -------------------------------------- Director October 11, 1996 (C. Warren Neel)
II-8
SIGNATURE TITLE DATE - ------------------------------------------------ --------------------------------------- ---------------------- /s/ BEN C. PETERNELL -------------------------------------- Director October 11, 1996 (Ben C. Peternell) /s/ MICHAEL D. ROSE -------------------------------------- Director and Chairman October 11, 1996 (Michael D. Rose) /s/ MICHAEL I. ROTH -------------------------------------- Director October 11, 1996 (Michael I. Roth) /s/ RAYMOND E. SCHULTZ -------------------------------------- Director, President and October 11, 1996 (Raymond E. Schultz) Chief Executive Officer /s/ JAY STEIN -------------------------------------- Director October 11, 1996 (Jay Stein) /s/ DAVID C. SULLIVAN -------------------------------------- Director, Executive Vice President and October 11, 1996 (David C. Sullivan) Chief Operating Officer /s/ RONALD TERRY -------------------------------------- Director October 11, 1996 (Ronald Terry) /s/ DONALD H. DEMPSEY -------------------------------------- Chief Financial Officer October 11, 1996 (Donald H. Dempsey) /s/ JEFFERY M. JARVIS -------------------------------------- Controller and Chief October 11, 1996 (Jeffery M. Jarvis) Accounting Officer
II-9 PROMUS HOTELS, INC. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Promus Hotels, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized at Memphis, Tennessee on October 11, 1996. PROMUS HOTELS, INC. By: /s/ RALPH B. LAKE ------------------------------------------ Name: Ralph B. Lake Dated: October 11, 1996 Title: Secretary and General Counsel POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Donald H. Dempsey, Jeffery M. Jarvis, and Ralph B. Lake and each of them, any one of whom may act without joinder of the other, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all pre- and post-effective amendments to this Registration Statement or any registration statement for the same offering that is to be effective upon filing pursuant to 462(b) under the Securities Act, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or the substitute or substitutes of any or all of them, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in their respective capacities with Promus Hotels, Inc. on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------ --------------------------------------- ---------------------- /s/ RAYMOND E. SCHULTZ -------------------------------------- Director, President and October 11, 1996 (Raymond E. Schultz) Chief Executive Officer /s/ DAVID C. SULLIVAN Director, Executive Vice -------------------------------------- President and Chief Operating October 11, 1996 (David C. Sullivan) Officer /s/ DONALD H. DEMPSEY Director, Senior Vice -------------------------------------- President and Chief October 11, 1996 (Donald H. Dempsey) Financial Officer /s/ JEFFERY M. JARVIS -------------------------------------- Controller and Chief Accounting Officer October 11, 1996 (Jeffery M. Jarvis)
II-10 EX-3.3 2 EXHIBIT 3.3 Exhibit 3(3) CERTIFICATE OF INCORPORATION OF PROMUS HOTELS, INC. FIRST: The name of the Corporation is: PROMUS HOTELS, INC. SECOND: The address of the Corporation's registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). FOURTH: The total number of shares of stock which the Corporation is authorized to issue is one thousand (1,000) shares of common stock ("Common Stock"); and the par value of each share of Common Stock shall be ten cents ($0.10). FIFTH: The name and mailing address of the incorporator is: Ilona F. Bush LATHAM & WATKINS 633 West Fifth Street, Suite 4000 Los Angeles, California 90071 SIXTH: The business and affairs of the Corporation shall be managed by the board of directors, and the directors need not be elected by ballot unless the bylaws of the Corporation so provide. SEVENTH: In furtherance and not in limitation of the powers conferred by the State of Delaware, the board of directors is expressly authorized, without stockholder action, to adopt, amend or repeal the bylaws of the Corporation. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware. All rights herein conferred are granted subject to this reservation. NINTH: No director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. TENTH: Notwithstanding any other provision of this Certificate of Incorporation to the contrary, outstanding shares of Common Stock or any other class or series of stock of the Corporation shall always be subject to redemption by the Corporation, by action of the board of directors, if, in the judgment of the board of directors, any holder of such stock is determined by any gaming regulatory agency to be unsuitable, has an application for a license or permit rejected, or has a previously issued license or permit rescinded, suspended, revoked or not renewed, as the case may be, whether or not any of the foregoing is final and nonappealable, or if such action otherwise should be taken, pursuant to Section 151(b) of the GCL or any other applicable provision of law, to the extent necessary to avoid any regulatory sanctions against, or to prevent the loss of or secure the reinstatement of any license, franchise or entitlement from any governmental agency held by the Corporation, any Affiliate of the Corporation or any entity in which the Corporation or such Affiliate is an owner, which license, franchise or entitlement is (i) conditioned upon some or all of the holders of the Corporation's stock of any class or series possessing prescribed qualifications, or (ii) needed to allow the conduct of any portion of the business of the Corporation or any such Affiliate or other entity. The terms and conditions of such redemption shall be as follows: (a) the redemption price of the shares to be redeemed pursuant to this Article TENTH shall be equal to the Fair Market Value of such shares (excluding any dividends thereon not entitled to be received pursuant to paragraph (e) of this Article TENTH) or such other redemption price as required by any applicable law, regulation or rule; (b) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (c) if less than all the shares held by Disqualified Holders are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the board of directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the board of directors; (d) at least 30 days' written notice of the Redemption Date shall be given to the record holders of the shares selected to be redeemed (unless waived in writing by any such holder), provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and 2 subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; (e) from and after the Redemption Date or such earlier date as mandated by any applicable law, regulation or rule, any and all rights of whatever nature, which may be held by the owners of shares selected for redemption (including without limitation, any rights to vote or participate in dividends declared on stock of the same class or series as such shares), shall cease and terminate and they shall thenceforth be entitled only to receive the cash or Redemption Securities payable upon redemption; and (f) such other terms and conditions as the board of directors shall determine. For purposes of this Article TENTH: (i) "Disqualified Holder" shall mean any holder of shares of stock of the Corporation of any class (or classes) or series who, either individually or when taken together with any other holders of shares of stock of the Corporation of any class (or classes) or series, in the judgment of the board of directors, is determined by any gaming regulatory agency to be unsuitable, or has an application for a license or permit rejected, or has a previously issued license or permit rescinded, suspended, revoked or not renewed, as the case may be, whether or not any of the foregoing is final and nonappealable, or whose holding of such stock, either individually or when taken together with the holding of shares of stock of the Corporation of any class (or classes) or series by any other holders, may result, in the judgment of the board of directors, in any regulatory sanctions against, or the loss of or the failure to secure the reinstatement of any license, franchise, or entitlement from any governmental agency held by the Corporation, any Affiliate of the Corporation or any entity in which the Corporation or such Affiliate is an owner. (ii) "Fair Market Value" of a share of the Corporation's stock of any class or series shall mean the average Closing Price for such share for each of the 45 most recent days of which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall be given pursuant to paragraph (d) of this Article TENTH; PROVIDED, HOWEVER, that if shares of stock of such class or series are not traded on any securities exchange or in the over-the-counter market, "Fair Market Value" shall be determined by the board of directors in good faith; and PROVIDED FURTHER, HOWEVER, that "Fair Market Value" as to any stockholder who purchased any stock of the class (or classes) or series subject to redemption within 120 days of a Redemption Date need not (unless otherwise determined by the board of directors) exceed the purchase price paid by him for any stock of such class (or classes) or series of the Corporation. "Closing Price" on any day means the reported closing sales price or, in case no such sale takes place, the average of the reported closing bid and asked prices on the Composite Tape for the New York Stock Exchange Listed Stocks, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which such stock is listed, or, if such stock is not listed 3 on any such exchange, the highest closing sales price or bid quotation for such stock on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such prices or quotations are available, the fair market value on the day in question as determined by the board of directors in good faith. (iii) "Redemption Date" shall mean the date fixed by the Board of Directors for the redemption of any shares of stock of the Corporation pursuant to this Article TENTH. (iv) "Redemption Securities" shall mean any debt or equity securities of the Corporation, any Subsidiary or any other corporation, or any combination thereof, having such terms and conditions as shall be approved by the board of directors and which, together with any cash to be paid as part of the redemption price, in the opinion of any nationally recognized investment banking firm selected by the board of directors (which may be a firm which provides other investment banking, brokerage or other services to the Corporation), has a value at the time notice of redemption is given pursuant to paragraph (d) of this Article TENTH, at least equal to the Fair Market Value of the shares to be redeemed pursuant to this Article TENTH (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity). (v) "Subsidiary" shall mean any corporation more than 50% of whose outstanding stock entitled to vote generally in the election of directors is owned by the Corporation, by one or more Subsidiaries or by the Corporation and one or more Subsidiaries. (vi) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 under the Exchange Act as in effect on the date hereof (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, herein declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this tenth day of May, 1995. /s/ Ilona F. Bush ---------------------------------- Ilona F. Bush 4 EX-3.4 3 EXHIBIT 3.4 Exhibit 3(4) BYLAWS OF PROMUS HOTELS, INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of Promus Hotels, Inc. (the "Corporation") shall be at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated form time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders shall be held on the last Wednesday in April in each year or on such other date and at such time as may be fixed by the Board of Directors and stated in the notice of the meeting, for the purpose of electing directors and for the transaction of only such other business as is properly brought before the meeting in accordance with these Bylaws. Written notice of an annual meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. To be properly brought before the annual meeting, business must be either (i) specified in the notice of annual meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the annual meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the annual meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by a stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth (a) as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, and (ii) any material interest of the stockholder in such business, and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section 2. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the annual meeting that business was not properly brought before the annual meeting in accordance with the provisions of this Article II, Section 2, and if such officer should so determine, such officer shall so declare to the annual meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the Certificate of Incorporation, special meetings of stockholders, for any purpose or purposes, may only be called by a majority of the entire Board of Directors or by the Chairman or the President. Written notice of a special meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. SECTION 4. QUORUM. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote thereat, present in person or represented by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. 2 SECTION 5. VOTING. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder, unless otherwise provided by the Certificate of Incorporation. Such votes may be cast in person or by proxy but no proxy shall be voted after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. SECTION 6. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. SECTION 7. STOCK LEDGER. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 6 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III DIRECTORS SECTION 1. NUMBER OF DIRECTORS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which initially shall consist of four directors. The Board of Directors shall consist of not less than two or more than ten directors, the exact number to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. SECTION 2. NOMINATION OF DIRECTORS. Nominations of persons for election to the Board of Directors of the Corporation at the annual meeting may be made at such meeting by or at the direction of the Board of Directors, by any committee or persons appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article III. 3 Section 2. Such nominations by any stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than (60) days nor more than ninety (90) days prior to the meeting; provided however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (a) the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, and (d) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, as amended; and (ii) as to the stockholder giving the notice (a) the name and record address of the stockholder and (b) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. The directors shall be elected at the annual meeting of the stockholders, except as provided in the Certificate of Incorporation, and each director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. SECTION 3. MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President or a majority of the entire Board of Directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. SECTION 4. QUORUM. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of 4 business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 5. ACTIONS OF BOARD OF DIRECTORS. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. SECTION 6. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 6 of Article III shall constitute presence in person at such meeting. SECTION 7. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. SECTION 8. COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 9. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any 5 other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contact or transaction. ARTICLE IV OFFICERS SECTION 1. GENERAL. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. SECTION 2. ELECTION. The Board of Directors shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers who are directors of the Corporation shall be fixed by the Board of Directors. SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President and any such office may, in the name and on behalf of the 6 Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors. Except whereby law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors. SECTION 5. PRESIDENT. The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolution of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and the Board of Directors. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors. SECTION 6. VICE PRESIDENTS. At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing 7 committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. SECTION 8. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. 8 SECTION 11. CONTROLLER. The Controller shall establish and maintain the accounting records of the Corporation in accordance with generally accepted accounting principles applied on a consistent basis, maintain proper internal control of the assets of the Corporation and shall perform such other duties as the Board of Directors, the President or any Vice President of the Corporation may prescribe. SECTION 12. OTHER OFFICERS. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. SECTION 2. SIGNATURES. Any or all of the signatures on the certificate may be a facsimile, including, but not limited to, signatures of officers of the Corporation and countersignatures of a transfer agent or registrar. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully 9 constituted in writing and upon surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. SECTION 5. RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI INDEMNIFICATION SECTION 1. Subject to Section 3 of this Article VI, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completion action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgement, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, or, with respect to any criminal action or proceeding, had reasonable cause to believe his conduct was unlawful. 10 SECTION 2. Subject to Section 3 of this Article VI, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. Any indemnification under this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VI, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 1 or Section 2 of this Article VI, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. SECTION 4. For purposes of any determination under Section 3 of this Article VI, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records of books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 of Article VI, shall mean any other corporation or any partnership, joint venture, trust or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in 11 which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VI as the case may be. SECTION 5. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VI, and notwithstanding the absence of any determination thereunder, any director, officer, employee or agent may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissable under Section 1 and Section 2 of this Article VI. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or Section 2 of this Article VI, as the case may be. Notice of any application for indemnification pursuant to this Section 5 of Article VI shall be given to the Corporation promptly upon the filing of such application. SECTION 6. Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VI. SECTION 7. The indemnification and advancement of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of, and advancement of expenses to, the persons specified in Section 1 and Section 2 of Article VI shall be made to the fullest extent permitted by law. The provisions of this Article VI shall not be deemed to preclude the indemnification of, and advancement of expenses to, any person who is not specified in Section 1 or Section 2 of this Article VI but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided by this Article VI shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. SECTION 8. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VI. SECTION 9. For purposes of this Article VI, reference to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any 12 constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VII NOTICES SECTION 1. NOTICES. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telex or cable. SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VIII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. 13 SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall end on December 31, unless the fiscal year is otherwise changed by affirmative resolution of the entire Board of Directors. SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 14 EX-4.2 4 EXHIBIT 4(2) EXHIBIT 4.2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PROMUS HOTELS, INC. AS THE COMPANY PROMUS HOTEL CORPORATION AS THE GUARANTOR AND SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION AS TRUSTEE INDENTURE DATED AS OF ____________, 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- RECITALS OF THE COMPANY ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . 8 SECTION 1.3 Incorporation by Reference of Trust Indenture Act. . . . 9 SECTION 1.4 Rules of Construction. . . . . . . . . . . . . . . . . . 9 ARTICLE 2 THE SECURITIES SECTION 2.1 Form . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.2 Execution and Authentication . . . . . . . . . . . . . . 10 SECTION 2.3 Amount Unlimited; Issuable in Series . . . . . . . . . . 12 SECTION 2.4 Denomination and Date of Securities; Payments of Interest . . . . . . . . . . . . . . . . . . 15 SECTION 2.5 Registrar and Paying Agent; Agents Generally . . . . . . 16 SECTION 2.6 Paying Agent to Hold Money in Trust. . . . . . . . . . . 17 SECTION 2.7 Transfer and Exchange. . . . . . . . . . . . . . . . . . 18 SECTION 2.8 Replacement Securities . . . . . . . . . . . . . . . . . 21 SECTION 2.9 Outstanding Securities . . . . . . . . . . . . . . . . . 22 SECTION 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . 23 SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.12 CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.13 Defaulted Interest . . . . . . . . . . . . . . . . . . . 24 SECTION 2.14 Series May Include Tranches. . . . . . . . . . . . . . . 24 ARTICLE 3 REDEMPTION - ------------------------- Note: The Table of Contents shall not for any purposes be deemed to be a part of the Indenture. i Page ---- SECTION 3.1 Applicability of Article . . . . . . . . . . . . . . . . 25 SECTION 3.2 Notice of Redemption; Partial Redemptions. . . . . . . . 25 SECTION 3.3 Payment of Securities Called for Redemption. . . . . . . 27 SECTION 3.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption . . . . . . . . 28 SECTION 3.5 Mandatory and Optional Sinking Funds . . . . . . . . . . 28 ARTICLE 4 COVENANTS SECTION 4.1 Payment of Securities. . . . . . . . . . . . . . . . . . 31 SECTION 4.2 Maintenance of Office or Agency. . . . . . . . . . . . . 33 SECTION 4.3 Negative Pledge. . . . . . . . . . . . . . . . . . . . . 34 SECTION 4.4 Certain Sale and Lease-back Transactions . . . . . . . . 35 SECTION 4.5 Certificate to Trustee . . . . . . . . . . . . . . . . . 37 SECTION 4.6 Reports by the Company . . . . . . . . . . . . . . . . . 37 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.1 When Company May Merge, Etc. . . . . . . . . . . . . . . 37 SECTION 5.2 Successor Substituted. . . . . . . . . . . . . . . . . . 38 ARTICLE 6 DEFAULT AND REMEDIES SECTION 6.1 Events of Default. . . . . . . . . . . . . . . . . . . . 39 SECTION 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . 42 SECTION 6.4 Waiver of Past Defaults. . . . . . . . . . . . . . . . . 43 SECTION 6.5 Control by Majority. . . . . . . . . . . . . . . . . . . 43 SECTION 6.6 Limitation on Suits. . . . . . . . . . . . . . . . . . . 43 SECTION 6.7 Rights of Holders to Receive Payment . . . . . . . . . . 44 SECTION 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . . 44 SECTION 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . . 45 ii Page ---- SECTION 6.10 Application of Proceeds. . . . . . . . . . . . . . . . . 45 SECTION 6.11 Restoration of Rights and Remedies . . . . . . . . . . . 46 SECTION 6.12 Undertaking for Costs. . . . . . . . . . . . . . . . . . 47 SECTION 6.13 Rights and Remedies Cumulative . . . . . . . . . . . . . 47 SECTION 6.14 Delay or Omission Not Waiver . . . . . . . . . . . . . . 47 ARTICLE 7 TRUSTEE SECTION 7.1 General. . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 7.2 Certain Rights of Trustee. . . . . . . . . . . . . . . . 48 SECTION 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . 50 SECTION 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 50 SECTION 7.5 Notice of Default. . . . . . . . . . . . . . . . . . . . 51 SECTION 7.6 Reports by Trustee to Holders. . . . . . . . . . . . . . 51 SECTION 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . 51 SECTION 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . 52 SECTION 7.9 Successor Trustee by Merger, Etc.. . . . . . . . . . . . 54 SECTION 7.10 Eligibility. . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.11 Money Held in Trust. . . . . . . . . . . . . . . . . . . 54 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1 Defeasance Within One Year of Payment. . . . . . . . . . 54 SECTION 8.2 Defeasance . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 8.3 Covenant Defeasance. . . . . . . . . . . . . . . . . . . 57 SECTION 8.4 Application of Trust Money . . . . . . . . . . . . . . . 58 SECTION 8.5 Repayment to Company . . . . . . . . . . . . . . . . . . 58 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.1 Without Consent of Holders . . . . . . . . . . . . . . . 59 SECTION 9.2 With Consent of Holders. . . . . . . . . . . . . . . . . 60 SECTION 9.3 Revocation and Effect of Consent . . . . . . . . . . . . 61 SECTION 9.4 Notation on or Exchange of Securities. . . . . . . . . . 62 iii Page ---- SECTION 9.5 Trustee to Sign Amendments, Etc. . . . . . . . . . . . . 62 SECTION 9.6 Conformity with Trust Indenture Act. . . . . . . . . . . 63 ARTICLE 10 MISCELLANEOUS SECTION 10.1 Trust Indenture Act of 1939. . . . . . . . . . . . . . . 63 SECTION 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 10.3 Certificate and Opinion as to Conditions Precedent . . . 65 SECTION 10.4 Statements Required in Certificate or Opinion. . . . . . 65 SECTION 10.5 Evidence of Ownership. . . . . . . . . . . . . . . . . . 66 SECTION 10.6 Rules by Trustee, Paying Agent or Registrar. . . . . . . 67 SECTION 10.7 Payment Date Other Than a Business Day . . . . . . . . . 67 SECTION 10.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . 68 SECTION 10.9 No Adverse Interpretation of Other Agreements. . . . . . 68 SECTION 10.10 Successors . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 10.11 Duplicate Originals. . . . . . . . . . . . . . . . . . . 68 SECTION 10.12 Separability . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 10.13 Table of Contents, Headings, Etc.. . . . . . . . . . . . 68 SECTION 10.14 Incorporators, Shareholders, Officers and Directors of Company Exempt from Individual Liability . . . . . . . . . . . . . . . . . . 68 SECTION 10.15 Judgment Currency. . . . . . . . . . . . . . . . . . . . 69 ARTICLE 11 GUARANTEE SECTION 11.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 11.2 Execution and Delivery of Guarantee. . . . . . . . . . . 71 SECTION 11.3 Release of Guarantor . . . . . . . . . . . . . . . . . . 71 SECTION 11.4 When Guarantor May Merge, etc. . . . . . . . . . . . . . 73 SIGNATURES iv INDENTURE, dated as of ____________, 1996, among PROMUS HOTELS, INC., a Delaware corporation, as the Company, PROMUS HOTEL CORPORATION, a Delaware corporation, as the Guarantor, and SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, a national banking association, as Trustee. RECITALS OF THE COMPANY WHEREAS, the Company has duly authorized the issue from time to time of its debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture and to provide, among other things, for the authentication, delivery and administration thereof, the Company has duly authorized the execution and delivery of this Indenture; WHEREAS, the Guarantor has duly authorized its guarantee (the "Guarantee") of all of the Company's obligations under the Securities, and to provide therefor, the Guarantor has duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been done; NOW, THEREFORE: In consideration of the premises and the purchases of the Securities by the holders thereof, the Company, the Guarantor and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective holders from time to time of the Securities or of any and all series thereof and of the coupons, if any, appertaining thereto as follows: DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS. "Agent" means any Registrar, Paying Agent, transfer agent or Authenticating Agent. "Attributable Debt" means, when used in connection with a sale and lease-back transaction referred to in Section 4.4, on any date as of which the amount thereof is to be determined, the product of (a) the net proceeds from such sale and lease-back transaction multiplied by (b) a fraction, the numerator of which is the number of full years of the term of the lease relating to the property involved in such sale and lease-back transaction (without regard to any options to renew or extend such term) remaining on the date of the making of such computation and the denominator of which is the number of full years of the term of such lease measured from the first day of such term. "Authorized Newspaper" means a newspaper (which, in the case of The City of New York, will, if practicable, be The Wall Street Journal (Eastern Edition) and in the case of London, will, if practicable, be the Financial Times (London Edition) and published in an official language of the country of publication customarily published at least once a day for at least five days in each calendar week and of general circulation in The City of New York or London, as applicable. If it shall be impractical in the opinion of the Trustee to make any publication of any notice required hereby in an Authorized Newspaper, any publication or other notice in lieu thereof which is made or given with the approval of the Trustee shall constitute a sufficient publication of such notice. "Board Resolution" means one or more resolutions of the board of directors of the Company or the Guarantor, as the case maybe, or any authorized committee thereof, certified by the secretary or an assistant secretary to have been duly adopted and to be in full force and effect on the date of certification, and delivered to the Trustee. "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York or in the city in which the Corporate Trust Office is located, with respect to any Security the interest on which is based on the offered quotations in the interbank Eurodollar market for dollar deposits in London, or with respect to Securities denominated in a specified currency other than United States dollars, in the principal financial center of the country of the specified currency. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital stock or equity, including, without limitation, all Common Stock and Preferred Stock. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or 2 non-voting) of such Person's common stock, whether now outstanding or issued after the date of this Indenture, including, without limitation, all series and classes of such common stock. "Company" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to Article 5 of this Indenture and thereafter means the successor. "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of the Company and its Restricted Subsidiaries for the total assets (including investments in Joint Ventures) (less accumulated depletion, depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, after giving effect to purchase accounting and after deducting therefrom, to the extent included in total assets, in each case as determined on a consolidated basis in accordance with GAAP (without duplication): (i) the aggregate amount of liabilities of the Company and its Restricted Subsidiaries that may properly be classified as current liabilities (including taxes accrued as estimated); (ii) current indebtedness and current maturities of long-term indebtedness; (iii) minority interests in the Company's Restricted Subsidiaries held by Persons other than the Company or a wholly-owned Restricted Subsidiary of the Company; and (iv) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at One Office Park Drive, Birmingham, Alabama 35223, Attention: Corporate Trust Administration. "Default" means any Event of Default as defined in Section 6.1 and any event that is, or after notice or passage of time or both would be, an Event of Default. "Depositary" means, with respect to the Securities of any series issuable or issued in the form of one or more Registered Global Securities, the Person designated as Depositary by the Company pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Registered Global Securities of that series. 3 "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exempted Debt" means the sum, without duplication, of the following items outstanding as of the date Exempted Debt is being determined: (i) indebtedness of the Company and its Restricted Subsidiaries incurred after the date of this Indenture and secured by liens created or assumed or permitted to exist pursuant to Section 4.3(b) and (ii) Attributable Debt of the Company and its Restricted Subsidiaries in respect of all sale and lease-back transactions with regard to any Principal Property entered into pursuant to Section 4.4(b). "Funded Debt" means all indebtedness for money borrowed, including purchase money indebtedness, having a maturity of more than one year from the date of its creation or having a maturity of less than one year but by its terms being renewable or extendible, at the option of the obligor in respect thereof, beyond one year from the date of its creation. "GAAP" means generally accepted accounting principles in the United States of America at the date of any computation required or permitted hereunder. "Guarantee" shall have the meaning set forth in Section 11.1 hereof. "Guarantor" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to Article 11.4 of this Indenture and thereafter means the successor. "Holder" or "Securityholder" means the registered holder of any Security with respect to Registered Securities and the bearer of any Unregistered Security or any coupon appertaining thereto, as the case may be. "Indenture" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture and shall include the forms and terms of the Securities of each series established as contemplated pursuant to Sections 2.1 and 2.3. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "Joint Venture" means any partnership, corporation or other entity, in which up to and including 50% of the partnership interests, outstanding voting stock or other equity interests is owned, directly or indirectly, by the Company and/or one or more subsidiaries. 4 "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. "Officer" means, with respect to the Company or the Guarantor, as the case may be, the chairman of the board of directors, the president or chief executive officer, any vice president, the chief financial officer, the treasurer or any assistant treasurer, or the secretary or any assistant secretary. "Officers' Certificate" means a certificate signed in the name of the Company or the Guarantor, as the case may be, (i) by the chairman of the board of directors, the president or chief executive officer or a vice president and (ii) by the chief financial officer, the treasurer or any assistant treasurer, or the secretary or any assistant secretary, complying with Section 10.4 and delivered to the Trustee. Each such certificate shall comply with Section 314 of the Trust Indenture Act and include (except as otherwise expressly provided in this Indenture) the statements provided in Section 10.4. "Opinion of Counsel" means a written opinion signed by legal counsel, who may be an employee of or counsel to the Company or the Guarantor, as the case may be, satisfactory to the Trustee and complying with Section 10.4. Each such opinion shall comply with Section 314 of the Trust Indenture Act and include the statements provided in Section 10.4, if and to the extent required thereby. "original issue date" of any Security (or portion thereof) means the earlier of (a) the date of authentication of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. "Original Issue Discount Security" means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 6.2. "Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 5 "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference stock, whether now outstanding or issued after the date of the Indenture, including, without limitation, all series and classes of such preferred or preference stock. "Principal" of a Security means the principal amount of, and, unless the context indicates otherwise, includes any premium payable on, the Security. "Principal Property" means land, land improvements, buildings and associated equipment owned or leased pursuant to a capital lease and used by the Company or a Restricted Subsidiary primarily in the hotel business which exceeds 2% of Consolidated Net Tangible Assets, but shall not include any such property financed through the issuance of tax exempt governmental obligations (including, without limitation, industrial revenue bonds and similar financings). "Registered Global Security" means a Security evidencing all or a part of a series of Registered Securities, issued to the Depositary for such series in accordance with Section 2.2, and bearing the legend prescribed in Section 2.2. "Registered Security" means any Security registered on the Security Register (as defined in Section 2.5). "Responsible Officer" means, when used with respect to the Trustee, any senior trust officer, any vice president, any trust officer, any assistant trust officer, or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary organized and existing under the laws of the United States of America and the principal business of which is carried on within the United States of America which owns or is a lessee pursuant to a capital lease of any Principal Property other than: (i) each Subsidiary the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination thereof; and (ii) each Subsidiary formed or acquired after the date hereof for the purpose of acquiring the business or assets of another Person and which does not acquire all or any substantial part of the business or assets of the Company or any Restricted Subsidiary; 6 PROVIDED, HOWEVER, that any Subsidiary may be declared a Restricted Subsidiary by Board Resolution, effective as of the date such Board Resolution is adopted; PROVIDED further, that any such declaration may be rescinded by further Board Resolution, effective as of the date such further Board Resolution is adopted. "Securities" means any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture and, unless the context indicates otherwise, shall include any coupon appertaining thereto. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article 7 and thereafter means such successor. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as it may be amended from time to time. "UCC" means the Uniform Commercial Code, as in effect in each applicable jurisdiction. "United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended and as codified in Title 11 of the United States Code, as amended from time to time hereafter, or any successor federal bankruptcy law. "Unregistered Security" means any Security other than a Registered Security. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. 7 Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Yield to Maturity" means, as the context may require, the yield to maturity (i) on a series of Securities or (ii) if the Securities of a series are issuable from time to time, on a Security of such series, calculated at the time of issuance of such series in the case of clause (i) or at the time of issuance of such Security of such series in the case of clause (ii), or, if applicable, at the most recent redetermination of interest on such series or on such Security, and calculated in accordance with the constant interest method or such other accepted financial practice as is specified in the terms of such Security. SECTION 1.2 OTHER DEFINITIONS. Each of the following terms is defined in the section set forth opposite such term: TERM SECTION ---- ------- Authenticating Agent 2.2 cash transaction 7.3 Dollars 4.2 Event of Default 6.1 Judgment Currency 10.15 mandatory sinking fund payment 3.5 optional sinking fund payment 3.5 Paying Agent 2.5 record date 2.4 Registrar 2.5 Required Currency 10.15 Security Register 2.5 self-liquidating paper 7.3 sinking fund payment date 3.5 tranche 2.14 SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture. The following terms used in this Indenture that are defined by the Trust Indenture Act have the following meanings: "indenture securities" means the Securities; 8 "indenture security holder" means a Holder or a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by reference in the Trust Indenture Act to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.4 RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (ii) words in the singular include the plural, and words in the plural include the singular; (iii) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (iv) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated; and (v) use of masculine, feminine or neuter pronouns should not be deemed a limitation, and the use of any such pronouns should be construed to include, where appropriate, the other pronouns. ARTICLE 2 THE SECURITIES SECTION 2.1 FORM. The Securities of each series shall be substantially in such form or forms (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this 9 Indenture and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law, or with any rules of any securities exchange or usage, all as may be determined by the officers executing such Securities as evidenced by their execution of the Securities. Unless otherwise so established, Unregistered Securities shall have coupons attached. SECTION 2.2 EXECUTION AND AUTHENTICATION. Two Officers shall execute the Securities (other than coupons) for the Company by facsimile or manual signature in the name and on behalf of the Company. Two Officers shall execute the Guarantees for the Guarantor by facsimile or manual signature in the name and on behalf of the Guarantor. The seal of the Company, if any, shall be reproduced on the Securities. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. The Trustee, at the expense of the Company, may appoint an authenticating agent (the "AUTHENTICATING AGENT") to authenticate Securities (other than coupons). The Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. A Security (other than coupons) shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series having attached thereto appropriate coupons, if any, executed by the Company and the Guarantor to the Trustee for authentication together with the applicable documents referred to below in this Section, and the Trustee shall thereupon authenticate and deliver such Securities to or upon the written order of the Company. In authenticating any Securities of a series, the Trustee shall be entitled to receive prior to the first authentication of any Securities of such series, and (subject to Article 7) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked: (1) any Board Resolution and/or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities of that series were established; (2) an Officers' Certificate setting forth the form or forms and terms of the Securities, stating that the form or forms and terms of the Securities of such series have been, or will be when established in 10 accordance with such procedures as shall be referred to therein, established in compliance with this Indenture; and (3) at the option of the Company, either an Opinion of Counsel, or a letter addressed to the Trustee permitting it to rely on an Opinion of Counsel, substantially to the effect that the Securities have been duly authorized and, if executed and authenticated in accordance with the provisions of the Indenture and delivered to and duly paid for by the purchasers thereof on the date of such opinion, would be entitled to the benefits of the Indenture and would be valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting creditors' rights generally, general principles of equity, and such other matters as shall be specified therein. If the Company shall establish pursuant to Section 2.3 that the Securities of a series or a portion thereof are to be issued in the form of one or more Registered Global Securities, then the Company and the Guarantor shall execute and the Trustee shall authenticate and deliver one or more Registered Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series issued in such form and not yet canceled, (ii) shall be registered in the name of the Depositary for such Registered Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or its custodian or pursuant to such Depositary's instructions and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary." SECTION 2.3 AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series and each such series shall rank equally and pari passu with all other unsecured and unsubordinated debt of the Company. There shall be established in or pursuant to Board Resolution or one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series, subject to the last sentence of this Section 2.3, (1) the designation of the Securities of the series, which shall distinguish the Securities of the series from the Securities of all other series; 11 (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture and any limitation on the ability of the Company to increase such aggregate principal amount after the initial issuance of the Securities of that series (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, or upon redemption of, other Securities of the series pursuant hereto); (3) the date or dates on which the principal of the Securities of the series is payable (which date or dates may be fixed or extendible); (4) the rate or rates (which may be fixed or variable) per annum at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, on which such interest shall be payable and (in the case of Registered Securities) on which a record shall be taken for the determination of Holders to whom interest is payable and/or the method by which such rate or rates or date or dates shall be determined; (5) if other than as provided in Section 4.2, the place or places where the principal of and any interest on Securities of the series shall be payable, any Registered Securities of the series may be surrendered for exchange, notices, demands to or upon the Company in respect of the Securities of the series and this Indenture may be served and notice to Holders may be published; (6) the right, if any, of the Company to redeem Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices at which and any terms and conditions upon which Securities of the series may be so redeemed, pursuant to any sinking fund or otherwise; (7) the obligation, if any, of the Company to redeem, purchase or repay Securities of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and any of the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof; 12 (10) if other than the coin or currency in which the Securities of the series are denominated, the coin or currency in which payment of the principal of or interest on the Securities of the series shall be payable or if the amount of payments of principal of and/or interest on the Securities of the series may be determined with reference to an index based on a coin or currency other than that in which the Securities of the series are denominated, the manner in which such amounts shall be determined; (11) if other than the currency of the United States of America, the currency or currencies, including composite currencies, in which payment of the Principal of and interest on the Securities of the series shall be payable, and the manner in which any such currencies shall be valued against other currencies in which any other Securities shall be payable; (12) whether the Securities of the series or any portion thereof will be issuable as Registered Securities (and if so, whether such Securities will be issuable as Registered Global Securities) or Unregistered Securities (with or without coupons), or any combination of the foregoing, any restrictions applicable to the offer, sale or delivery of Unregistered Securities or the payment of interest thereon and, if other than as provided herein, the terms upon which Unregistered Securities of any series may be exchanged for Registered Securities of such series and vice versa; (13) whether and under what circumstances the Company will pay additional amounts on the Securities of the series held by a person who is not a U.S. person in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether the Company will have the option to redeem such Securities rather than pay such additional amounts; (14) if the Securities of the series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions; (15) any trustees, depositaries, authenticating or paying agents, transfer agents or the registrar or any other agents with respect to the Securities of the series; (16) provisions, if any, for the defeasance of the Securities of the series (including provisions permitting defeasance of less than all Securities of the series), which provisions may be in addition to, in substitution for, or in modification of (or any combination of the foregoing) the provisions of Article 8; 13 (17) if the Securities of the series are issuable in whole or in part as one or more Registered Global Securities, the identity of the Depositary for such Registered Global Security or Securities (which Depositary shall, at the time of its designation as Depositary and at all times while it serves as Depositary, be a clearing agency registered under the Exchange Act and any other applicable statute or regulation); (18) any other events of default or covenants with respect to the Securities of the series; and (19) the subordination provisions, if any, relating to such Securities or the Guarantee; (20) with respect to any series of senior secured Securities, the type, amount and other terms of, and provisions relating to, the collateral to be provided as security, and any deletions, additions or modifications to this Indenture to permit the issuance of senior secured Securities or the administration thereof; and (21) any other terms of the Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series and coupons, if any, appertaining thereto shall be substantially identical, except in the case of Registered Securities as to date and denomination, except in the case of any Periodic Offering and except as may otherwise be provided by or pursuant to the Board Resolution referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution or in any such indenture supplemental hereto and any forms and terms of Securities to be issued from time to time may be completed and established from time to time prior to the issuance thereof by procedures described in such Board Resolution or supplemental indenture. SECTION 2.4 DENOMINATION AND DATE OF SECURITIES; PAYMENTS OF INTEREST. The Securities of each series shall be issuable as Registered Securities or Unregistered Securities in denominations established as contemplated by Section 2.3 or, if not so established with respect to Securities of any series, in denominations of $1,000 and any integral multiple thereof. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the Officers of the Company executing the same may determine, as evidenced by their execution thereof. 14 Each Security shall be dated the date of its authentication. The Securities of each series shall bear interest, if any, from the date, and such interest and shall be payable on the dates, established as contemplated by Section 2.3. The person in whose name any Registered Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Registered Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Company shall default in the payment of the interest due on such interest payment date for such series, in which case the provisions of Section 2.13 shall apply. The term "RECORD DATE" as used with respect to any interest payment date (except a date for payment of defaulted interest) for the Securities of any series shall mean the date specified as such in the terms of the Registered Securities of such series established as contemplated by Section 2.3, or, if no such date is so established, the fifteenth day next preceding such interest payment date, whether or not such record date is a Business Day. SECTION 2.5 REGISTRAR AND PAYING AGENT; AGENTS GENERALLY. The Company shall maintain an office or agency where Securities may be presented for registration, registration of transfer or for exchange (the "REGISTRAR") and an office or agency where Securities may be presented for payment (the "PAYING AGENT"). The Company shall cause the Registrar to keep a register of the Registered Securities and of their registration, transfer and exchange (the "SECURITY REGISTER"). The Company may have one or more additional Paying Agents or transfer agents with respect to any series. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture and the Trust Indenture Act that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any Agent and any change in the name or address of an Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company may remove any Agent upon written notice to such Agent and the Trustee; PROVIDED that no such removal shall become effective until (i) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by the Company and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (i) of this proviso. The Company or any affiliate of the Company may act as Paying Agent or Registrar; PROVIDED that neither the Company nor an affiliate of the Company shall act as Paying Agent in connection with the defeasance of the Securities or the discharge of this Indenture under Article 8. 15 The Company initially appoints the Trustee as Registrar, Paying Agent and Authenticating Agent. If, at any time, the Trustee is not the Registrar, the Registrar shall make available to the Trustee ten days prior to each interest payment date and at such other times as the Trustee may reasonably request the names and addresses of the Holders as they appear in the Security Register. SECTION 2.6 PAYING AGENT TO HOLD MONEY IN TRUST. Not later than 10:00 a.m. New York City time on each due date of any Principal or interest on any Securities, the Company shall deposit with the Paying Agent money in immediately available funds sufficient to pay such Principal or interest. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders of such Securities or the Trustee all money held by the Paying Agent for the payment of Principal of and interest on such Securities and shall promptly notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company or any affiliate of the Company acts as Paying Agent, it will, on or before each due date of any Principal of or interest on any Securities, segregate and hold in a separate trust fund for the benefit of the Holders thereof a sum of money sufficient to pay such Principal or interest so becoming due until such sum of money shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee in writing of its action or failure to act as required by this Section. SECTION 2.7 TRANSFER AND EXCHANGE. Unregistered Securities (except for any temporary global Unregistered Securities) and coupons (except for coupons attached to any temporary global Unregistered Securities) shall be transferable by delivery. At the option of the Holder thereof, Registered Securities of any series (other than a Registered Global Security, except as set forth below) may be exchanged for a Registered Security or Registered Securities of such series and tenor having authorized denominations and an equal aggregate principal amount, upon surrender of such Registered Securities to be exchanged at the agency of the Company that shall be maintained for such purpose in accordance with Section 2.5 and upon payment, if the Company shall so require, of the charges hereinafter provided. If the Securities of any series are issued in both registered and unregistered form, except as otherwise established pursuant to Section 2.3, at the option of the Holder thereof, Unregistered Securities of any series may be exchanged for Registered Securities of such series and tenor having authorized denominations and an equal aggregate principal amount, upon 16 surrender of such Unregistered Securities to be exchanged at the agency of the Company that shall be maintained for such purpose in accordance with Section 4.2, with, in the case of Unregistered Securities that have coupons attached, all unmatured coupons and all matured coupons in default thereto appertaining, and upon payment, if the Company shall so require, of the charges hereinafter provided. At the option of the Holder thereof, if Unregistered Securities of any series, maturity date, interest rate and original issue date are issued in more than one authorized denomination, except as otherwise established pursuant to Section 2.3, such Unregistered Securities may be exchanged for Unregistered Securities of such series and tenor having authorized denominations and an equal aggregate principal amount, upon surrender of such Unregistered Securities to be exchanged at the agency of the Company that shall be maintained for such purpose in accordance with Section 4.2, with, in the case of Unregistered Securities that have coupons attached, all unmatured coupons and all matured coupons in default thereto appertaining, and upon payment, if the Company shall so require, of the charges hereinafter provided. Registered Securities of any series may not be exchanged for Unregistered Securities of such series. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Registered Securities presented for registration of transfer, exchange, redemption or payment shall be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee duly executed by, the holder or his attorney duly authorized in writing. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities. No service charge shall be made for any such transaction. Notwithstanding any other provision of this Section 2.7, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Registered Global Security representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. If at any time the Depositary for any Registered Global Securities of any series notifies the Company that it is unwilling or unable to continue as Depositary for such Registered Global Securities or if at any time the Depositary for such Registered Global Securities shall no longer be eligible under applicable law, the Company shall appoint a successor Depositary eligible under applicable law with respect to such Registered Global Securities. If a successor Depositary eligible under 17 applicable law for such Registered Global Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company will execute, and the Trustee, upon receipt of the Company's order for the authentication and delivery of definitive Registered Securities of such series and tenor, will authenticate and deliver Registered Securities of such series and tenor, in any authorized denominations, in an aggregate principal amount equal to the principal amount of such Registered Global Securities, in exchange for such Registered Global Securities. The Company may at any time and in its sole discretion determine that any Registered Global Securities of any series shall no longer be maintained in global form. In such event the Company and the Guarantor will execute, and the Trustee, upon receipt of the Company's order for the authentication and delivery of definitive Registered Securities of such series and tenor, will authenticate and deliver, Registered Securities of such series and tenor in any authorized denominations, in an aggregate principal amount equal to the principal amount of such Registered Global Securities, in exchange for such Registered Global Securities. Any time the Registered Securities of any series are not in the form of Registered Global Securities pursuant to the preceding two paragraphs, the Company agrees to supply the Trustee with a reasonable supply of certificated Registered Securities without the legend required by Section 2.2 and the Trustee agrees to hold such Registered Securities in safekeeping until authenticated and delivered pursuant to the terms of this Indenture. If established by the Company pursuant to Section 2.3 with respect to any Registered Global Security, the Depositary for such Registered Global Security may surrender such Registered Global Security in exchange in whole or in part for Registered Securities of the same series and tenor in definitive registered form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to the Person specified by such Depositary new Registered Securities of the same series and tenor, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Registered Global Security; and (ii) to such Depositary a new Registered Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Registered Global Security and the aggregate principal amount of Registered Securities authenticated and delivered pursuant to clause (i) above. 18 Registered Securities issued in exchange for a Registered Global Security pursuant to this Section 2.7 shall be registered in such names and in such authorized denominations as the Depositary for such Registered Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Company or the Trustee. The Trustee or such agent shall deliver such Securities to or as directed by the Persons in whose names such Securities are so registered. All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. Notwithstanding anything herein or in the forms or terms of any Securities to the contrary, none of the Company, the Guarantor, the Trustee or any agent of the Company, the Guarantor or the Trustee shall be required to exchange any Unregistered Security for a Registered Security if such exchange would result in adverse Federal income tax consequences to the Company or the Guarantor (such as, for example, the inability of the Company or the Guarantor to deduct from its income, as computed for Federal income tax purposes, the interest payable on the Unregistered Securities) under then applicable United States Federal income tax laws. The Trustee and any such agent shall be entitled to rely on an Officers' Certificate or an Opinion of Counsel in determining such result. Neither the Registrar nor the Company shall be required (i) to issue, authenticate, register the transfer of or exchange Securities of any series for a period of 15 days before a selection of such Securities to be redeemed or (ii) to register the transfer of or exchange any Security selected for redemption in whole or in part. SECTION 2.8 REPLACEMENT SECURITIES. If a defaced or mutilated Security of any series is surrendered to the Trustee or if a Holder claims that its Security of any series has been lost, destroyed or wrongfully taken, the Company and the Guarantor shall, subject to the further provisions of this Section 2.8, issue and the Trustee shall authenticate a replacement Security of such series and tenor and principal amount bearing a number not contemporaneously outstanding. The Company may charge such Holder for any tax or other governmental charge that may be imposed as a result of or in connection with replacing a Security and for its expenses and the expenses of the Trustee (including without limitation attorneys' fees and expenses) in replacing a Security. In case any such mutilated, defaced, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. If required by the Trustee or the Company, (i) an indemnity bond must be furnished that is sufficient in the judgment of both the Trustee and the Company to protect the Company, the Trustee and any Agent from any loss that any 19 of them may suffer if a Security is replaced or paid as provided in this Section 2.8 and (ii) in the case of a lost, destroyed or wrongfully taken Security, evidence must be furnished to the satisfaction of both the Trustee and the Company of the loss, destruction or wrongful taking of such Security. Notwithstanding the foregoing, the Company and the Trustee shall have no obligation to replace or pay a Security pursuant to this Section 2.8 if either the Company or the Trustee has notice that such Security has been acquired by a bona fide purchaser. Every replacement Security is an additional obligation of the Company and shall be entitled to the benefits of this Indenture. To the extent permitted by law, the foregoing provisions of this Section are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Securities. SECTION 2.9 OUTSTANDING SECURITIES. Securities outstanding at any time are all Securities that have been authenticated and delivered by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.8, it ceases to be outstanding unless and until the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a holder in due course. If the Paying Agent (other than the Company or an affiliate of the Company) holds on the maturity date or any redemption date or date for repurchase of the Securities money sufficient to pay Securities payable or to be redeemed or repurchased on that date, then on and after that date such Securities cease to be outstanding and interest on them shall cease to accrue. A Security does not cease to be outstanding because the Company or one of its affiliates holds such Security, PROVIDED, HOWEVER, that, in determining whether the Holders of the requisite principal amount of the outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities as to which a Responsible Officer of the Trustee has received written notice to be so owned shall be so disregarded. Any Securities so owned which are pledged by the Company, or by any affiliate of the Company, as security for loans or other obligations, otherwise than to another such affiliate of the Company, shall be deemed to be outstanding, if the pledgee is entitled pursuant to the terms of its pledge agreement and is free to exercise in its or his 20 discretion the right to vote such securities, uncontrolled by the Company or by any such affiliate. SECTION 2.10 TEMPORARY SECURITIES. Until definitive Securities of any series are ready for delivery, the Company and the Guarantor may prepare and the Trustee shall authenticate temporary Securities of such series. Temporary Securities of any series shall be substantially in the form of definitive Securities of such series but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Securities, as evidenced by their execution of such temporary Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of any series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series and tenor upon surrender of such temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 4.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of such series and tenor and authorized denominations. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series. SECTION 2.11 CANCELLATION. The Company at any time may deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold. The Registrar, any transfer agent and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee shall cancel and destroy all Securities surrendered for transfer, exchange, payment or cancellation and shall deliver a certificate of destruction to the Company. The Company may not issue new Securities to replace Securities it has paid in full or delivered to the Trustee for cancellation. SECTION 2.12 CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders and no representation shall be made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or exchange. SECTION 2.13 DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Securities, it shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay, the defaulted interest 21 plus (to the extent lawful) any interest payable on the defaulted interest (as may be specified in the terms thereof, established pursuant to Section 2.3) to the Persons who are Holders on a subsequent special record date, which shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before such special record date, the Company shall mail to each Holder and to the Trustee a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.14 SERIES MAY INCLUDE TRANCHES. A series of Securities may include one or more tranches (each a "TRANCHE") of Securities, including Securities issued in a Periodic Offering. The Securities of different tranches may have one or more different terms, including authentication dates and public offering prices, but all the Securities within each such tranche shall have identical terms, including authentication date and public offering price. Notwithstanding any other provision of this Indenture, with respect to Sections 2.2 (other than the fourth paragraph thereof) through 2.4, 2.7, 2.8, 2.10, 3.1 through 3.5, 4.2, 6.1 through 6.14, 8.1 through 8.5 and 9.2, if any series of Securities includes more than one tranche, all provisions of such sections applicable to any series of Securities shall be deemed equally applicable to each tranche of any series of Securities in the same manner as though originally designated a series unless otherwise provided with respect to such series or tranche pursuant to Section 2.3. In particular, and without limiting the scope of the next preceding sentence, any of the provisions of such sections which provide for or permit action to be taken with respect to a series of Securities shall also be deemed to provide for and permit such action to be taken instead only with respect to Securities of one or more tranches within that series (and such provisions shall be deemed satisfied thereby), even if no comparable action is taken with respect to Securities in the remaining tranches of that series. ARTICLE 3 REDEMPTION SECTION 3.1 APPLICABILITY OF ARTICLE. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 2.3 for Securities of such series. SECTION 3.2 NOTICE OF REDEMPTION; PARTIAL REDEMPTIONS. Notice of redemption to the Holders of Registered Securities of any series to be redeemed as a whole or in part at the option of the Company shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Registered Securities of 22 such series at their last addresses as they shall appear upon the Securities Register. Notice of redemption to the Holders of Unregistered Securities of any series to be redeemed as a whole or in part who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act, shall be given by mailing notice of such redemption, by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption, to such Holders at such addresses as were so furnished to the Trustee (and, in the case of any such notice given by the Company, the Trustee shall make such information available to the Company for such purpose). Notice of redemption to all other Holders of Unregistered Securities of any series to be redeemed as a whole or in part shall be published in an Authorized Newspaper in The City of New York or with respect to any Security the interest on which is based on the offered quotations in the interbank Eurodollar market for dollar deposits in an Authorized Newspaper in London, in each case, once in each of three successive calendar weeks, the first publication to be not less than 30 days nor more than 60 days prior to the date fixed for redemption. Any notice which is mailed or published in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. The notice of redemption to each such Holder shall specify (i) the principal amount of each Security of such series held by such Holder to be redeemed, (ii) the CUSIP numbers of the Securities to be redeemed, (iii) the date fixed for redemption, (iv) the redemption price, (v) the place or places of payment, (vi) that payment will be made upon presentation and surrender of such Securities and, in the case of Securities with coupons attached thereto, of all coupons appertaining thereto maturing after the date fixed for redemption, (vii) that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, (viii) that interest accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series and tenor in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Securities of any series to be redeemed at the option of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Not later than 10:00 a.m. New York City time on the redemption date specified in the notice of redemption given as provided in this Section, the Company will deposit with the Trustee or with one or more Paying Agents (or, if the Company 23 is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 2.6) an amount of money in immediately available funds sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption. If less than all the outstanding Securities of a series are to be redeemed, the Company will deliver to the Trustee at least 15 days prior to the last date on which notice of redemption may be given to Holders pursuant to the first paragraph of this Section 3.2 (or such shorter period as shall be acceptable to the Trustee) an Officers' Certificate (which need not contain the statements required by Section 10.4) stating the aggregate principal amount of such Securities to be redeemed. In case of a redemption at the election of the Company prior to the expiration of any restriction on such redemption, the Company shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such redemption is not prohibited by such restriction. If less than all the Securities of a series are to be redeemed, the Trustee shall select, pro rata, by lot or in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Company in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 3.3 PAYMENT OF SECURITIES CALLED FOR REDEMPTION. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after such date (unless the Company shall default in the payment of such Securities at the redemption price, together with interest accrued to such date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue, and the unmatured coupons, if any, appertaining thereto shall be void and, except as provided in Sections 7.11 and 8.4, such Securities shall cease from and after the date fixed for redemption to be entitled to any benefit under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, together with all coupons, if any, appertaining thereto maturing after the date fixed for redemption, said Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to 24 the date fixed for redemption; PROVIDED that payment of interest becoming due on or prior to the date fixed for redemption shall be payable in the case of Securities with coupons attached thereto, to the Holders of the coupons for such interest upon surrender thereof, and in the case of Registered Securities, to the Holders of such Registered Securities registered as such on the relevant record date subject to the terms and provisions of Sections 2.4 and 2.13 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by such Security. If any Security with coupons attached thereto is surrendered for redemption and is not accompanied by all appurtenant coupons maturing after the date fixed for redemption, the surrender of such missing coupon or coupons may be waived by the Company and the Trustee, if there be furnished to each of them such security or indemnity as they may require to save each of them harmless. Upon presentation of any Security of any series redeemed in part only, the Company and the Guarantor shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Company, a new Security or Securities of such series and tenor (with any unmatured coupons attached), of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. SECTION 3.4 EXCLUSION OF CERTAIN SECURITIES FROM ELIGIBILITY FOR SELECTION FOR REDEMPTION. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by an authorized officer of the Company and delivered to the Trustee at least 40 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Company or (b) an entity specifically identified in such written statement as directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. SECTION 3.5 MANDATORY AND OPTIONAL SINKING FUNDS. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "MANDATORY SINKING FUND PAYMENT", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an "OPTIONAL SINKING FUND PAYMENT". The date on which a sinking fund payment is to be made is herein referred to as the "SINKING FUND PAYMENT DATE". 25 In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Company may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except through a mandatory sinking fund payment) by the Company or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Company and delivered to the Trustee for cancellation pursuant to Section 2.11, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Company through any optional sinking fund payment. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities. On or before the sixtieth day next preceding each sinking fund payment date for any series, or such shorter period as shall be acceptable to the Trustee, the Company will deliver to the Trustee an Officers' Certificate (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of specified Securities of such series and the basis for such credit, (b) stating that none of the specified Securities of such series has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured) and are continuing and (d) stating whether or not the Company intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Company intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Company to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.11 to the Trustee with such Officers' Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officers' Certificate shall be irrevocable and upon its receipt by the Trustee the Company shall become unconditionally obligated to make all the cash payments or delivery of securities therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Company, on or before any such sixtieth day, to deliver such Officer's Certificate and Securities specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Company (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (ii) that the Company will make no optional sinking fund payment with respect to such series as provided in this Section. If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any 26 unused balance of any preceding sinking fund payments made in cash shall exceed $50,000 (or a lesser sum if the Company shall so request with respect to the Securities of any series), such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price thereof together with accrued interest thereon to the date fixed for redemption. If such amount shall be $50,000 (or such lesser sum) or less and the Company makes no such request then it shall be carried over until a sum in excess of $50,000 (or such lesser sum) is available. The Trustee shall select, in the manner provided in Section 3.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and shall inform the Company of the serial numbers of the Securities of such series (or portions thereof) so selected. Securities shall be excluded from eligibility for redemption under this Section if they are identified by registration and certificate number in an Officers' Certificate delivered to the Trustee at least 60 days prior to the sinking fund payment date as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Company or (b) an entity specifically identified in such Officers' Certificate as directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. The Trustee, in the name and at the expense of the Company (or the Company, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 3.2 (and with the effect provided in Section 3.3) for the redemption of Securities of such series in part at the option of the Company. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the Principal of, and interest on, the Securities of such series at maturity. Not later than 10:00 a.m. New York City time on each sinking fund payment date, the Company shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest accrued to the date fixed for redemption on Securities to be redeemed on the next following sinking fund payment date. The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund during the continuance of a Default in payment of interest on such Securities or of any Event of Default except that, where the mailing of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Company a sum sufficient for such redemption. Except as 27 aforesaid, any moneys in the sinking fund for such series at the time when any such Default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such Default or Event of Default, be deemed to have been collected under Article 6 and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 6.4 or the Default cured on or before the sixtieth day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities. ARTICLE 4 COVENANTS SECTION 4.1 PAYMENT OF SECURITIES. The Company shall pay the Principal of and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. The interest on Securities with coupons attached (together with any additional amounts payable pursuant to the terms of such Securities) shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. The interest on any temporary Unregistered Securities (together with any additional amounts payable pursuant to the terms of such Securities) shall be paid, as to the installments of interest evidenced by coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Unregistered Securities for notation thereon of the payment of such interest. The interest on Registered Securities (together with any additional amounts payable pursuant to the terms of such Securities) shall be payable only to the Holders thereof and at the option of the Company may be paid by mailing checks for such interest payable to or upon the written order of such Holders at their last addresses as they appear on the Security Register of the Company. Notwithstanding any provisions of this Indenture and the Securities of any series to the contrary, if the Company and a Holder of any Registered Security so agree, payments of interest on, and any portion of the Principal of, such Holder's Registered Security (other than interest payable at maturity or on any redemption or repayment date or the final payment of Principal on such Security) shall be made by the Paying Agent, upon receipt from the Company of immediately available funds by 11:00 A.M., New York City time (or such other time as may be agreed to between the Company and the Paying Agent), directly to the Holder of such Security (by Federal funds wire transfer or otherwise) if the Holder has delivered written instructions to the Trustee 15 days prior to such payment date requesting that such payment will be so made and designating the bank account to which such payments shall be so made and in the case of payments of Principal surrenders the same to the Trustee in exchange for 28 a Security or Securities aggregating the same principal amount as the unredeemed principal amount of the Securities surrendered. The Trustee shall be entitled to rely on the last instruction delivered by the Holder pursuant to this Section 4.1 unless a new instruction is delivered 15 days prior to a payment date. The Company will indemnify and hold each of the Trustee and any Paying Agent harmless against any loss, liability or expense (including attorneys' fees) resulting from any act or omission to act on the part of the Company or any such Holder in connection with any such agreement or from making any payment in accordance with any such agreement. The Company shall pay interest on overdue Principal, and interest on overdue installments of interest, to the extent lawful, at the rate per annum specified in the Securities. SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office or agency of the Company. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 10.2. The Company will maintain one or more agencies in a city or cities located outside the United States (including any city in which such an agency is required to be maintained under the rules of any stock exchange on which the Securities of any series are listed) where the Unregistered Securities, if any, of each series and coupons, if any, appertaining thereto may be presented for payment. No payment on any Unregistered Security or coupon will be made upon presentation of such Unregistered Security or coupon at an agency of the Company within the United States nor will any payment be made by transfer to an account in, or by mail to an address in, the United States unless, pursuant to applicable United States laws and regulations then in effect, such payment can be made without adverse tax consequences to the Company. Notwithstanding the foregoing, if full payment in United States Dollars ("DOLLARS") at each agency maintained by the Company outside the United States for payment on such Unregistered Securities or coupons appertaining thereto is illegal or effectively precluded by exchange controls or other similar restrictions, payments in Dollars of Unregistered Securities of any series and coupons appertaining thereto which are payable in Dollars may be made at an agency of the Company. 29 The Company may also from time to time designate one or more other offices or agencies where the Securities of any series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 4.3 NEGATIVE PLEDGE. The following covenant applies to Securities of any series that are designated as senior unsecured debt Securities: (a) The Company will not, and will not permit any Restricted Subsidiary to, create or incur any Lien on any shares of stock, indebtedness or other obligations of a Restricted Subsidiary or any Principal Property of the Company or a Restricted Subsidiary, whether such shares of stock, indebtedness or other obligations of a Restricted Subsidiary or Principal Property are owned at the date of this Indenture or hereafter acquired, unless the Company secures or causes such Restricted Subsidiary to secure the outstanding Securities equally and ratably with all indebtedness secured by such Lien, so long as such indebtedness shall be so secured; PROVIDED, however, that this covenant shall not apply in the case of: (i) the creation of any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property hereafter acquired (including acquisitions by way of merger or consolidation) by the Company or a Restricted Subsidiary contemporaneously with such acquisition, or within 180 days thereafter, to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any Lien upon any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property hereafter acquired existing at the time of such acquisition, or the acquisition of any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property subject to any Lien without the assumption thereof; (ii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property existing at the date of this Indenture; (iii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property in favor of the Company or any Restricted Subsidiary; (iv) any Lien on any Principal Property being constructed or improved securing loans to finance such construction or improvements; (v) any Lien on shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property incurred in connection with the issuance of tax-exempt governmental obligations (including, without limitation, industrial revenue bonds and similar financings); (vi) any mechanics', materialmen's, carriers' or other similar Liens arising in the ordinary course of business with respect to obligations which are not yet due or that are being contested in good faith, (vii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property for taxes, assessments or governmental charges or levies not yet delinquent, or already delinquent but the validity of which is being contested in good faith, (viii) any Lien on any shares of stock, indebtedness or other obligations of a Subsidiary or 30 any Principal Property arising in connection with legal proceedings being contested in good faith, including any judgment Lien so long as execution thereon is stayed, (ix) any landlord's Lien on fixtures located on premises leased by the Company or a Restricted Subsidiary in the ordinary course of business, and tenants' rights under leases, easements and similar Liens not materially impairing the use or value of the property involved, (x) any Lien arising by reason of deposits necessary to qualify the Company or any Restricted Subsidiary to conduct business, maintain self-insurance, or obtain the benefit of, or comply with, any law, (xi) Liens resulting from the deposit of funds or evidences of indebtedness in trust for the purpose of defeasing indebtedness of the Company or of any of its Subsidiaries, and (xii) Liens existing on property or indebtedness of, or an equity interest in, any corporation, partnership or any other entity at the time such corporation, partnership or other entity becomes a Restricted Subsidiary; (xiii) Liens on the stock, partnership or other equity interest of the Company or any Subsidiary in any Joint Venture or any Subsidiary which owns an equity interest in such Joint Venture, to secure Debt, provided the amount of such Debt is contributed and/or advanced solely to such Joint Venture; and (xiv) any renewal of or substitution for any Lien permitted by any of the preceding clauses (i) through (xiii), provided, in the case of a Lien permitted under clause (i), (ii) or (iv), the principal amount of indebtedness secured thereby does not exceed (x) the greater of (i) the principal amount secured thereby at the time of such renewal or substitution, and (ii) 80% of the fair market value (in the opinion of the Company's Board of Directors) of the properties subject to such renewal or substitution plus (y) any costs incurred in connection with such renewal or substitution. (b) Notwithstanding the provisions of paragraph (a) of this Section, the Company or any Restricted Subsidiary may create or assume Liens in addition to those permitted by paragraph (a) of this Section, and renew, extend or replace such liens, PROVIDED that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt does not exceed the greater of (x) $50 million, or (y) 15% of Consolidated Net Tangible Assets. SECTION 4.4 CERTAIN SALE AND LEASE-BACK TRANSACTIONS. The following covenant applies to Securities of any series that are designated as senior unsecured debt Securities: (a) The Company will not, and will not permit any Restricted Subsidiary to, sell or transfer, directly or indirectly, except to the Company or a Restricted Subsidiary, any Principal Property as an entirety, or any substantial portion thereof, with the intention of taking back a lease of such property, except a lease for a period of three years or less at the end of which it is intended that the use of such property by the lessee will be discontinued; PROVIDED that, notwithstanding the foregoing, the Company or any Restricted Subsidiary may sell any such Principal Property and lease it back for a longer period (i) if the Company or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 4.3(a), to create a Lien on the property to be leased securing Funded Debt in an amount equal to the Attributable Debt with respect to such sale and lease-back transaction without equally 31 and ratably securing the outstanding Securities or (ii) if (A) the Company promptly informs the Trustee of such transaction and (B) the Company causes an amount equal to the fair value (as determined by Board Resolution of the Company) of such property to be applied (1) to the purchase of other property that will constitute Principal Property having a fair value at least equal to the fair value of the property sold or (2) to the retirement, within 240 days after receipt of such proceeds, of Funded Debt incurred or assumed by the Company or a Restricted Subsidiary (including the Securities); PROVIDED further that, in lieu of applying all of or any part of such net proceeds to such retirement, the Company may, within 240 days after such sale, deliver or cause to be delivered to the applicable trustee for cancellation either debentures or notes evidencing Funded Debt of the Company (which may include the Securities) or of a Restricted Subsidiary previously authenticated and delivered by the applicable trustee, and not theretofore tendered for sinking fund purposes or called for a sinking fund or otherwise applied as a credit against an obligation to redeem or retire such notes or debentures, and an Officers' Certificate (which shall be delivered to the Trustee and which need not contain the statements prescribed by Section 10.4) stating that the Company elects to deliver or cause to be delivered such debentures or notes in lieu of retiring Funded Debt as hereinabove provided. If the Company shall so deliver debentures or notes to the applicable trustee and the Company shall duly deliver such Officers' Certificate, the amount of cash which the Company shall be required to apply to the retirement of Funded Debt under this Section 4.4(a) shall be reduced by an amount equal to the aggregate of the then applicable optional redemption prices (not including any optional sinking fund redemption prices) of such debentures or notes, or, if there are no such redemption prices, the principal amount of such debentures or notes; PROVIDED, that in the case of debentures or notes which provide for an amount less than the principal amount thereof to be due and payable upon a declaration of the maturity thereof, such amount of cash shall be reduced by the amount of principal of such debentures or notes that would be due and payable as of the date of such application upon a declaration of acceleration of the maturity thereof pursuant to the terms of the indenture pursuant to which such debentures or notes were issued. (b) Notwithstanding the provisions of paragraph (a) of this Section 4.4, the Company or any Restricted Subsidiary may enter into sale and lease-back transactions in addition to those permitted by paragraph (a) of this Section 4.4 without any obligation to retire any outstanding Securities or other Funded Debt, PROVIDED that at the time of entering into such sale and lease-back transactions and after giving effect thereto, Exempted Debt does not exceed the greater of (x) $50 million or (y) 15% of Consolidated Net Tangible Assets. SECTION 4.5 CERTIFICATE TO TRUSTEE. The Company and the Guarantor will furnish to the Trustee annually, on or before a date not more than four months after the end of its fiscal year (which, on the date hereof, is a calendar year), a brief certificate (which need not contain the statements required by Section 10.4) from its principal executive, financial or accounting officer as to his or her knowledge of the 32 compliance of the Company and the Guarantor with all conditions and covenants under this Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided under this Indenture) which certificate shall comply with the requirements of the Trust Indenture Act. SECTION 4.6 REPORTS BY THE COMPANY. The Company and the Guarantor covenant to file with the Trustee, within 15 days after either the Company or the Guarantor is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports which the Company and the Guarantor may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act. ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.1 THE COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge with or into any other Person or, directly or indirectly, sell, lease, or convey all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person, unless: (1) (A) the Company shall be the continuing corporation in the case of a merger or (B) the resulting, surviving, or transferee entity (each such Person, or the Company in the case of clause (A), a "Surviving Entity") shall be a corporation or partnership organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered by the Surviving Entity to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company pursuant hereto and pursuant to the Securities; (2) immediately after giving effect to such transaction, no Event of Default, and no event or condition which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, conveyance or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. 33 SECTION 5.2 SUCCESSOR SUBSTITUTED FOR THE COMPANY. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any sale, lease or conveyance of all or substantially all of the assets of the Company in accordance with Section 5.1, the Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein and thereafter and all the obligations of the Company hereunder and under the Securities shall terminate. ARTICLE 6 DEFAULT AND REMEDIES SECTION 6.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur with respect to the Securities of any series if: (a) the Company defaults in the payment of the Principal of any Security of such series when the same becomes due and payable at maturity, upon acceleration, redemption or mandatory repurchase, including as a sinking fund installment, or otherwise; (b) the Company defaults in the payment of interest on any Security of such series when the same becomes due and payable, and such default continues for a period of 30 days; (c) (i) default by the Company or any Restricted Subsidiary in the payment when due at maturity of any Funded Debt (other than Funded Debt that is non-recourse to the Company and its Restricted Subsidiaries) in excess of the greater of $15,000,000 or 5% of Consolidated Net Tangible Assets, whether such Funded Debt is outstanding at the date of this Indenture or is hereafter outstanding, and the continuation of such default for the greater of any period of grace applicable thereto or ten days from the date of such default and the holder thereof shall have taken affirmative action to enforce the payment thereof, or (ii) an event of default, as defined in any indenture, agreement or instrument evidencing or under which the Company and/or any Restricted Subsidiary has at the date of this Indenture or shall thereafter have outstanding at least the greater of $15,000,000 or 5% of Consolidated Net Tangible Assets aggregate principal amount of Funded Debt, shall happen and be continuing and such Funded Debt shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled or such indebtedness shall not be discharged, within ten days; 34 (d) the Company or the Guarantor defaults in the performance of or breaches any other covenant or agreement of the Company or the Guarantor in this Indenture with respect to any Security of such series or in the Securities of such series and such default or breach continues for a period of 30 consecutive days after written notice to the Company or the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the Holders of 25% or more in aggregate principal amount of the Securities of all series affected thereby; (e) an involuntary case or other proceeding shall be commenced against the Company or any Restricted Subsidiary with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Restricted Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (f) the Company or any Restricted Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (C) effects any general assignment for the benefit of creditors; or (g) any other Event of Default established pursuant to Section 2.3 with respect to the Securities of such series occurs. SECTION 6.2 ACCELERATION. (a) If an Event of Default described in clauses (a) or (b) of Section 6.1 with respect to the Securities of any series then outstanding occurs and is continuing, then, and in each and every such case, except for any series of Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of any such affected series then outstanding hereunder (each such series treated as a separate class) by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Securities of any such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series established pursuant to Section 2.3) of all Securities of such affected series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. 35 (b) If an Event of Default described in clauses (c), (d) or (g) of Section 6.1 with respect to the Securities of one or more but not all series then outstanding, or with respect to the Securities of all series then outstanding, occurs and is continuing, then, and in each and every such case, except for any series of Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount (or, if the Securities of any such series are Original Issue Discount Securities, the amount thereof accelerable under this Section) of the Securities of all such affected series then outstanding hereunder (treated as a single class) by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Securities of any such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series established pursuant to Section 2.3) of all Securities of all such affected series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. (c) If an Event of Default described in clause (d) or (e) of Section 6.1 occurs and is continuing, then the principal amount (or, if any Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof established pursuant to Section 2.3) of all the Securities then outstanding and interest accrued thereon, if any, shall be and become immediately due and payable, without any notice or other action by any Holder or the Trustee, to the full extent permitted by applicable law. The foregoing provisions, however, are subject to the condition that if, at any time after the principal (or, if the Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof established pursuant to Section 2.3) of the Securities of any series (or of all the Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of each such series (or of all the Securities, as the case may be) and the principal of any and all Securities of each such series (or of all the Securities, as the case may be) which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of each such series to the date of such payment or deposit) and such amount as shall be sufficient to cover all amounts owing the Trustee under Section 7.7, and if any and all Events of Default under the Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the Holders of a majority in aggregate principal 36 amount of all the then outstanding Securities of all such series that have been accelerated (voting as a single class), by written notice to the Company and to the Trustee, may waive all defaults with respect to all such series (or with respect to all the Securities, as the case may be) and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Securities. SECTION 6.3 OTHER REMEDIES. If a payment default or an Event of Default with respect to the Securities of any series occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Securities of such series or to enforce the performance of any provision of the Securities of such series or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. SECTION 6.4 WAIVER OF PAST DEFAULTS. Subject to Sections 6.2, 6.7 and 9.2, the Holders of at least a majority in principal amount (or, if the Securities are Original Issue Discount Securities, such portion of the principal as is then accelerable under Section 6.2) of the outstanding Securities of all series affected (voting as a single class), by notice to the Trustee, may waive, on behalf of the Holders of all the Securities of such series, an existing Default or Event of Default with respect to the Securities of such series and its consequences, except a Default in the payment of Principal of or interest on any Security as specified in clauses (a) or (b) of Section 6.1 or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of the Holder of each outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default with respect to the Securities of such series arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. 37 SECTION 6.5 CONTROL BY MAJORITY. Subject to Sections 7.1 and 7.2(v), the Holders of at least a majority in aggregate principal amount (or, if any Securities are Original Issue Discount Securities, such portion of the principal as is then accelerable under Section 6.2) of the outstanding Securities of all series affected (voting as a single class) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series by this Indenture; PROVIDED, that the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction; and PROVIDED FURTHER, that the Trustee may take any other action it deems proper that is not inconsistent with any directions received from Holders of Securities pursuant to this Section 6.5. SECTION 6.6 LIMITATION ON SUITS. No Holder of any Security of any series may institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities of such series, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the Securities of such series; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Securities of all such series affected shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (iii) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request; (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Securities of all such affected series have not given the Trustee a direction that is inconsistent with such written request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive 38 payment of Principal of or interest, if any, on such Holder's Security on or after the respective due dates expressed on such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default with respect to the Securities of any series in payment of Principal or interest specified in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount (or such portion thereof as specified in the terms established pursuant to Section 2.3 of Original Issue Discount Securities) of Principal of, and accrued interest remaining unpaid on, together with interest on overdue Principal of, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest on, the Securities of such series, in each case at the rate or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Securities, and such further amount as shall be sufficient to cover all amounts owing the Trustee under Section 7.7. SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM. In the case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts due the Trustee under Section 7.7) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor on the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any moneys, securities or other property payable or deliverable upon conversion or exchange of the Securities or upon any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it under Section 7.7. Nothing herein contained shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 APPLICATION OF PROCEEDS. Any moneys collected by the Trustee pursuant to this Article in respect of the Securities of any series shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of Principal or interest, upon presentation of the several Securities and coupons appertaining to such Securities in respect of 39 which moneys have been collected and noting thereon the payment, or issuing Securities of such series and tenor in reduced principal amounts in exchange for the presented Securities of such series and tenor if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 7.7 applicable to the Securities of such series in respect of which moneys have been collected; SECOND: In case the principal of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference; THIRD: In case the principal of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for Principal and interest, with interest upon the overdue Principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such Principal and interest or Yield to Maturity, without preference or priority of Principal over interest or Yield to Maturity, or of interest or Yield to Maturity over Principal, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such Principal and accrued and unpaid interest or Yield to Maturity; and FOURTH: To the payment of the remainder, if any, to the Company or any other person lawfully entitled thereto. SECTION 6.11 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored to their former positions hereunder and thereafter all 40 rights and remedies of the Company, Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.12 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, in either case in respect to the Securities of any series, a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees, against any party litigant (other than the Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.12 does not apply to a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in principal amount of the outstanding Securities of such series. SECTION 6.13 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Securities in Section 2.8, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 41 ARTICLE 7 TRUSTEE SECTION 7.1 GENERAL. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act and as set forth herein. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, unless it receives indemnity satisfactory to it against any loss, liability or expense. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article 7. SECTION 7.2 CERTAIN RIGHTS OF TRUSTEE. Subject to Trust Indenture Act Sections 315(a) through (d): (i) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, Officers' Certificate, Opinion of Counsel (or both), statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper person or persons. The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (ii) before the Trustee acts or refrains from acting, it may require an Officers' Certificate and/or an Opinion of Counsel, which shall conform to Section 10.4. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. Subject to Sections 7.1 and 7.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof; 42 (iii) the Trustee may act through its attorneys and agents not regularly in its employ and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care by it hereunder; (iv) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (v) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (vi) the Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders in accordance with Section 6.5 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; (vii) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; and (viii) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, Officers' Certificate, Opinion of Counsel, Board Resolution, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine, during normal business hours and upon prior written notice, the books, records and premises of the Company, personally or by agent or attorney. SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would 43 have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311. For purposes of Trust Indenture Act Section 311(b)(4) and (6), the following terms shall mean: (a) "CASH TRANSACTION" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and (b) "SELF-LIQUIDATING PAPER" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. SECTION 7.4 TRUSTEE'S DISCLAIMER. The recitals contained herein and in the Securities (except the Trustee's certificate of authentication) shall be taken as statements of the Company and not of the Trustee and the Trustee assumes no responsibility for the correctness of the same. Neither the Trustee nor any of its agents (i) makes any representation as to the validity or adequacy of this Indenture or the Securities and (ii) shall be accountable for the Company's use or application of the proceeds from the Securities. SECTION 7.5 NOTICE OF DEFAULT. If any Default with respect to the Securities of any series occurs and is continuing and if such Default is known to the actual knowledge of a Responsible Officer with the Corporate Trust Department of the Trustee, the Trustee shall give to each Holder of Securities of such series notice of such Default within 90 days after it occurs (i) if any Unregistered Securities of such series are then outstanding, to the Holders thereof, by publication at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York and at least once in an Authorized Newspaper in London and (ii) to all Holders of Securities of such series in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, unless such Default shall have been cured or waived before the mailing or publication of such notice; PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the Principal of or interest on any Security, the Trustee shall be protected in withholding such notice if the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. 44 SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15, beginning with May 15, 1997, the Trustee shall mail to each Holder as and to the extent provided in Trust Indenture Act Section 313(c) a brief report dated as of such May 15, if required by Trust Indenture Act Section 313(a). SECTION 7.7 COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee such compensation as shall be agreed upon in writing from time to time for its services. The compensation of the Trustee shall not be limited by any law on compensation of a Trustee of an express trust. The Company agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture and the Securities or the issuance of the Securities or any series thereof (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except to the extent any such expense, disbursement or advance may arise from its negligence or bad faith. The Company shall indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense arising out of or in connection with the acceptance or administration of this Indenture and the Securities or the issuance of the Securities or any series thereof or the trusts hereunder and the performance of its duties hereunder, including the costs and expenses of defending itself against or investigating any claim of liability in the premises, except to the extent such loss liability or expense is due to the negligence or bad faith of the Trustee or such predecessor Trustee. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; PROVIDED, that the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay Principal of, and interest on particular Securities. The obligations of the Company under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the rejection or termination of this Indenture under 45 bankruptcy law. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities or coupons, and the Securities are hereby subordinated to such senior claim. If the Trustee renders services and incurs expenses following an Event of Default under Section 6.1(e) or Section 6.1(f) hereof, the parties hereto and the holders by their acceptance of the Securities hereby agree that such expenses are intended to constitute expenses of administration under any bankruptcy law. SECTION 7.8 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee as Trustee with respect to the Securities of any series and appointment of a successor Trustee as Trustee with respect to the Securities of any series shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.8. The Trustee may resign as Trustee with respect to the Securities of any series at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the outstanding Securities of any series may remove the Trustee as Trustee with respect to the Securities of such series by so notifying the Trustee and the Company in writing and may appoint a successor Trustee with respect thereto with the consent of the Company. The Company may remove the Trustee as Trustee with respect to the Securities of any series if: (i) the Trustee is no longer eligible under Section 7.10 of this Indenture; (ii) the Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. If the Trustee resigns or is removed as Trustee with respect to the Securities of any series, or if a vacancy exists in the office of Trustee with respect to the Securities of any series for any reason, the Company shall promptly appoint a successor Trustee with respect thereto. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities of such series may appoint a successor Trustee in respect of such Securities to replace the successor Trustee appointed by the Company. If the successor Trustee with respect to the Securities of any series does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.8 within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Securities of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect thereto. A successor Trustee with respect to the Securities of any series shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after the delivery of such written acceptance, subject to the lien provided for in Section 7.7, (i) the retiring Trustee shall transfer all property held 46 by it as Trustee in respect of the Securities of such series to the successor Trustee, (ii) the resignation or removal of the retiring Trustee in respect of the Securities of such series shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee in respect of the Securities of such series under this Indenture. A successor Trustee shall mail notice of its succession to each Holder of Securities of such series. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the preceding paragraph. The Company shall give notice of any resignation and any removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee in respect of the Securities of such series to all Holders of Securities of such series. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee with respect to the Securities of any series pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein. SECTION 7.10 ELIGIBILITY. This Indenture shall always have a Trustee who satisfies the requirements of Trust Indenture Act Section 310(a). The Trustee shall have a combined capital and surplus of at least $10,000,000 as set forth in its most recent published annual report of condition, if any. The Trustee shall comply with Trust Indenture Act Section 310(b). If at any time the Trustee with respect to the Securities of any series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Article. SECTION 7.11 MONEY HELD IN TRUST. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article 8 of this Indenture. 47 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1 DEFEASANCE WITHIN ONE YEAR OF PAYMENT. Except as otherwise provided in this Section 8.1, the Company may terminate its obligations under the Securities of any series and this Indenture with respect to Securities of such series if: (i) all Securities of such series previously authenticated and delivered (other than destroyed, lost or wrongfully taken Securities of such series that have been replaced or Securities of such series that are paid pursuant to Section 4.1 or Securities of such series for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.5) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or (ii) (A) the Securities of such series mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Company irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders of such Securities for that purpose, money or U.S. Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment, to pay Principal of and interest on the Securities of such series to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, and (C) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture with respect to the Securities of such series have been complied with. With respect to the foregoing clause (i), only the Company's obligations under Sections 7.7 and 8.5 in respect of the Securities of such series shall survive. With respect to the foregoing clause (ii), only the Company's obligations in Sections 2.2 through 2.12, 4.2, 7.7, 7.8 and 8.5 in respect of the Securities of such series shall survive until such Securities of such series are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.7 and 8.5 in respect of the Securities of such series shall survive. After any such irrevocable deposit, the Trustee shall acknowledge in writing the discharge of the Company's obligations under the Securities of such series and this Indenture with respect to the Securities of such series except for those surviving obligations specified above. 48 SECTION 8.2 DEFEASANCE. Except as provided below, the Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Securities of any series and the provisions of this Indenture will no longer be in effect with respect to the Securities of such series (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same); PROVIDED that the following conditions shall have been satisfied: (i) the Company has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the Holders of the Securities of such series, for payment of the Principal of and interest on the Securities of such series, money or U.S. Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) without consideration of any reinvestment and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the Principal of and accrued interest on the outstanding Securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be; (ii) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (iii) no Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit; (iv) the Company shall have delivered to the Trustee (1) either (x) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 8.2 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x) above and based upon a change in law and (2) an Opinion of Counsel to the effect that the Holders of the Securities of such series have a valid security interest in the trust funds subject to no prior liens under the UCC; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.2 of the Securities of such series have been complied with. 49 The Company's obligations in Sections 2.2 through 2.12, 4.2, 7.7, 7.8 and 8.5 with respect to the Securities of such series shall survive until such Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.7 and 8.5 shall survive. SECTION 8.3 COVENANT DEFEASANCE. The Company may omit to comply with any term, provision or condition set forth in Sections 4.3 or 4.4 (or any other specific covenant relating to such series provided for in a Board Resolution or supplemental indenture pursuant to Section 2.3 which may by its terms be defeased pursuant to this Section 8.3), and such omission shall be deemed not to be an Event of Default under clauses (c), (d) or (g) of Section 6.1, with respect to the outstanding Securities of a series if: (i) the Company has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the Holders of the Securities of such series, for payment of the Principal of and interest, if any, on the Securities of such series, money or U.S. Government Obligations or a combination thereof in an amount sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) without consideration of any reinvestment and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the Principal of and interest on the outstanding Securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be; (ii) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (iii) no Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit; (iv) the Company has delivered to the Trustee an Opinion of Counsel to the effect that (A) the Holders of the Securities of such series have a valid security interest in the trust funds subject to no prior liens under the UCC and (B) such Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent 50 provided for herein relating to the covenant defeasance contemplated by this Section 8.3 of the Securities of such series have been complied with. SECTION 8.4 APPLICATION OF TRUST MONEY. Subject to Section 8.5, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.1, 8.2 or 8.3, as the case may be, in respect of the Securities of any series and shall apply the deposited money and the proceeds from deposited U.S. Government Obligations in accordance with the Securities of such series and this Indenture to the payment of Principal of and interest on the Securities of such series; but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 8.1, 8.2 or 8.3, as the case may be, or the principal and interest received in respect thereof, other than any such tax, fee or other charge that by law is for the account of the Holders. SECTION 8.5 REPAYMENT TO COMPANY. Subject to Sections 7.7, 8.1, 8.2 and 8.3, the Trustee and the Paying Agent shall promptly pay to the Company upon request set forth in an Officers' Certificate any money held by them at any time and not required to make payments hereunder and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them and required to make payments hereunder under this Indenture that remains unclaimed for two years; PROVIDED that the Trustee or such Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in an Authorized Newspaper in The City of New York or with respect to any Security the interest on which is based on the offered quotations in the interbank Eurodollar market for dollar deposits in an Authorized Newspaper in London or mail to each Holder entitled to such money at such Holder's address (as set forth in the Security Register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 51 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.1 WITHOUT CONSENT OF HOLDERS. The Company, the Guarantor and the Trustee may amend or supplement this Indenture or the Securities of any series without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in this Indenture; PROVIDED that such amendments or supplements shall not materially and adversely affect the interests of the Holders; (2) to comply with Article 5; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the Trust Indenture Act; (4) to evidence and provide for the acceptance of appointment hereunder with respect to the Securities of any or all series by a successor Trustee; (5) to establish the form or forms or terms of Securities of any series or of the coupons appertaining to such Securities as permitted by Section 2.3; (6) to provide for uncertificated or Unregistered Securities and to make all appropriate changes for such purpose; (7) to change or eliminate any provisions of the Indenture with respect to all or any series of the Securities not then outstanding (and, if such change is applicable to fewer than all such series of the Securities, specifying the series to which such change is applicable), and to specify the rights and remedies of the Trustee and the holders of such Securities in connection therewith; and (8) to make any change that does not materially and adversely affect the rights of any Holder. SECTION 9.2 WITH CONSENT OF HOLDERS. Subject to Sections 6.4 and 6.7, without prior notice to any Holders, the Company, the Guarantor, and the Trustee may amend this Indenture and the Securities of any series with the written consent of the Holders of a majority in principal amount of the outstanding Securities of all series affected by such supplemental indenture (all such series voting as one class), and the 52 Holders of a majority in principal amount of the outstanding Securities of all series affected thereby (all such series voting as one class) by written notice to the Trustee may waive future compliance by the Company or the Guarantor with any provision of this Indenture or the Securities of such series. Notwithstanding the provisions of this Section 9.2, without the consent of each Holder affected thereby, an amendment or waiver, including a waiver pursuant to Section 6.4, may not: (i) extend the stated maturity of the Principal of, or any sinking fund obligation or any installment of interest on, such Holder's Security, or reduce the Principal amount thereof or the rate of interest thereon (including any amount in respect of original issue discount), or any premium payable with respect thereto, or adversely affect the rights of such Holder under any mandatory redemption or repurchase provision or any right of redemption or repurchase at the option of such Holder, or reduce the amount of the Principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 6.2 or the amount thereof provable in bankruptcy, or change any place of payment where, or the currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the due date therefor; (ii) reduce the percentage in principal amount of outstanding Securities of the relevant series the consent of whose Holders is required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Indenture or certain Defaults and their consequences provided for in this Indenture; (iii) waive a Default in the payment of Principal of or interest on any Security of such Holder; or (iv) modify any of the provisions of this Section 9.2, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series or of the coupons appertaining to such Securities. 53 It shall not be necessary for the consent of any Holder under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company or, at the Company's request, the Trustee shall give to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company or, at the Company's request, the Trustee will mail supplemental indentures to Holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.3 REVOCATION AND EFFECT OF CONSENT. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the Security of the consenting Holder, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of its Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. The Company may, but shall not be obligated to, fix a record date (which may be not less than 10 nor more than 60 days prior to the solicitation of consents) for the purpose of determining the Holders of the Securities of any series affected entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the immediately preceding paragraph, those Persons who were such Holders at such record date (or their duly designated proxies) and only those Persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be such Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective with respect to the Securities of any series affected thereby, it shall bind every Holder of such Securities theretofore or thereafter authenticated and delivered hereunder unless it is of the type described in any of clauses (i) through (iv) of Section 9.2. In case of an amendment or waiver of the type described in clauses (i) through (iv) of Section 9.2, the amendment or waiver shall bind each such Holder who has consented to it and every subsequent Holder of a Security that evidences the same indebtedness as the Security of the consenting Holder. SECTION 9.4 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of any Security, the Trustee may require the Holder thereof to deliver it to the Trustee. The Trustee may place an 54 appropriate notation on the Security about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Security of such series thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security of the same series and tenor that reflects the changed terms. SECTION 9.5 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 is authorized or permitted by this Indenture, stating that all requisite consents have been obtained or that no consents are required and stating that such supplemental indenture constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to customary exceptions. Subject to the preceding sentence, the Trustee shall sign such amendment, supplement or waiver if the same does not adversely affect the rights of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.6 CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article 9 shall conform to the requirements of the Trust Indenture Act as then in effect. ARTICLE 10 MISCELLANEOUS SECTION 10.1 TRUST INDENTURE ACT OF 1939. This Indenture shall incorporate and be governed by the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of Section 318(c) of the Trust Indenture Act, the imposed duties shall control. SECTION 10.2 NOTICES. Any notice or communication shall be sufficiently given if written and (a) if delivered in person when received or (b) if mailed by first class mail 5 days after mailing, or (c) as between the Company and the Trustee if sent by facsimile transmission, when transmission is confirmed, in each case addressed as follows: 55 IF TO THE COMPANY: Promus Hotels, Inc. 755 Crossover Lane Memphis, TN 38117 Attention: General Counsel IF TO THE GUARANTOR: Promus Hotel Corporation 755 Crossover Lane Memphis, TN 38117 Attention: General Counsel IF TO THE TRUSTEE: SouthTrust Bank of Alabama, National Association One Office Park Drive Birmingham, Alabama 35223 Attention: Corporate Trust Administration The Company, the Guarantor or the Trustee by written notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication shall be sufficiently given to Holders of any Unregistered Securities, by publication at least once in an Authorized Newspaper in The City of New York, or with respect to any Security the interest on which is based on the offered quotations in the interbank Eurodollar market for dollar deposits at least once in an Authorized Newspaper in London, and by mailing to the Holders thereof who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act at such addresses as were so furnished to the Trustee (and in the case of any notice given by the Company or the Guarantor, the Trustee shall make such information available to the Company or the Guarantor for such purpose) and to Holders of Registered Securities by mailing to such Holders at their addresses as they shall appear on the Security Register. Notice mailed shall be sufficiently given if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Except as otherwise 56 provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 10.2, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case it shall be impracticable to give notice as herein contemplated, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 10.3 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee: (i) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with. SECTION 10.4 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (iii) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; PROVIDED, HOWEVER, 57 that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate, statement or opinion of an officer of the Company or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters or information that is in the possession of the Company or the Guarantor, upon the certificate, statement or opinion of or representations by an officer or officers of the Company or the Guarantor, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Company or the Guarantor or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 10.5 EVIDENCE OF OWNERSHIP. The Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may deem and treat the Holder of any Unregistered Security and the Holder of any coupon as the absolute owner of such Unregistered Security or coupon (whether or not such Unregistered Security or coupon shall be overdue) for the purpose of receiving 58 payment thereof or on account thereof and for all other purposes, and neither the Company, the Guarantor, the Trustee, nor any agent of the Company, the Guarantor or the Trustee shall be affected by any notice to the contrary. The fact of the holding by any Holder of an Unregistered Security, and the identifying number of such Security and the date of his holding the same, may be proved by the production of such Security or by a certificate executed by any trust company, bank, banker or recognized securities dealer wherever situated satisfactory to the Trustee, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Security bearing a specified identifying number was deposited with or exhibited to such trust company, bank, banker or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more Unregistered Securities specified therein. The holding by the person named in any such certificate of any Unregistered Securities specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (1) another certificate bearing a later date issued in respect of the same Securities shall be produced or (2) the Security specified in such certificate shall be produced by some other Person, or (3) the Security specified in such certificate shall have ceased to be outstanding. Subject to Article 7, the fact and date of the execution of any such instrument and the amount and numbers of Securities held by the Person so executing such instrument may also be proven in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in any other manner which the Trustee may deem sufficient. The Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may deem and treat the person in whose name any Registered Security shall be registered upon the Security Register for such series as the absolute owner of such Registered Security (whether or not such Registered Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the Principal of and, subject to the provisions of this Indenture, interest on such Registered Security and for all other purposes; and none of the Company, the Guarantor nor the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by any notice to the contrary. SECTION 10.6 RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 10.7 PAYMENT DATE OTHER THAN A BUSINESS DAY. If any date for payment of Principal or interest on any Security shall not be a Business Day at any place of payment, then payment of Principal of or interest on such Security, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day at any place of payment with the same force and effect as if made on 59 such date and no interest shall accrue in respect of such payment for the period from and after such date. SECTION 10.8 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES. SECTION 10.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company. Any such indenture or agreement may not be used to interpret this Indenture. SECTION 10.10 SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.11 DUPLICATE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 10.12 SEPARABILITY. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.13 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. SECTION 10.14 INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS OF COMPANY AND THE GUARANTOR EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any obligation, covenant or agreement contained in this Indenture or any indenture supplemental hereto, or in any Security or any coupons appertaining thereto, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future shareholder (other than the Guarantor), officer, director or employee, as such, of the Company or the Guarantor or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities and the coupons appertaining thereto by the holders thereof and as part of the consideration for the issue of the Securities and the coupons appertaining thereto. 60 SECTION 10.15 JUDGMENT CURRENCY. The Company agrees, to the fullest extent that it may effectively do so under applicable law, that (a) if for the purpose of obtaining judgment in any court it is necessary to convert the sum due in respect of the Principal of or interest on the Securities of any series (the "REQUIRED CURRENCY") into a currency in which a judgment will be rendered (the "JUDGMENT CURRENCY"), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the day on which final unappealable judgment is entered, unless such day is not a Business Day, then, to the extent permitted by applicable law, the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the Business Day preceding the day on which final unappealable judgment is entered and (b) its obligations under this Indenture to make payments in the Required Currency (i) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment (whether or not entered in accordance with subsection (a)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable and (iii) shall not be affected by judgment being obtained for any other sum due under this Indenture. ARTICLE 11 GUARANTEE SECTION 11.1 GUARANTEE. (a) Subject to subsection (b) below, the Guarantor hereby irrevocably and unconditionally guarantees (such guarantee being the "Guarantee") to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture and the Securities hereunder, that: (i) the principal of, premium, if any, and interest on the Securities promptly will be paid in full when due, whether at the maturity or Interest Payment Date, by acceleration, call for redemption or otherwise, and interest on the overdue principal, premium, if any, and interest, if any, of the Securities, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof, and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same 61 will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due by the Company of any amount so guaranteed for whatever reason, the Guarantor shall be obligated to pay the same immediately. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Securities and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company or any custodian, Trustee, liquidator or other similar official acting in relation to the Company, any amount paid by the Company to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. The Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations is guaranteed hereby. (b) It is the intention of the Guarantor and the Company that the obligations of the Guarantor hereunder shall be, but not in excess of, the maximum amount permitted by applicable law. Accordingly, if the obligations in respect of the Guarantee would be annulled, avoided or subordinated to the creditors of the Guarantor by a court of competent jurisdiction in a proceeding actually pending before such court as a result of a determination both that such Guarantee was made without fair consideration and, immediately after giving effect thereto, the Guarantor was insolvent or unable to pay its debts as they mature or left with an unreasonably small capital, then the obligations of the Guarantor under the Guarantee shall be reduced by such court if such reduction would result in the avoidance of such annulment, avoidance or subordination; provided, however, that any reduction pursuant to this paragraph shall be made in the smallest amount as is strictly necessary to reach such result. For purposes of this paragraph, "fair consideration," "insolvency," "unable to pay its debts as they mature," "unreasonably small capital" and the effective times of reductions, if any, required by this paragraph shall be determined in accordance with applicable law. 62 (c) The Guarantor shall be subrogated to all rights of the Holders against the Company in respect of any amounts paid by Guarantor pursuant to the provisions of the Guarantee or this Indenture; provided, however, that the Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of, premium, if any, and interest on all Securities issued hereunder shall have been paid in full. SECTION 11.2 EXECUTION AND DELIVERY OF GUARANTEE. To evidence the Guarantee set forth in Section 11.1, the Company and the Guarantor hereby agree that a notation of such Guarantee shall be endorsed on each Security authenticated and delivered by the Trustee, that such notation of such Guarantee shall be in such form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate provisions as are required or permitted by this Indenture, and that this Indenture shall be executed on behalf of the Guarantor by its Chairman of the Board, one of its Vice Chairmen of the Board, its President or one of its Vice Presidents under a facsimile of its seal reproduced thereon and attested to by another officer other than the officer executing the Indenture, as the case may be. The Guarantor hereby agrees that the Guarantee set forth in Section 11.1 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of the Guarantee. If an officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates the Security on which the Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantor. SECTION 11.3 RELEASE OF GUARANTOR. The Guarantor shall be released from all of its obligations under the Guarantee and under this Indenture if: (a) (i) the Company or the Guarantor has transferred all or substantially all of its properties and assets to any Person (whether by sale, merger or consolidation or otherwise), or has merged into or consolidated with another Person, pursuant to a transaction in compliance with this Indenture; (ii) the corporation to whom all or substantially all of the properties and assets of the Company or the Guarantor are transferred, or whom the Company or the Guarantor has merged into or consolidated with, has expressly assumed, by an indenture supplemental hereto, executed and delivered 63 to the Trustee, in form satisfactory to the Trustee, all the obligations of the Guarantor under the Guarantees and this Indenture; (iii) immediately before and immediately after giving effect to such transaction, no Event of Default, and no event or condition which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; nd (iv) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Section 11.3 and that all conditions precedent herein provided for relating to such transaction have been complied with; or (b) the Guarantor liquidates (other than pursuant to any Bankruptcy Law) and complies, if applicable, with the provisions of this Indenture; provided that if a Person and its Affiliates, if any, shall acquire all or substantially all of the assets of the Guarantor upon such liquidation the Guarantor shall liquidate only if: (i) the Person and each such Affiliate (or the common corporate parent of such Person and its Affiliates, if such Person and its Affiliates are wholly owned by such Parent) which acquire or will acquire all or a portion of the assets of the Guarantor shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Guarantor, under the Guarantees and this Indenture and such Person or any of such Affiliates (or such parent) shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) immediately after giving effect to such transaction, no Event of Default, and no event or condition which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (iii) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such liquidation and such supplemental indenture comply with this Section 11.3 and that all conditions precedent herein provided for relating to such transaction have been complied with; or (c) the Company ceases for any reason to be a "wholly owned subsidiary" of the Guarantor (as such term is defined in Rule 1-02(z) of the Regulation S-X promulgated by the Commission). 64 Upon any assumption of the Guarantee by any Person pursuant to this Section, such Person may exercise every right and power of the Guarantor under this Indenture with the same effect as if such successor corporation had been named as the Guarantor herein, and all the obligations of the Guarantor, hereunder and under the Guarantees and the Indenture shall terminate. SECTION 11.4 WHEN GUARANTOR MAY MERGE, ETC. The Guarantor shall not consolidate with or merge with or into any other Person or, directly or indirectly, sell, lease or convey all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person, unless: (a) either the Guarantor shall be the continuing person, or the Person (if other than the Guarantor) formed by such consolidation or into which the Guarantor is merged or to which the assets of the Guarantor are transferred shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Guarantor under the Guarantee and this Indenture; (b) immediately giving effect to such transaction, no Event of Default, and no event or condition which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (c) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, conveyance or lease and such supplemental indenture comply with this Section and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consideration or merger, or any sale, conveyance or lease of all or substantially all of the assets of the Guarantor, in accordance with this Section, the successor corporation formed by such consolidation or into which the Guarantor is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor under this Indenture with the same effect as if such successor corporation had been named as the Guarantor herein, and all the obligations of the predecessor Guarantor hereunder and under the Guarantee and the Indenture shall terminate. 65 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. (SEAL) PROMUS HOTELS, INC. Attest: as the Company - ----------------------- Name: Title: By: ----------------------- Name: Title: (SEAL) PROMUS HOTEL CORPORATION Attest: as the Guarantor - ----------------------- Name: Title: By: ----------------------- Name: Title: (SEAL) SOUTHTRUST BANK OF ALABAMA, Attest: NATIONAL ASSOCIATION as Trustee - ------------------------ Name: Title: By: ------------------------ Name: Title: 66 EX-5.1 5 EXHIBIT 5(1) EXHIBIT 5.1 LATHAM & WATKINS 885 Third Avenue, Suite 1000 New York, New York 10022 (212) 906-1200 October 11, 1996 Promus Hotels, Inc. Promus Hotel Corporation 755 Crossover Lane Memphis, Tennessee 38117 Re: Shelf Registration of $300,000,000 AGGREGATE PRINCIPAL AMOUNT OF DEBT SECURITIES --------------------------------------------- Ladies and Gentlemen: In connection with the registration of $300,000,000 aggregate principal amount of Debt Securities (the "Securities") by Promus Hotels, Inc., a Delaware corporation ("PHI") and the guarantee of the Securities (the "Guarantee") by Promus Hotel Corporation, a Delaware corporation ("Promus"), under the Securities Act of 1933, as amended (the "Act"), on Form S-3 filed with the Securities and Exchange Commission (the "Commission") on October 11, 1996 (the "Registration Statement"), and the offering of such Securities from time to time, as set forth in the prospectus contained in the Registration Statement (the "Prospectus") and as to be set forth in one or more supplements to the Prospectus (each a "Prospectus Supplement"), you have requested our opinion with respect to the matters set forth below. In our capacity as your counsel in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by PHI and Promus in connection with the authorization and issuance of the Securities and the Guarantee, respectively, and for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our Promus Hotels, Inc. Promus Hotel Corporation October 11, 1996 Page 2 satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state, and in the case of Delaware, any other laws. Capitalized terms used herein without definition have the meanings ascribed to them in the Registration Statement. Subject to the foregoing and the other matters set forth herein, it is our opinion that as of the date hereof: 1. The Securities have been duly authorized by all necessary corporate action of PHI, and when the Securities have been established by an Indenture, and duly executed, authenticated and delivered by or on behalf of PHI against payment therefor in accordance with the terms of the Indenture and as contemplated by the Registration Statement and/or applicable Prospectus Supplement, the Securities will constitute legally valid and binding obligations of PHI, enforceable against PHI in accordance with their terms. 2. The Guarantee has been duly authorized by all necessary corporate action of Promus, and when the Guarantee has been duly established by an Indenture, and duly executed in accordance with the terms of the Indenture and upon due execution, authentication and delivery of the Securities and upon payment therefor, will be a legally valid and binding obligation of Promus, enforceable against Promus in accordance with its terms. The opinions rendered above relating to the enforceability of the Securities and the Guarantee are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general Promus Hotels, Inc. Promus Hotel Corporation October 11, 1996 Page 3 principles of equity, whether enforcement is considered in a proceeding in equity or law, and the discretion of the court before which any proceeding therefor may be brought; (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy; (iv) the manner by which the acceleration of the Securities may affect the collectibility of that portion of the stated principal amount thereof which might be determined to constitute unearned interest thereon; and (v) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Article XI of the Indenture. To the extent that the obligations of PHI and Promus under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legal, valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters." Very truly yours, LATHAM & WATKINS EX-10.4(A) 6 EXHIBIT 10(4)(A) Exhibit 10(4)(a) THE RESTATEMENT OF THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - A TABLE OF CONTENTS Page ---- Article I. The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Establishment of Plan . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Applicability of the Plan . . . . . . . . . . . . . . . . . . . . 1 1.3 Purpose of Plan . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article II. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Administrative Delegate . . . . . . . . . . . . . . . . . . . . . 3 2.3 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.4 After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . 4 2.5 Annuity Starting Date . . . . . . . . . . . . . . . . . . . . . . 4 2.6 Basic Contributions . . . . . . . . . . . . . . . . . . . . . . . 4 2.7 Before-Tax Contributions. . . . . . . . . . . . . . . . . . . . . 4 2.8 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 Break Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.11 Chief Executive Officer. . . . . . . . . . . . . . . . . . . . . 4 2.12 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.13 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.14 Company Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 Eligible Employee. . . . . . . . . . . . . . . . . . . . . . . . 5 2.18 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.19 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 Enrollment Form. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.23 Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.24 Highly Compensated Employee. . . . . . . . . . . . . . . . . . . 6 2.25 Holiday Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 Human Resources Committee. . . . . . . . . . . . . . . . . . . . 12 2.28 Investment Fund . . . . . . . . . . . . . . . . . . . . . . . . 12 2.29 Matching Contributions . . . . . . . . . . . . . . . . . . . . . 12 2.30 Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.31 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.32 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.33 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . 12 2.34 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.35 Predecessor Effective Date . . . . . . . . . . . . . . . . . . . 12 2.36 Predecessor Plan . . . . . . . . . . . . . . . . . . . . . . . . 13 2.37 Retirement Date. . . . . . . . . . . . . . . . . . . . . . . . . 13 2.38 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . 13 2.39 Spin-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.40 Supplemental Contributions . . . . . . . . . . . . . . . . . . . 13 2.41 Termination of Service . . . . . . . . . . . . . . . . . . . . . 13 i Page ---- 2.42 Total and Permanent Disability . . . . . . . . . . . . . . . . . 13 2.43 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 13 2.44 Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.45 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.46 Vested Balance . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.47 Vested Percentage. . . . . . . . . . . . . . . . . . . . . . . . 14 2.48 Year of Eligibility Service. . . . . . . . . . . . . . . . . . . 14 2.49 Year of Vesting Service. . . . . . . . . . . . . . . . . . . . . 14 Article III. Eligibility and Participation. . . . . . . . . . . . . . . . 15 3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.2 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.3 Eligible Employees. . . . . . . . . . . . . . . . . . . . . . . . 16 3.4 Rehired Employees . . . . . . . . . . . . . . . . . . . . . . . . 16 3.5 Loss of Status as Eligible Employee . . . . . . . . . . . . . . . 17 3.6 Leased Employees. . . . . . . . . . . . . . . . . . . . . . . . . 17 Article IV. Contributions and Allocations . . . . . . . . . . . . . . . . 17 4.1 Before-Tax Contributions. . . . . . . . . . . . . . . . . . . . . 17 4.2 After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . 18 4.3 Pay Reduction Agreements. . . . . . . . . . . . . . . . . . . . . 19 4.4 Matching Contributions. . . . . . . . . . . . . . . . . . . . . . 20 4.5 [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.6 Allocation of Forfeitures . . . . . . . . . . . . . . . . . . . . 20 4.7 Limitations on Contributions. . . . . . . . . . . . . . . . . . . 22 4.8 Limitations on Annual Additions . . . . . . . . . . . . . . . . . 29 4.9 Rollover Contributions and Plan to Plan Transfers . . . . . . . . 31 Article V. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Article VI. Members' Accounts; Investment Funds . . . . . . . . . . . . . 33 6.1 Investment Elections by Members . . . . . . . . . . . . . . . . . 33 6.2 Plan Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.3 Valuation; Allocation of Investment Earnings and Losses . . . . . 35 6.4 Company Stock Funds . . . . . . . . . . . . . . . . . . . . . . . 36 Article VII. Vesting and Forfeitures. . . . . . . . . . . . . . . . . . . 38 7.1 Vesting in Before-Tax Contributions and Rollover. . . . . . . . . 38 7.2 Vesting Schedule for Matching Contributions Account . . . . . . . 38 7.3 Full Vesting of Certain Employee Accounts . . . . . . . . . . . . 39 7.4 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Article VIII. In-Service Withdrawals. . . . . . . . . . . . . . . . . . . 40 8.1 Order of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . 40 ii Page ---- 8.2 Withdrawal Limitations. . . . . . . . . . . . . . . . . . . . . . 41 Article IX. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 44 9.1 Entitlement to Distribution Upon Death of Member. . . . . . . . . 44 9.2 Distribution Upon Termination of Service for Reasons Other Than Death. . . . . . . . . . . . . . . . . . . . . . . . . 46 9.3 Form of Benefit Payments. . . . . . . . . . . . . . . . . . . . . 46 9.4 Time of Benefit Payments. . . . . . . . . . . . . . . . . . . . . 48 9.5 Incidental Death Benefit. . . . . . . . . . . . . . . . . . . . . 49 9.6 Distribution of Employee Account 9. . . . . . . . . . . . . . . . 49 9.7 [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 9.8 Limitations on Distributions. . . . . . . . . . . . . . . . . . . 54 9.9 Eligible Rollover Distributions . . . . . . . . . . . . . . . . . 55 9.10 Plan to Plan Transfers . . . . . . . . . . . . . . . . . . . . . 56 Article X. Loans to Members . . . . . . . . . . . . . . . . . . . . . . . 57 10.1 Administrator Authorized to Make Loans . . . . . . . . . . . . . 57 10.2 Amount of Loans. . . . . . . . . . . . . . . . . . . . . . . . . 58 10.3 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 10.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 10.5 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 10.6 Accounting for Loans . . . . . . . . . . . . . . . . . . . . . . 59 10.7 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 10.8 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 10.9 Spousal Consent. . . . . . . . . . . . . . . . . . . . . . . . . 60 Article XI. Amendment and Termination . . . . . . . . . . . . . . . . . . 60 11.1 Amendment and Termination. . . . . . . . . . . . . . . . . . . . 60 11.2 Vesting on Termination or Partial Termination. . . . . . . . . . 61 11.3 Merger, Consolidation, or Transfer . . . . . . . . . . . . . . . 62 11.4 Effect of Change in Control. . . . . . . . . . . . . . . . . . . 62 Article XII. Administration of the Plan . . . . . . . . . . . . . . . . . 63 12.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . 63 12.2 Appointment and Resignation of Trustees. . . . . . . . . . . . . 64 12.3 Powers and Duties of the Plan Administrator. . . . . . . . . . . 64 12.4 Action by Majority of the Plan Administrator . . . . . . . . . . 64 12.5 Rules and Regulations of the Plan Administrator. . . . . . . . . 65 12.6 Conclusiveness of Reports, Etc.. . . . . . . . . . . . . . . . . 65 12.7 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . 65 12.8 Employment of Agents . . . . . . . . . . . . . . . . . . . . . . 66 12.9 Compensation and Expenses of Trustees. . . . . . . . . . . . . . 66 12.10 Indemnity for Liability . . . . . . . . . . . . . . . . . . . . 66 12.11 Effect of Mistake . . . . . . . . . . . . . . . . . . . . . . . 67 Article XIII. Trust Arrangements. . . . . . . . . . . . . . . . . . . . . 67 iii Page ---- 13.1 Appointment of Trustee . . . . . . . . . . . . . . . . . . . . . 67 13.2 Change in Trust Agreements . . . . . . . . . . . . . . . . . . . 67 13.3 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 13.4 Appointment of an Investment Manager . . . . . . . . . . . . . . 67 13.5 Diversification of Investments . . . . . . . . . . . . . . . . . 68 13.6 Reversion of Employer Contributions. . . . . . . . . . . . . . . 68 Article XIV. Top-Heavy Plan Provisions. . . . . . . . . . . . . . . . . . 69 14.1 Application of Top-Heavy Provisions. . . . . . . . . . . . . . . 69 14.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 71 14.3 Vesting Requirements . . . . . . . . . . . . . . . . . . . . . . 72 14.4 Minimum Contribution . . . . . . . . . . . . . . . . . . . . . . 73 14.5 Limit on Annual Additions; Combined Plan Limit . . . . . . . . . 73 Article XV. Participation in and Withdrawal . . . . . . . . . . . . . . . 74 15.1 Participation in the Plan. . . . . . . . . . . . . . . . . . . . 74 15.2 Withdrawal from the Plan . . . . . . . . . . . . . . . . . . . . 74 Article XVI. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 76 16.1 No Employment Rights Created . . . . . . . . . . . . . . . . . . 76 16.2 Rights to Fund Assets. . . . . . . . . . . . . . . . . . . . . . 76 16.3 Nonalienation of Benefits. . . . . . . . . . . . . . . . . . . . 76 16.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 16.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 77 16.6 Governing State. . . . . . . . . . . . . . . . . . . . . . . . . 77 16.7 Facility of Payment. . . . . . . . . . . . . . . . . . . . . . . 77 16.8 Missing Persons. . . . . . . . . . . . . . . . . . . . . . . . . 77 16.9 Telephonic/Electronic Decisions. . . . . . . . . . . . . . . . . 78 16.10 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 iv THE RESTATEMENT OF THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - A ARTICLE I. THE PLAN 1.1 ESTABLISHMENT OF PLAN. The Promus Hotel Corporation (the "Company") established the Promus Hotel Corporation Savings and Retirement Plan (the "Plan") for its eligible Employees, effective as of June 30, 1995 (the "Spin-off Date"). The Plan is a spin-off of The Promus Companies Incorporated Savings and Retirement Plan (now, The Harrah's Entertainment, Inc. Savings and Retirement Plan (the "Predecessor Plan")), which spin-off was pursuant to the distribution of a dividend of common stock in the Company to the shareholders of The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). The Plan was amended effective June 30, 1995 and on November 15, 1995. As of December 31, 1995, the Plan consisted of two plans, a profit-sharing plan and a stock bonus plan ("ESOP"). Effective as of December 31, 1995, the ESOP was spun-off from the Plan. Following the spin-off of the ESOP, the Plan was further split into two plans on December 31, 1995 by spinning off the portion of the Plan attributable to the following participants: (1) Embassy Suitekeepers, (2) Hampton Room Attendants and (3) Homewood Suitekeepers and such plan was named The Promus Hotel Corporation Savings and Retirement Plan-- B ("Plan B"). In order to document said spin-offs of the ESOP and Plan B from the Plan and to make certain other administrative changes to the Plan, the restatement of the Plan has been adopted by a resolution of the Board of Directors of the Company on November 15, 1995, effective as of January 1, 1996, except as otherwise provided in Exhibit 1 and the Plan is renamed the Promus Hotel Corporation Savings and Retirement Plan - A. 1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are applicable only to Employees in the employ of the Company or an Affiliate on or after January 1, 1996, except as otherwise specifically provided herein. 1.3 PURPOSE OF PLAN. The purpose of the Plan is to allow eligible Employees to accumulate capital for their retirement. The Plan is intended to qualify as a profit sharing plan, and it, together with all related trusts, is intended to meet the requirements of Sections 401(a), 401(k), 401(m) and 501(a) of the Code. ARTICLE II. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below unless otherwise expressly provided. Any masculine terminology shall be deemed to refer either to a male or a female, and the definition of any term in the singular shall also include the plural, whichever is appropriate in the context. 2.1 ACCOUNT means the separate account maintained under the Plan for each Member, which represents his total proportionate interest in the Fund as of any Valuation Date and which consists of the sum of the following subaccounts: (a) EMPLOYEE ACCOUNT 1 means the portion of a Member's Account which evidences the value of-- (1) the Base Matching Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan; (2) the noncontributory portion of the Holiday Plan as in effect on December 31, 1977; and (3) forfeitures allocated to such Account under Section 4.6(a). Employee Account 1 also includes any gains and losses of the Fund attributable to paragraphs (1), (2), and (3). (b) EMPLOYEE ACCOUNT 2 means the portion of a Member's Account which evidences the value of the Basic Before-Tax Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan, and also including any gains and losses of the Fund attributable thereto. (c) EMPLOYEE ACCOUNT 3 means the portion of a Member's Account which evidences the value of the Supplemental Before-Tax Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan, and also including any gains and losses of the Fund attributable thereto. (d) EMPLOYEE ACCOUNT 4 means the portion of a Member's Account which evidences the value of his Basic After-Tax Contributions, including the value of such contributions transferred from the Predecessor Plan, and also including any gains and losses of the Fund attributable thereto. 2 (e) EMPLOYEE ACCOUNT 5 means the portion of a Member's Account which evidences the value of his Supplemental After-Tax Contributions, including the value of such contributions transferred from the Predecessor Plan, and also including any gains and losses of the Fund attributable thereto. (f) EMPLOYEE ACCOUNT 6 means the portion of a Member's Account which evidences the value of the Discretionary Matching Contributions made on his behalf by an Employer, the value of such contributions transferred from the Predecessor Plan, and the value of forfeitures allocated to such Account under Section 4.6(a), including any gains and losses of the Fund attributable thereto. (g) EMPLOYEE ACCOUNT 7 means the portion of a Member's Account which evidences the value of his Rollover Contributions, including the value of such contributions transferred from the Holiday Plan and/or the Predecessor Plan, and also including any gains and losses of the Fund attributable thereto. (h) EMPLOYEE ACCOUNT 8 means the portion of a Member's Account transferred from the Predecessor Plan which is attributable to the Member's accounts from the Harrah's Retirement Plan and the Holiday Casino Profit Sharing Plan (collectively referred to as the "Harrah's Plans") which were previously merged into the Holiday Plan, and the value of forfeitures allocated to such Account under Section 4.6(b), including any gains and losses of the Fund attributable thereto. (i) EMPLOYEE ACCOUNT 9 means the portion of a Member's Account transferred from the Predecessor Plan which evidences the value of the portion of his account from the Holiday Plan attributable to direct transfers from the Holiday Inns, Inc. Employee's Retirement Plan and from any plan subject to Code Section 417, including any gains and losses of the Fund attributable thereto. 2.2 ADMINISTRATIVE DELEGATE means one or more persons or institutions to whom the Plan Administrator has delegated certain administrative functions pursuant to a written agreement. 2.3 AFFILIATE means a member of the same controlled group of corporations (as defined in Code Section 414(b)) as the Employer, a trade or business that is under common control (as defined in Code Section 414(c)) with the Employer; an organization which, along with the Employer, is a member of an affiliated service group (as defined in Code Section 414(m)); or any other entity while it is required to be aggregated with the Employer under Code Section 414(o) and related Regulations. Notwithstanding anything in this Section to the contrary, for purposes of Section 3 4.8 (regarding annual limitations on additions to a Participant's Account), a determination as to whether an entity is an Affiliate shall be made in accordance with Code Section 415. 2.4 AFTER-TAX CONTRIBUTIONS mean the contributions made by a Participant under Section 4.2, which are derived from a Member's taxable compensation, and which shall include both Basic After-Tax Contributions and Supplemental After-Tax Contributions. 2.5 ANNUITY STARTING DATE means the first day of the first period for which a benefit is paid as an annuity or in any other form. 2.6 BASIC CONTRIBUTIONS mean those contributions on which Matching Contributions are made, and shall include Basic Before-Tax Contributions and Basic After-Tax Contributions. 2.7 BEFORE-TAX CONTRIBUTIONS mean the contributions made by an Employer on behalf of a Participant pursuant to the Participant's election to reduce Compensation, as described in Sections 4.1 and 4.3, and shall include both Basic Before-Tax Contributions and Supplemental Before-Tax Contributions. 2.8 BENEFICIARY means the person or persons designated under Section 9.1 to receive benefits under the Plan. 2.9 BOARD OF DIRECTORS means the board of directors of the Company, the Human Resources Committee, or any other committee of the Board of Directors designated by the Chief Executive Officer, with authority to act in matters related to the Plan. 2.10 BREAK YEAR means a Plan Year in which the Employee is credited with no more than 500 Hours of Service. 2.11 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Company. 2.12 CODE means the Internal Revenue Code of 1986, as amended from time to time. A reference to a provision of the Code shall, if such provision is amended, refer to the successor to such provision to the extent required by law. 2.13 COMPANY means Promus Hotel Corporation or any successor thereto that agrees to assume and continue this Plan. 2.14 COMPANY STOCK means the common stock of the Company or an Affiliate, as the Plan Administrator shall determine. 2.15 COMPENSATION. (a) Except as otherwise specified in subsections (b) and (c), Compensation means base pay paid to the Employee by the Employer (determined prior to such Employee's election to reduce wages under Code Section 125 or 4 401(k)); including shift premiums, commissions, and tips reported to the Employer for additional withholding of Federal income tax (not to exceed actual tips received); and excluding overtime, bonuses, and other forms of additional remuneration. (b) For purposes of determining whether an individual is a Highly Compensated Employee, "Compensation" means an Employee's compensation, as defined in Code Section 414(q)(7) and the applicable Treasury Regulations. (c) For purposes of satisfying the limits on contributions described in Section 4.7, Compensation means an Employee's compensation as defined in Code Section 414(s) and, at the Plan Administrator's election, may be increased by amounts excluded from wages by reason of an Employee's election to reduce wages under Code Sections 125 and 401(k). (d) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the annual compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of an Employee for purposes of this limitation, Code Section 414(q)(6) shall apply, except in applying such Section, the term "family" shall include only the Employee's spouse and any lineal descendants of the Employee who have not attained age 19 before the close of the Plan Year. 2.16 DIVISION means an Employer, Affiliate, group, or other identifiable unit of the Company. 2.17 ELIGIBLE EMPLOYEE means an Employee described in Section 3.3. 2.18 EMPLOYEE means any individual employed by the Company or an Affiliate. No individual shall be considered an Employee under the Plan by reason of service to the Company or an Affiliate solely as a director or during a period of service pursuant to an agreement designating such service as that of a consultant. 5 2.19 EMPLOYER means the Company and any Affiliate which is participating hereunder or which elects or determines, with the consent of the Chief Executive Officer, to participate hereunder. An Affiliate that employs a nonresident alien who is participating in this Plan under Section 3.3(a) shall be deemed an Employer only with respect to such nonresident alien. 2.20 ENROLLMENT FORM means the form described in Section 3.2. 2.21 ENTRY DATE means the Spin-Off Date, or any January 1 or July 1 thereafter. 2.22 ERISA means the Employee Retirement Income Security Act of 1974, as in effect at the time with respect to which such term is used. 2.23 FUND means the trust fund established under Article XIII to hold the assets of the Plan. It shall be composed of separate Investment Funds as permitted by the Plan Administrator and the Trustees. A separate Investment Fund exists to hold the Aurora National Life Assurance Company investment, formerly the Executive Life investment, of certain Members (the "Executive Life Fund"). (See Addendum A attached hereto.) The Plan Administrator and the Trustees shall have the discretion to establish, amend, and terminate such Investment Funds as they shall deem appropriate. 2.24 HIGHLY COMPENSATED EMPLOYEE means an Employee who performs service during the determination year and is described in one or more of the following groups: (a) An Employee who is a 5% owner, as defined in Code Section 416(i)(1)(A)(iii), at any time during the determination year or the look-back year. (b) An Employee who receives compensation in excess of $75,000, (indexed in accordance with Code Section 415(d)) during the look-back year. (c) An Employee who receives compensation in excess of $50,000 (indexed in accordance with Code Section 415(d)) during the look-back year and is a member of the top-paid group for the look-back year. (d) An Employee who is an officer, within the meaning of Code Section 416(i), during the look-back year and who receives compensation in the look-back year greater than 50% of the dollar limitation in effect under Code Section 415(b)(1)(A) for the calendar year in which the look-back year begins. (e) An Employee who is both described in paragraph (b), (c) or (d) above when these paragraphs are modified to substitute the determination year for the look-back 6 year and one of the 100 employees who receive the most compensation from the Employer during the determination year. For purposes of the definition of Highly Compensated Employee: (1) The determination year is the Plan Year for which the determination of who is highly compensated is being made. (2) The look-back year is the 12 month period immediately preceding the determination year, or if the Employer elects, the calendar year ending with or within the determination year. (3) The top-paid group consists of the top 20% of Employees ranked on the basis of compensation received during the year. For purposes of determining the number of Employees in the top-paid group, Employees described in Code Section 414(q)(8) and Q & A 9(b) of Section 1.414(q)-1T of the Code Regulations are excluded. (4) The number of officers is limited to 50 (or, if lesser, the greater of 3 Employees or 10% of Employees) excluding those Employees who may be excluded in determining the top-paid group. (5) When no officer has compensation in excess of 50% of the Code Section 415(b)(1)(A) limit, the highest paid officer is treated as highly compensated. (6) Compensation means compensation within the meaning of Code Section 415(c)(3), including elective or salary reduction contributions to a cafeteria plan, cash or deferred arrangement or tax-sheltered annuity. (7) Employers aggregated under Code Section 414(b), (c), (m), or (o) are treated as a single Employer. For purposes of the requirements of Code Section 414(q), a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees is subject to the family aggregation rules of Code Section 414(q)(6). For purposes of the family aggregation rules, the term "family" means, with respect to any Employee, such Employee's spouse and lineal ascendants and descendants and the spouses of such lineal ascendants and descendants. 7 2.25 HOLIDAY PLAN means the Holiday Corporation Savings and Retirement Plan, as in effect immediately before the Predecessor Effective Date. 2.26 HOUR OF SERVICE. (a) GENERAL RULE. "Hour of Service" means each hour for which the Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate-- (1) for the performance of duties, (2) on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, or (3) for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate; provided, however, that no hour shall be credited as an Hour of Service under more than one of the preceding paragraphs. For Employees who are paid on other than an hourly basis, Hours of Service shall be credited for each payroll period of the Employee for which the Employee receives or is entitled to receive compensation according to the following chart: Payroll Period Hours of Service Credited -------------- ------------------------- (1) Daily 10 (2) Weekly 45 (3) Bi-Weekly 90 (4) Semi-Monthly 95 (5) Monthly 190 (b) APPLICABLE COMPUTATION PERIOD. (1) Hours of Service described in subsection (a)(1) shall be credited to the computation period (as defined below) in which the duties are performed. (2) Hours of Service described in subsection (a)(2) shall be credited to the computation period in which the Employee is compensated for such Hours of Service. (3) Hours of Service described in subsection (a)(3) shall be credited to the computation period to which the award or agreement for back pay pertains, rather than the computation period in which the award, agreement, or payment is made. 8 (4) The term "computation period" means-- (A) the Plan Year, when crediting Hours of Service for purposes of determining Years of Vesting Service; and (B) the appropriate 12-month period determined under Section 2.48 for purposes of determining Years of Eligibility Service. (c) HOURS NOT COUNTED. This subsection limits the Hours of Service credited for periods during which no duties are performed and applies whether or not Hours of Service otherwise would have been counted for such periods under subsection (a)(2). (1) UNPAID TIME. An hour for which an Employee is not paid, either directly or indirectly, shall not be credited except in the case of an approved leave of absence or military leave (as defined below). (2) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT COMPENSATION. An hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which the Employee performed no duties shall not be credited if such payment is made or due under a plan maintained solely for the purpose of complying with an applicable workers' compensation, disability insurance, or unemployment compensation law. (3) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited for a payment which solely reimburses the Employee for medical or medically-related expenses incurred by the Employee. (4) 501 HOUR LIMITATION. Except in the case of an approved leave of absence or military leave and except as required by the Family and Medical Leave Act of 1993, not more than 501 Hours of Service shall be credited under subsection (a)(2) on account of any single period during which the Employee performs no duties (whether or not such period occurs in a single computation period). (d) MILITARY LEAVE. An Employee shall be credited with an Hour of Service for each hour of the normally scheduled workweek for each week during any period in which he is absent from work, without pay, with the Company and its Affiliates for voluntary or involuntary military service with the armed forces of the United States of America, but not to exceed the period required under the laws pertaining to veteran's reemployment rights; 9 provided, however, that if he fails to return to the employ of the Company or an Affiliate at the end of such absence during which he has reemployment rights under the applicable laws, he shall not receive credit for hours on such leave. (e) MATERNITY AND PATERNITY ABSENCE. Solely for purposes of determining whether a Break Year has occurred, an Employee shall be credited with an Hour of Service for each hour which would have been credited to such Employee but for such Employee's absence from employment for maternity or paternity reasons. In any case in which the Plan Administrator is unable to determine the hours which would have been credited to such Employee but for such absence, the Employee shall be credited with eight Hours of Service for each day of the normally scheduled workweek the Employee is absent from work for maternity or paternity reasons. An absence from work for maternity or paternity reasons shall mean an absence-- (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. Except as required by the Family and Medical Leave Act of 1993, no more than 501 Hours of Service shall be credited under this subsection for any such absence. Hours of Service under this subsection shall be credited in the Plan Year in which the absence from employment commences if the crediting is necessary to prevent a Break Year (and only to prevent a Break Year) or, in all other cases, such Hours of Service shall be credited in the following Plan Year (and only for the purpose of preventing a Break Year in such Plan Year). (f) SPECIAL RULE FOR FORMER EMPLOYEES OF THE PROMUS COMPANIES INCORPORATED. (1) Notwithstanding any other provision of this Section 2.26, for purposes of Sections 2.48 and 2.49, with respect to an Employee who was an employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan), including for purposes of this Section 2.26(f) Harrah's Entertainment, Inc. or 10 any of its subsidiaries, at any time prior to the Spin-Off Date and who becomes an Employee of the Company or an Affiliate under either of the circumstances described below, "Hour of Service" shall include, to the extent reasonably determinable by the Plan Administrator, each "Hour of Service" credited to such Employee under the Predecessor Plan through the date determined in accordance with the following: (A) any such employee who was employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) on the day immediately preceding the Spin-Off Date and who becomes employed by the Company or any Affiliate on or after the Spin-Off Date but prior to January 1, 1996, or who becomes concurrently employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) and the Company or an Affiliate as of the Spin-Off Date, shall be credited with such "Hours of Service" through the date of commencement of such Employee's employment or concurrent employment with the Company or Affiliate; or (B) any such employee who becomes employed by the Company or any Affiliate after December 31, 1995 but within five years after the Spin-Off Date shall be credited with such "Hours of Service" through the Spin-Off Date only. (2) Notwithstanding any other provision of this Section 2.26, for purposes of Section 2.48 and 2.49, with respect to an Employee who (i) is a former employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) participating in the Predecessor Plan, (ii) was, on the Spin-Off Date, employed by The Promus Companies Incorporated in a position in its Administrative Systems Department or Computer Operations Department in a capacity supporting the Human Resources and Financial Computer Systems for the hotel business of The Promus Companies Incorporated, (iii) terminates employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as defined in the Predecessor Plan) within thirty months following the Spin-Off Date and (iv) within thirty days following such termination is employed by the Company or one of its Affiliates in a capacity substantially similar to the capacity in which such employee was 11 employed by The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as defined in the Predecessor Plan), "Hour of Service" shall include, in addition to each "Hour of Service" credited to such employee during the period preceding and including the Spin-Off Date, each "Hour of Service" credited to such Employee under the Predecessor Plan during the period following Spin-Off Date until the date of such termination of employment, to the extent that such service is reasonably determinable by the Plan Administrator. (g) CONSTRUCTION. This Section is intended to be consistent with the requirements of Section 2530.200b-2 of Department of Labor Regulations and shall be so construed. 2.27 HUMAN RESOURCES COMMITTEE means the committee of that name appointed by the Board of Directors, or any successor to such committee. 2.28 INVESTMENT FUND means one of the investment funds of the Fund which is authorized by the Plan Administrator and the Trustees at the time of reference, and may include a fund solely or primarily invested in Company Stock (the "Company Stock Fund"). 2.29 MATCHING CONTRIBUTIONS mean the contributions made by an Employer under Section 4.4 and shall include both Base Matching Contributions and Discretionary Matching Contributions. Matching Contributions shall also include forfeitures which are allocated based upon elective (Before-Tax) or Matching Contributions or Employee After-Tax Contributions. 2.30 MEMBER means a Participant, or a former Participant who still has a balance in his Account. 2.31 PARTICIPANT means any Employee of an Employer who has met and continues to meet the active participation requirements of the Plan as set forth in Article III. 2.32 PLAN means the Promus Hotel Corporation Savings and Retirement Plan - A, as set forth herein. 2.33 PLAN ADMINISTRATOR means the Promus Hotels, Inc. acting through one or more of its officers or their respective delegates. 2.34 PLAN YEAR means initially the period beginning on the Spin-Off Date and ending on December 31, 1995. Thereafter, the Plan Year shall be the calendar year. 2.35 PREDECESSOR EFFECTIVE DATE means February 6, 1990. 12 2.36 PREDECESSOR PLAN means The Promus Companies Incorporated Amended and Restated Savings and Retirement Plan (now, The Harrah's Entertainment, Inc. Savings and Retirement Plan), as in effect immediately before the Spin-Off Date, unless otherwise required by the context to include the Harrah's Entertainment, Inc. Savings and Retirement Plan, as in effect after the Spin-Off Date. 2.37 RETIREMENT DATE under the Plan includes the following: (a) NORMAL RETIREMENT DATE means the Employee's sixty-fifth birthday. (b) EARLY RETIREMENT DATE means the date on or after the Employee's fifty-fifth birthday, but before his sixty- fifth birthday, on which he retires. 2.38 ROLLOVER CONTRIBUTIONS mean the contributions made under Section 4.9. 2.39 SPIN-OFF DATE means June 30, 1995, when the Plan was spun-off from the Predecessor Plan. 2.40 SUPPLEMENTAL CONTRIBUTIONS mean those employee contributions that are not eligible for Matching Contributions, and shall include Supplemental Before-Tax Contributions and Supplemental After-Tax Contributions. 2.41 TERMINATION OF SERVICE means the last date on which the individual is an Employee of the Company or an Affiliate. 2.42 TOTAL AND PERMANENT DISABILITY means any physical or mental injury or disease which causes an Employee to be permanently incapable of continuing employment with his or her Employer or securing any gainful employment. Such disability shall be established by certification to the Plan Administrator. Such certification shall be by: (a) a physician selected by the Employee and approved by the Plan Administrator; (b) three physicians, one selected by the Employee, one selected by the Plan Administrator, and one selected by the physicians selected by the Employee and Plan Administrator; (c) an award to receive Social Security disability benefits; or (d) approval of waiver of premiums under the Employer's group life insurance plan. 2.43 TRUST AGREEMENT means the agreement under which Plan assets are held and invested pursuant to Article XIII. 13 2.44 TRUSTEES means the person or persons acting as trustee under the Trust Agreement. 2.45 VALUATION DATE means any day that the New York Stock Exchange is open for business or any other date designated by the Plan Administrator and the Trustees. 2.46 VESTED BALANCE as of a given date means the Vested Percentage of the Member's Employee Accounts 1, 6, and 8 plus the aggregate balances of the Member's Employee Accounts 2, 3, 4, 5, 7 and 9. 2.47 VESTED PERCENTAGE means the percentage determined under Section 7.2 or 7.3 of the Plan, whichever is applicable. 2.48 YEAR OF ELIGIBILITY SERVICE. An Employee shall receive credit for a Year of Eligibility Service for each 12-month period during which the Employee completes 1,000 or more Hours of Service, beginning on (1) the earlier of the Employee's first day of compensated work for the Company or an Affiliate or, to the extent applicable pursuant to Section 2.26(f), The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or an affiliate thereof (as defined in the Predecessor Plan) or (2) any January 1 thereafter. 2.49 YEAR OF VESTING SERVICE. (a) GENERAL RULE. An Employee shall be credited with a Year of Vesting Service for each Plan Year in which he is credited with at least 1,000 Hours of Service; provided however, that no Employee shall be credited with more than one Year of Vesting Service for any Plan Year, notwithstanding that an Employee may have 1,000 or more Hours of Service with more than one Company or Affiliate or other entity during the Plan Year. (b) EFFECT OF BREAK IN SERVICE. An Employee's Years of Vesting Service completed prior to a Break Year shall be disregarded if (1) the Employee was not vested in any part of his Employee Accounts 1, 6, or 8 prior to such Break Year and (2) the number of such consecutive Break Years equals or exceeds the greater of five or the aggregate number of Years of Vesting Service completed prior to such Break Year. In determining the aggregate number of Years of Vesting Service for purposes of this subsection (c), the aggregate number of Years of Vesting Service completed prior to a Break Year shall not include Years of Vesting Service disregarded by reason of any prior Break Year. (c) SPECIAL RULE FOR FIRST YEAR OF VESTING SERVICE. Solely for the purpose of determining an Employee's Vested Percentage, if the Employee completes a Year of Eligibility Service but does not complete a Year of 14 Vesting Service in the Plan Year (or preceding Plan Year) in which the Employee completes such Year of Eligibility Service, the Employee shall be credited with a Year of Vesting Service for the Plan Year in which he completes a Year of Eligibility Service. ARTICLE III. ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY. Each Eligible Employee who became a Participant on the Spin-Off Date shall continue to be a Participant subject to Section 3.5. Each other Eligible Employee shall be eligible to become a Participant on the latest of: (a) the Entry Date coincident with or next following the date on which he becomes an Eligible Employee; (b) the Entry Date coincident with or next following his completion of one Year of Eligibility Service; or (c) any business day. 3.2 PARTICIPATION. (a) An Employee who became a Participant under Section 3.1 on the Spin-Off Date, and who was a participant in the Predecessor Plan on the day immediately preceding the Spin-Off Date, shall be enrolled in this Plan as of the Spin-Off Date at the same contribution rates, and with the same investment elections and beneficiary designation, that were in effect for him under the Predecessor Plan on the day immediately preceding the Spin-Off Date; provided, however, that such Employee may change these contribution and investment elections and beneficiary designation by submitting an Enrollment Form (as described in subsection (b)) at the time, and in the manner, specified by the Plan Administrator. (b) An Employee who shall from time to time qualify to become a Participant in accordance with Section 3.1 may enroll in the Plan, with regard to the elective contributions described in Sections 4.1 and 4.2, as of the Entry Date coincident with or next following the date on which he satisfies the requirements of Section 3.1, or any business day thereafter, by submitting an Enrollment Form at the time and in the manner specified by the Plan Administrator. Such Enrollment Form shall serve as-- (1) a pay reduction agreement pursuant to Section 4.3; 15 (2) a Beneficiary designation pursuant to Section 9.1; (3) an investment election pursuant to Section 6.1; and (4) a pre-authorization to effect future changes to his investment election under paragraph (3) as directed by the Participant telephonically or by written instruction to the Administrative Delegate. 3.3 ELIGIBLE EMPLOYEES. (a) GENERAL RULE. Subject to the provisions of subsection (b), the term "Eligible Employee" shall mean an Employee of an Employer and shall include a nonresident alien who receives no United States source income from an Employer who has been designated by an Employer as eligible to participate in this Plan; provided, however, effective as of December 31, 1995, no Employee who is employed in the capacity of an (1) Embassy Suitekeeper, (2) Hampton Room Attendant or (3) Homewood Suitekeeper shall be an Eligible Employee or shall otherwise participate in this Plan; and provided, further, that any Employee hired after December 31, 1995 shall not be an Eligible Employee until such Employee attains age 21. (b) EXCLUDED EMPLOYEES. There shall be excluded from the class of "Eligible Employees" any Employees included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, unless such agreement specifically provides for participation in the Plan. In addition, there shall be excluded from the class of "Eligible Employees" any Employees who (1) are nonresident aliens and receive no United States source income from an Employer unless specifically designated as "Eligible Employees" by the Employer, or (2) reside in Puerto Rico or are otherwise subject to the income tax code of Puerto Rico unless such Employee is designated as an Eligible Employee by the Employer. 3.4 REHIRED EMPLOYEES. Each reemployed Employee who was an Eligible Employee and who had completed a Year of Eligibility Service prior to his Termination of Service but was not then a Participant shall be eligible to become a Participant on the Entry Date coincident with or next following his satisfying the requirements of Section 3.3, or on any business day thereafter, provided he completes an appropriate Enrollment Form. A former Eligible Employee who was a Participant and is re-employed as an Eligible Employee will be eligible to participate in the Plan immediately upon his or her reemployment commencement date by 16 completing an appropriate enrollment form. Each Participant who ceases to be an Eligible Employee because he is transferred to a position as an (1) Embassy Suitekeeper, (2) Hampton Room Attendant or (3) Homewood Suitekeeper and who is subsequently retransferred into a position which qualifies him as an Eligible Employee under Section 3.3 will be eligible to participate in the Plan immediately upon such retransfer by completing an enrollment form. Each other former Employee who is subsequently rehired by the Company or an Affiliate as an Eligible Employee shall, upon reemployment, become a Participant in accordance with Sections 3.1 and 3.2. 3.5 LOSS OF STATUS AS ELIGIBLE EMPLOYEE. For any period during which a Member either-- (a) remains in the employ of the Company or Affiliate, but ceases to be an Eligible Employee within the meaning of Section 3.3; or (b) is no longer an Employee but has an Account balance under the Plan, no contributions of any kind shall be made on his behalf to his Account, but such individual shall remain a Member for all other purposes until the earlier of his death or the complete distribution (and/or forfeiture) of his Account. 3.6 LEASED EMPLOYEES. A person who is treated as an Employee of an Employer or an Affiliate pursuant to Code Section 414(n) or (o) and the regulations thereunder shall be considered a "leased employee" and shall not be considered an Employee for purposes of the Plan. If such a person participates in the Plan as a result of subsequent employment with an Employer or Affiliate, he shall receive Years of Eligibility Service and Years of Vesting Service for his employment as a leased employee. Notwithstanding the preceding provisions of this Section, a leased employee shall be treated as an Employee for purposes of applying the requirements described in Code Section 414(n)(3) and in determining the number and identity of Highly Compensated Employees. ARTICLE IV. CONTRIBUTIONS AND ALLOCATIONS 4.1 BEFORE-TAX CONTRIBUTIONS. (a) BASIC BEFORE-TAX CONTRIBUTIONS. Each Employer shall contribute to the Fund, on behalf of each Participant of such Employer, Basic Before-Tax Contributions in an amount equal to the amount by which the Participant's Compensation has been reduced for such contributions under a Pay Reduction Agreement described in Section 4.3. Such reduction for Basic Before-Tax Contributions shall be a specified whole percentage of Compensation 17 of no more than six percent and shall be subject to Section 4.3(d). (b) SUPPLEMENTAL BEFORE-TAX CONTRIBUTIONS. Provided that a Participant is making Basic Before-Tax contributions at a rate of 6 percent, such Participant's Employer shall contribute to the Fund, on his behalf, Supplemental Before-Tax Contributions in an amount equal to the amount by which the Participant's Compensation has been reduced for such contributions under a pay reduction agreement described in Section 4.3; provided, however, that a Highly Compensated Employee may not make Supplemental Before-Tax Contributions. Such reduction for Supplemental Before-Tax Contributions shall be a specified whole percentage of Compensation and shall be within limits established from time to time by the Chief Executive Officer and communicated to all Participants. (c) LIMIT ON BEFORE-TAX CONTRIBUTIONS. The maximum Before-Tax Contributions are as follows: (A) 14% for non-Highly Compensated Employees. (B) 6% for Highly Compensated Employees. (d) TIMING AND ALLOCATION OF BEFORE-TAX CONTRIBUTIONS. Before-Tax Contributions shall be paid to the Fund as soon as practicable after each payroll period, provided that in no event shall contributions under this Section for any Plan Year be made later than (1) the date prescribed by law for the Employer to obtain a federal income tax deduction for the Plan Year for which such contributions are made or (2) the date required under ERISA and the regulations thereunder, if earlier. Basic Before-Tax Contributions shall be allocated to Employee Account 2 and Supplemental Before-Tax Contributions shall be allocated to Employee Account 3 as soon as administratively feasible following such payments to the Fund. 4.2 AFTER-TAX CONTRIBUTIONS. (a) BASIC AFTER-TAX CONTRIBUTIONS. A Participant may contribute to the Fund Basic After-Tax Contributions in an amount specified by him in the pay reduction agreement described in Section 4.3. Such Basic After-Tax Contributions shall be a specified whole percentage of Compensation and, when added to a Participant's Before-Tax Contributions, shall not exceed 6 percent of such Participant's Compensation and shall be subject to Section 4.3(d). 18 (b) SUPPLEMENTAL AFTER-TAX CONTRIBUTIONS. Provided that a Participant has made the maximum Basic After-Tax Contributions permitted under subsection (a), he may contribute to the Fund Supplemental After-Tax Contributions in an amount equal to an amount specified by him in the pay reduction agreement described in Section 4.3. Such Supplemental After-Tax Contributions shall be a specified whole percentage of Compensation and, when added to a Participant's Before-Tax Contributions and Basic After-Tax Contributions, shall not exceed 16 percent of such Participant's Compensation. (c) TIMING AND ALLOCATION OF AFTER-TAX CONTRIBUTIONS. After-Tax Contributions shall be made at the time described in Section 4.1(d). Basic After-Tax Contributions shall be allocated to Employee Account 4 and Supplemental After-Tax Contributions shall be allocated to Employee Account 5 as soon as administratively feasible following such payment to the Fund. 4.3 PAY REDUCTION AGREEMENTS. (a) GENERAL RULE. In order to make Before-Tax Contributions and After-Tax Contributions, an Eligible Employee who has satisfied the requirements of Section 3.1 must enter into a pay reduction agreement, which shall be part of the Enrollment Form, whereby such Eligible Employee agrees to reduce his Compensation for such contribution within the limits described in Sections 4.1 and 4.2. A Participant's pay reduction agreement shall remain effective until canceled or amended. (b) CANCELLATION. A pay reduction agreement may be canceled by a Participant at any time during the Plan Year by filing notice thereof with the Plan Administrator. Such cancellation shall take effect as soon as administratively feasible following its receipt by the Plan Administrator. (c) AMENDMENT. A pay reduction agreement may be amended by a Participant to increase or decrease his Before-Tax Contributions and After-Tax Contributions, or to reallocate the amount of contributions between Before-Tax Contributions and After-Tax Contributions, at any time during the Plan Year by filing notice thereof with the Plan Administrator. Such amendment shall take effect as soon as administratively feasible following its receipt by the Plan Administrator. (d) LIMITATION. No pay reduction agreement shall be effective unless it provides for reduction of a specified whole percentage of Compensation of at least 19 two percent for Basic Before-Tax Contributions or Basic After-Tax Contributions, or any combination of the two. 4.4 MATCHING CONTRIBUTIONS. (a) BASE MATCHING CONTRIBUTIONS. Each Employer shall make Base Matching Contributions on behalf of each of its Employees, in an amount equal to 100 percent of an Employee's Basic Contributions (which shall not exceed 6 percent of such Employee's Compensation). (b) DISCRETIONARY MATCHING CONTRIBUTIONS. For each Plan Year, each Employer may make Discretionary Matching Contributions to Participants who are employed by an Employer or a Division that achieves its budgeted pretax profit for such Plan Year, as determined by the Chief Executive Officer in his sole and absolute discretion. The amount of any such Discretionary Matching Contributions, which shall be expressed as a percentage of the Participant's Basic Contributions, shall also be determined by the Chief Executive Officer and be subject to the approval of the Human Resources Committee. (c) TIMING AND ALLOCATION OF MATCHING CONTRIBUTIONS. Matching Contributions shall be made, in cash or Company Stock, as soon as practicable after the end of the pay period to which they relate, provided that in no event shall contributions under this Section for any Plan Year be made later than the date as prescribed by law for the Employer to obtain a federal income tax deduction for the Plan Year for which such contributions are made. Basic Matching Contributions shall be allocated to Employee Account 1 and Discretionary Matching Contributions shall be allocated to Employee Account 6 as soon as administratively feasible following the payment of such consideration to the Fund. Amounts allocated to Employee Account 6 may, at the Chief Executive Officer's discretion, be credited to the Investment Fund invested solely or primarily in Company Stock. 4.5 [RESERVED] 4.6 ALLOCATION OF FORFEITURES. (a) FORFEITED MATCHING CONTRIBUTION. To the extent not otherwise applied under Section 7.4(b) for purposes of restoration of forfeitures for reemployed Members, forfeitures of Matching Contributions attributable to a Plan Year quarter in accordance with Section 7.4 and 16.8, shall be allocated as of the end of such Plan Year quarter to Participants who are in active employment on the last day of such Plan Year quarter; 20 provided, however, if Section 401(a)(28) requires a transfer to the Plan pursuant to Section 4.9(d) prior to the end of a Plan Year quarter but following the end of the next preceding quarter, such allocation shall be made as of the last date such transfer is required under Section 401(a)(28) to Participants who are in active employment on such date. The amount of forfeitures allocated to each Participant under this subsection shall be a proportion equal to -- (1) the Basic Contributions made by the eligible Participant during the Plan Year quarter for which the allocation is made, divided by (2) the Basic Contributions made by all eligible Participants for such Plan Year quarter. Amounts allocated pursuant to this subsection shall be credited to the Employee Account from which such forfeitures were derived. (b) EMPLOYEE ACCOUNT 8. To the extent not otherwise applied under Section 7.4(b) for purposes of restoration of forfeitures from Employee Account 8 for reemployed Members, forfeitures of Employee Account 8 attributable to a Plan Year quarter in accordance with Section 7.4 and 16.8 shall be allocated as of the end of such Plan Year quarter to those Participants who are in active employment on the last day of such Plan Year quarter, and who have a balance in Employee Account 8 at that time; provided, however, if Section 401(a)(28) requires a transfer to the Plan pursuant to Section 4.9(d) prior to the end of a Plan Year quarter but following the end of the next preceding quarter, such allocation shall be made as of the last date such transfer is required under Section 401(a)(28) to Participants who are in active employment on such date and who have a balance in Employee Account 8 at that time. The amount of forfeitures allocated to each Participant under this subsection shall be a portion of the total of such forfeitures equal to -- (1) the balance in such Participant's Employee Account 8 as of the last Valuation Date of the Plan Year quarter, divided by (2) the total balance in Employee Account 8 for all such Participants as of the last Valuation Date in the Plan Year quarter; and amounts allocated pursuant to this subsection shall be credited to Employee Account 8. 21 4.7 LIMITATIONS ON CONTRIBUTIONS. (a) BEFORE-TAX CONTRIBUTIONS. (1) In no event shall any Employer make Before-Tax Contributions for any calendar year with respect to any Member, which, when aggregated with other deferrals in such calendar year by the Member pursuant to any other cash or deferred arrangement maintained by the Company or an Affiliate under Section 401(k), are in excess of $7,000 (or such greater amount as may be determined under Code Section 402(g)). If a Member has Before-Tax Contributions in excess of $7,000 (or such greater amount as may be permitted under Code Section 402(g)) for a Plan Year, such excess shall be refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. A Member retains the right to make changes in his contributions as provided in Section 4.3(a), except a Member may not change his or her contributions to exceed the maximum permitted by law or by this Plan. (2) In no event shall any Employer make Before-Tax Contributions for any Plan Year that would result in the actual deferral percentage of the group of Highly Compensated Employees eligible to participate in the Plan exceeding the actual deferral percentage of the group of all other eligible Employees by more than the greater of-- (A) one and one-quarter times; or (B) the lesser of two times or two percentage points. The deferral percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Before-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator shall reduce Before-Tax Contributions made on behalf of the Highly Compensated Employees. Such reduction shall be effected by reducing contributions made 22 on behalf of Highly Compensated Employees (in the order of their actual deferral percentage) beginning with the Highly Compensated Employees who elected the highest percentage of such contributions. Any such reduction in the Before-Tax Contributions made on behalf of any Member shall be recharacterized as After-Tax Contributions or refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. If recharacterized, such excess contributions shall be recharacterized as soon as practicable. In no event, however, shall such excess contributions be left unrecharacterized later than two and one-half months following the Plan Year in which such contributions were made. In addition to the foregoing, if the Plan Administrator determines during the course of a Plan Year that the discrimination test of Code Section 401(k)(3) otherwise might not be met for the Plan Year, the Plan Administrator may reduce, at any time, the maximum percentage of Compensation at which Highly Compensated Employees may elect Before-Tax Contributions to such percentage as the Plan Administrator determines appropriate to ensure that such test shall be met for such Plan Year. For purposes of determining whether the Plan satisfies the actual deferral percentage test of Code Section 401(k), the following provisions shall apply: (i) All elective contributions that are made under two or more plans that are aggregated for purposes of Code Section 401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii))are to be treated as made under a single plan and if two or more plans are permissively aggregated for purposes of Code Section 401(k), the aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b) as though they were a single plan. Plans that are aggregated must have the same Plan Year. (ii) In calculating the actual deferral percentage for purposes of Code Section 401(k), the actual deferral ratio of a Highly Compensated Employee will be determined by treating all cash or deferred arrangements under which the Highly Compensated Employee is eligible (other than those that may not be permissively aggregated) as a single arrangement. 23 (iii) In the case of a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees and is thereby subject to the family aggregation rules of Code Section 414(q)(6), the actual deferral ratio (ADR) for the family group (which is treated as one Highly Compensated Employee) is the ADR determined by combining the elective contributions, compensation, and amounts treated as elective contributions of all eligible family members. Except to the extent taken into account in the preceding sentence, the elective contributions, compensation, and amounts treated as elective contributions of all family members are disregarded in determining the actual deferral percentages for the groups of Highly Compensated Employees and non-Highly Compensated Employees. (iv) In the case of a Highly Compensated Employee whose ADR is determined under the family aggregation rules, the determination of the amount of excess contributions shall be as follows: The ADR is reduced in accordance with the "leveling" method described in Code Section 1.401(k)-1(f)(2) of the Code Regulations and the excess contributions are allocated among the family members in proportion to the contributions of each family member that have been combined. (v) The amount of excess contributions to be distributed or recharacterized shall be reduced by excess deferrals previously distributed for the taxable year ending in the same Plan Year and excess deferrals to be distributed for a taxable year will be reduced by excess contributions previously distributed or recharacterized for the Plan Year beginning in such taxable year. (vi) The distribution of excess contributions will include the income allocable thereto. The income allocable to excess contributions will include income for the Plan Year for which the excess contributions were made and will be equal to the sum of the allocable gain or loss for the Plan Year. The Plan will allocate income to excess contributions by multiplying the income for the Plan Year allocable to the Employee's elective contributions (Before-Tax Contributions) and amounts treated as elective contributions by the following fraction: The numerator of the fraction is the excess contributions for the Employee for the Plan Year and the denominator of the fraction is equal to the sum of: (1) the total Account balance of the Employee attributable to elective 24 contributions (Before-Tax Contributions) and amounts treated as elective contributions as of the beginning of the Plan Year, plus (2) the Employee's elective contributions (Before-Tax Contributions) and amounts treated as elective contributions for the Plan Year. (vii) Excess contributions will be corrected by the close of the Plan Year following the Plan Year for which they were made, since the failure to make such corrections by the close of the Plan Year following the Plan Year for which they were made will cause the Plan to fail to satisfy the requirements of Code Section 401(k)(3) for the Plan Year for which the excess contributions were made and for all subsequent years they remain in the trust. In addition, the Plan will endeavor to correct excess contributions within 2 1/2 months after the close of the Plan Year for which they were made since it is understood that the Employer will be liable for a 10% excise tax on the amount of excess contributions unless they are corrected within such 2 1/2 month period. (viii) Recharacterized excess contributions will remain subject to the nonforfeitability requirements and distribution limitations that apply to elective contributions. (b) MATCHING CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS. In no event shall Matching Contributions and After-Tax Contributions for any Plan Year be made which would result in the contribution percentage of the group of Highly Compensated Employees eligible to participate in the Plan exceeding the contribution percentage of the group of all other eligible Employees by more than the greater of-- (1) one and one-quarter times; or (2) the lesser of (A) two times or (B) two percentage points. The contribution percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Matching Contributions and After-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator shall reduce 25 Matching Contributions and After-Tax Contributions made on behalf of the Highly Compensated Employees in a manner similar to the method described in subsection (a). Any such reduction in the Matching Contributions or After-Tax Contributions made on behalf of any Member (including income and losses allocable thereto) shall be paid to the Member if vested, or treated as a forfeiture (if forfeitable). To the extent permitted by applicable Regulations, the Plan Administrator may elect to take Before-Tax Contributions into account in applying the contribution percentage test of this subsection (b). The Plan Administrator may comply with the requirements of this Section by combining contributions under this Plan with contributions under any other defined contribution plan maintained by the Company or an Affiliate, or in any other manner permissible under Code Section 401(k)(3) or 401(m)(2), as applicable. Any such combination shall be done in compliance with such guidelines, if any, established by the Secretary of the Treasury. The following provisions shall apply for purposes of determining whether the Plan satisfies the actual contribution percentage test of Code Section 401(m): (i) All Employee and matching contributions that are made under two or more plans that are aggregated for purposes of Code Section 401(a)(4) and 410(b) (other than Code Section 410(b)(2)(A)(ii)) are to be treated as made under a single plan and if two or more plans are permissively aggregated for purposes of Code Section 401(m), the aggregated plans must also satisfy Code Section 401(a)(4) and 410(b) as though they were a single plan. To be aggregated, the plans must have the same Plan Year. (ii) In calculating the actual contribution percentage for purposes of Code Section 401(m), the actual contribution ratio of a Highly Compensated Employee will be determined by treating all plans subject to Code Section 401(m) under which the Highly Compensated Employee is eligible (other than those that may not be permissively aggregated) as a single plan. (iii) In the case of a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees and is thereby subject to the family aggregation rules of Code Section 414(q)(6), the actual contribution ratio (ACR) for the family group (which is treated as one Highly 26 Compensated Employee) is the ACR determined by combining the contributions and compensation of all eligible family members. Except to the extent taken into account in the preceding sentence, the contributions and compensation of all family members are disregarded in determining the actual contribution percentages for the groups of Highly Compensated Employees and non-Highly Compensated Employees. (iv) In the case of a Highly Compensated Employee whose ACR is determined under the family aggregation rules, the determination of the amount of excess aggregate contributions shall be made as follows: the ACR is reduced in accordance with the "leveling" method described in Section 1.401(m)-1(e)(2) of the Code Regulations and the excess aggregate contributions are allocated among the family members in proportion to the contributions of each family member that have been combined. (v) The amount of excess aggregate contributions for a Plan Year shall be determined only after first determining the excess contributions that are treated as Employee contributions due to recharacterization. (vi) The distribution (or forfeiture, if applicable) of excess aggregate contributions will include the income allocable thereto. The income allocable to the excess aggregate contributions shall include income for the Plan Year for which the excess aggregate contributions were made and will be equal to the sum of the allocable gain or loss for the Plan Year. The Plan will allocate income to excess aggregate contributions by multiplying the income for the Plan Year allocable to the Employee's employee contributions (After-Tax Contributions), Matching Contributions, and amounts treated as Matching Contributions by the following fraction: The numerator of the fraction is the excess aggregate contributions for the Employee for the Plan Year and the denominator of the fraction is equal to the sum of: (1) the total account balance of the Employee attributable to employee contributions (After-Tax Contributions) and Matching Contributions and amounts treated as Matching Contributions as of the beginning of the Plan Year, plus (2) the Employee's employee contributions (After-Tax Contributions) and Matching Contributions and amounts treated as Matching Contributions for the Plan Year. 27 (vii) A method of correcting excess aggregate contributions shall meet the nondiscrimination requirements of Code Section 401(a)(4). Accordingly, the Plan shall not use a method under which Employee contributions are distributed to Highly Compensated Employees to the extent necessary to meet the requirements of Code Section 401(m)(2) while matching contributions attributable to such Employee contributions remain allocated in the Employee's account. If it is necessary to distribute Employee contributions that have been matched to a Highly Compensated Employee, then a pro-rata share of Employer Matching Contributions will also be distributed to such Employee so that Matching Contributions that remain allocated to Employee accounts will meet the requirements of Code Section 401(a)(4). (viii) Excess aggregate contributions shall be corrected by the close of the Plan Year following the Plan Year for which they were made. It is understood that if such correction is not made by the close of the Plan Year following the Plan Year for which they were made, such failure will cause the Plan to fail to satisfy the requirements of Code Section 401(a)(4) for the Plan Year for which the excess aggregate contributions were made and for all subsequent years they remain uncorrected. The Plan shall endeavor to correct excess aggregate contributions within 2 1/2 months after the close of the Plan Year for which they are made since it is understood the Employer will be liable for a 10% excise tax on the amount of excess aggregate contributions unless they are so corrected. (ix) Elective contributions and/or qualified nonelective contributions may be treated as matching contributions only if the conditions described in Section 1.401(m)-1(b)(5) of the Code Regulations are satisfied. (c) [RESERVED] (d) ADDITIONAL LIMITATION. The limits of this subsection shall comply with the provisions of Code Regulation 1.401(m)-2 for "multiple use of the alternative limitation" and for this purpose the provisions of Section 1.401(m)-2(d) of the Code Regulations are incorporated herein by reference. Correction of the multiple use of the alternative limitation shall occur by first reducing the actual contribution percentages for only those Highly Compensated Employees who are eligible in both the arrangement subject to Code Section 401(k) and the plan subject to Code Section 28 401(m). If this is insufficient to make the correction, then the actual deferral percentage shall be reduced for these Employees in a manner that complies with Code Regulations. 4.8 LIMITATIONS ON ANNUAL ADDITIONS. The provisions of this Section 4.8 shall apply to Plan Years (which shall be the "limitation years" under this Plan for purposes of Code Section 415). (a) ANNUAL ADDITION. "Annual Addition" means, for any Participant for any Plan Year, an annual addition as defined in Code Sections 415(c)(2) and 415(c)(6), generally including the sum of: (1) all Company and Affiliate contributions made for the Participant under "any defined contribution plan" for the year; (2) the Participant's after-tax contributions for the year to "any defined contribution plan;" (3) any forfeitures or employer contributions allocated to him for the year under "any defined contribution plan"; except as otherwise specified in Code Section 415(c)(6) for an employee stock ownership plan that satisfies certain nondiscrimination requirements; and (4) contributions to an individual, post-retirement medical account for the Participant, to the extent required by Code Section 415(1) or 419A(d)(2). "Any defined contribution plan" means all qualified defined contribution plans of the Employers and Affiliates that are considered as one plan under Code Sections 414 and 415. (b) LIMITATION. Notwithstanding the foregoing provisions of this Article IV, for any Plan Year the Annual Addition of a Participant shall not exceed the lesser of-- (1) $30,000 (or other amount for a particular Plan Year as may be determined under Code Sections 415(c)(1) and 415(d) and related Regulations); or (2) 25 percent of the Participant's wages and all other payments of compensation (for such Plan Year) as reported on Form W-2 (currently entitled "wages, tips, other compensation") (or the successor method of reporting income under Code Sections 6041, 6051 and 6052) and as 29 described in Treas. Reg. Section 1.415-2(d)(11)(i). (c) ADDITIONAL LIMITATION. If in any Plan Year a Participant is both a participant in any defined contribution plan and a participant in any qualified defined benefit plan of the Employer or an Affiliate, the sum of the defined benefit fraction (as defined in Code Section 415(e)(2)) and the defined contribution fraction (as defined in Code Section 415(e)(3)) shall not exceed 1.0. In calculating the defined contribution fraction, the Plan Administrator may, in his discretion, make the election provided under Code Section 415(e)(6). Before any contributions are reduced under this Plan, the benefit under a defined benefit plan shall be reduced to the extent necessary to ensure that the sum of the defined benefit fraction and defined contribution fraction does not exceed 1.0. (d) REDUCTION IN ANNUAL ADDITIONS. (1) If in any Plan Year a Member's Annual Addition exceeds the limitation determined above, such excess shall not be allocated to his accounts in any defined contribution plan. In accordance with the provisions of Code Section 415 and the Regulations thereunder, the Plan Administrator will distribute elective deferrals (within the meaning of Code Section 402(g)(3)) or return voluntary Employee contributions to the extent that the distribution or return will reduce the excess amounts in the Member's Account. Amounts equal to any gains attributable to the returned elective deferrals and voluntary Employee contributions will also be returned to the Member if necessary to insure that a Member's Annual Addition does not exceed the limitation determined above. If gains attributable to the returned elective deferrals or returned voluntary Employee contributions are not returned to the Member, such earnings will be considered as an Employee contribution for the limitation Plan Year for which the returned contribution was made. (2) If the foregoing distributions do not completely reduce the excess amounts in the Member's account, then the remaining excess amounts in the Member's Account will be placed in a suspense account and used to reduce Employer contributions for the next Plan Year and succeeding Plan Years as necessary (referred to as the "Next Plan Year"). Such remaining excess amounts will be held unallocated in the suspense account for the limitation Plan Year and will be allocated and reallocated in the next Plan Year to the Accounts of all Participants in accordance with applicable Code Regulations. Such suspense account shall share in the gains and losses of the Fund on the same basis as other Accounts. Excess amounts that are allocated to Participants will be used 30 to reduce Employer contributions for the Plan Year in which such allocation occurs. For purposes of this Section 4.8(d)(2), excess amounts will not be distributed to Participants or former Participants. 4.9 ROLLOVER CONTRIBUTIONS AND PLAN TO PLAN TRANSFERS. (a) ROLLOVER CONTRIBUTIONS. Any Eligible Employee, including an individual who has not satisfied the service requirements of Article III, may, with the approval of the Plan Administrator, contribute lump sum cash amounts to the Plan which are attributable to eligible rollover distributions within the meaning of Code Sections 402(c) or 403(a) or qualifying rollover distributions within the meaning of Code Section 408(d)(3); provided, however, that if such amounts are not contributed to the Plan in a direct transfer within the meaning of Code Section 401(a)(31), such amounts shall be contributed to the Plan within sixty days following the day on which the Employee received the distribution from a qualified trust, annuity plan, individual retirement account or individual retirement annuity. Such amounts shall be credited to the Employee Account 7 established for the Employee. An Eligible Employee who has not yet satisfied the service requirements of Article III shall be treated as a Member solely with regard to his Employee Account 7. (b) TRANSFERS FROM PREDECESSOR PLAN. In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner), the Plan will accept the direct transfer from the Predecessor Plan of an amount which if paid to the Participant instead of the Plan would have constituted a lump sum distribution within the meaning of Code Section 402(e). Such a plan-to-plan transfer must be for a person who has been admitted or readmitted to the Plan as a Participant and be received by the Trustee within two months after such admission or re-admission to the Plan. To the extent possible, as determined in the sole discretion of the Plan Administrator, such amount shall be credited to the subaccounts of this Plan which are analogous to the subaccounts of the Predecessor Plan in which such amounts were held immediately prior to such transfer; otherwise, the transferred amount shall be credited to the Participant's Employee Account 7. To the extent permitted by applicable law, the provisions of this Section 4.9(b) shall also be applicable to former employees of The Promus Companies Incorporated or its affiliates (i) who were participants in the Predecessor Plan and (ii) who terminated their employment with The Promus Companies Incorporated or its affiliates on or prior to the Spin-Off Date and (iii) whose unvested account balances under the Predecessor Plan were 31 retained by the Predecessor Plan after the Spin-Off Date and (iv) who subsequently become Eligible Employees under the Plan before incurring five consecutive break years as defined in the Predecessor Plan since termination of their employment with The Promus Companies Incorporated or its affiliates. (c) TRANSFERS FROM PLAN B. In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, the Plan may accept the direct transfer from Plan B of the total amount credited to an Eligible Employee's account under Plan B who immediately prior to his satisfaction of the eligibility requirements under Section 3.3 of the Plan was an eligible employee under the terms of Plan B and a participant thereunder. (d) TRANSFERS FROM EMPLOYER'S TERMINATED PLANS. In the event that the Employer maintains another defined contribution plan that is qualified under Section 401(a) and such plan is terminated, in the discretion of the Plan Administrator, the Plan will accept a direct transfer of the value of the account balance in such plan of any individual who does not accept a lump-sum distribution of such account balance upon termination. (e) TRANSFERS OF DIVERSIFIED AMOUNTS. In the event that any Participant in the Promus Hotel Corporation Employee Stock Ownership Plan (the "ESOP") diversifies the investment of his account in the ESOP a manner that satisfies Code Section 401(a)(28) and elects, within 90 days after the close of each Plan Year in the qualified election period (as defined in the ESOP), to transfer the amount subject to the diversification election to the Plan and invest such amount in any one or more of the Investment Funds offered by the Plan (which Funds are not inconsistent with IRS Regulations), the Plan shall accept such amounts and any such investment option selected by the qualified Participant shall be implemented no later than 90 days after the last day of the period during which the election can be made. A Member who chooses to diversify his ESOP by investing in any one or more of the Investment Funds offered by the Plan may not elect to receive this portion of his Account in Company Stock. (f) TRANSFERS FROM QUALIFIED PLANS In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner), the Plan may accept the direct transfer from a plan qualified under Code Section 401(a) of an amount which if paid to the 32 Participant or Eligible Employee (who would be a Participant but for the requirement under Section 3.1(b) that he complete one Year of Eligibility Service) instead of the Plan would have constituted a lump sum distribution within the meaning of Code Section 402(e). Such a plan-to-plan transfer must be received by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. To the extent possible, as determined in the sole discretion of the Plan Administrator, such amount shall be credited to the subaccounts of this Plan which are analogous to the accounts of the qualified plan in which such amounts were held immediately prior to such transfer; otherwise, the transferred amount shall be credited to the Participant's Employee Account 7. ARTICLE V. [RESERVED] ARTICLE VI. MEMBERS' ACCOUNTS; INVESTMENT FUNDS 6.1 INVESTMENT ELECTIONS BY MEMBERS. (a) INITIAL ELECTION. Upon becoming a Participant, each Member may file with the Plan Administrator such Member's direction with respect to what percentage, if any, of the Member's Account (derived from contributions made pursuant to Sections 4.1, 4.2, 4.4, 4.6, and 4.9) is to be invested in any one or more of the Investment Funds except the Executive Life Fund described in Addendum A. The percentages so specified by the Member shall be stated in one percent increments or such other increments as may be approved by the Plan Administrator in a nondiscriminatory manner. If by a date designated by the Plan Administrator, a Member fails to make a valid investment election when submitting an Enrollment Form, any amounts allocated to such Member's Account shall be invested entirely in the Investment Fund designated by the Plan Administrator in a uniform and nondiscriminatory manner. (b) CHANGE OF ELECTION AND TRANSFER AMONG FUNDS. A Participant may change his or her investment election as to future contributions (in accordance with the limitations described in Section 6.1(a)) as provided in the Rules of the Plan. Except with respect to the Investment Fund described in Addendum A, a Participant may elect to transfer amounts allocated to his Account among Investment Funds in increments of one percent (or such other increments as approved by the Plan Administrator in a nondiscriminatory manner) as provided in the Rules of the Plan. Subject to the transfer restrictions stated hereinbelow, such changes or transfers shall take effect as soon as 33 administratively feasible after the request is received by the Plan Administrator; provided, however in connection with establishing, amending, or terminating any Investment Fund including establishing a new Investment Fund, the Plan Administrator may establish reasonable rules and procedures on a uniform and nondiscriminatory basis in connection with changes or transfers by Members in transitioning with respect to such Fund. A Participant who is subject to Section 16 of the Securities Exchange Act of 1934, as amended (""Rule 16b-3"), or other securities laws, regulations or rules that relate to investments in the Company Stock Fund may effect the transfer of an existing Account balance into or out of any Company Stock Fund only as provided in the Rules of the Plan which shall be according to the applicable exemptive conditions of Rule 16b-3 and, in the Plan Administrator's discretion, the applicable conditions of such other securities laws, rules or regulations; PROVIDED, HOWEVER, that if the Plan Administrator reasonably determines that contractual, legal or administrative considerations no longer require such conditions be met, then the Plan Administrator may permit other transfers or establish other time requirements for transfers on a uniform and nondiscriminatory basis except as otherwise required by law. The Plan Administrator will impose limits on transfers between Investment Funds on a uniform and nondiscriminatory basis if the Plan Administrator determines that such other available funds would not be sufficient for such transfers. The Plan Administrator may adopt other Rules of the Plan to govern transfers which will be approved on a uniform and nondiscriminatory basis except as otherwise required by law. 6.2 PLAN EXPENSES. (a) INVESTMENT FEES, ETC. Expenses attributable to the management and investment of each of the Funds shall be charged against the respective Fund. (b) ADMINISTRATIVE EXPENSES, ETC. All fees paid to the Trustee for trustee services, all fees paid for recordkeeping services performed by the Trustee, the Plan Administrator and any third-party service provider, and any other costs or expenses described in Sections 12.9 and 16.4, shall constitute a charge upon the Fund and shall be paid from Members' Accounts in proportion to the balance of such Accounts except to the extent that the Company or an Employer elects to pay such fees, costs or expenses; provided that the Company or an Employer may advance fees, costs or expenses on behalf of the Plan in which case the 34 Company or Employer will be reimbursed for such payment by the Plan from Fund assets. 6.3 VALUATION; ALLOCATION OF INVESTMENT EARNINGS AND LOSSES. (a) GENERAL RULE. Except as provided in subsections (b) and (c), Accounts and Funds shall be valued at their fair market values as of each Valuation Date. Earnings, gains, and losses (realized or unrealized) for each Fund shall be allocated to the portion ("subaccount") of a Member's Account maintained with respect to that Fund, in the same ratio that the value of his subaccount (determined as of the Valuation Date) bears to the sum of the values of all Members' subaccounts maintained with respect to the Fund. For the purpose of determining this ratio, the value of a subaccount shall be the value of the subaccount as of the last preceding Valuation Date. After the allocation of earnings, gains, and losses, each Member's Account shall be adjusted for contributions, reallocated forfeitures, loan repayments, interfund transfers, distributions, withdrawals, and expenses made or incurred since the last preceding Valuation Date. (b) UNALLOCATED EARNINGS. Except as provided in subsection (c), earnings, gains, and losses which have not been allocated to Members' Accounts during the Plan Year under subsection (a), shall be allocated as of the last day of the Plan Year to all Members who have a balance in their Account as of such date. Each such Member shall receive a percentage of the total amount allocated under this subsection (b) equal to-- (1) the balance in the Member's Account as of the last Valuation Date of the Plan Year, divided by (2) the total balance of the Accounts of all eligible Members as of the last Valuation Date of the Plan Year. Amounts allocated under this subsection (b) shall be credited to the various subaccounts and invested in the various Investment Funds in accordance with uniform and nondiscriminatory procedures established by the Plan Administrator. (c) UNIT VALUES. The Plan Administrator or the Trustees (or their designated agent or agents) or the Administrative Delegate may, for administrative purposes, establish unit values for one or more Investment Fund, including any Company Stock Fund, (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund 35 (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Investment Fund (or any portion thereof), the value of a Member's interest in that Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Member. 6.4 COMPANY STOCK FUNDS. (a) VALUATION. (i) Subject to the special valuation rules set forth in subsection (ii), Company Stock in any Company Stock Fund shall be initially valued at the purchase price paid by the Trust and thereafter shall be valued at its most recent closing price on the New York Stock Exchange as of the Valuation Date. The Plan Administrator or the Trustees (or their designated agent or agents) may, for administrative purposes, establish unit values for any Company Stock Fund, (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Company Stock Fund (or any portion thereof), the value of a Member's interest in that Company Stock Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Company Stock Fund (or any portion thereof) multiplied by the number of units then credited to the Member. (ii) If Company Stock ceases to be publicly traded or if it is being valued in connection with a transaction between the Plan and a "party in interest" (as defined in ERISA Section 3(14)) or a "disqualified person" (as defined in Section 4975(e)(2) of the Code) or in connection with an extraordinary transaction or event, 36 its value shall be determined by the Trustees in good faith based on all relevant factors. (b) COMPANY STOCK DIVIDENDS. Company Stock Dividends received on shares in the Company Stock Fund shall be allocated as soon as administratively feasible following the date such dividends are paid, to each Member's Account in an amount which will bear substantially the same proportion to the total number of shares received as the number of shares of Company Stock in each Account as of the Valuation Date next preceding the date of such allocation bears to the total number of shares of Company Stock allocated to all Accounts as of such Valuation Date. (c) RIGHTS, WARRANTS, OR OPTIONS. Company Stock rights (including warrants and options) issued with respect to Company Stock shall be exercised by the Trustee on behalf of Members. (d) VOTING RIGHTS. (A) Members shall not have voting rights or other decision rights with respect to any investment in any Fund, including Company Stock in the Company Stock Fund, if any, all such rights being vested in the Trustee. Notwithstanding the foregoing, in the event of any "solicitation" of "proxies" as such terms are defined in Regulation 14a-l under the Securities Exchange Action of 1934, as amended, which is opposed by management of the Company, all voting rights in Company Stock held in any Company Stock Fund shall be voted in accordance with the directions to the Trustee of the Members who have any portion of their Accounts invested in any such Company Stock Fund, with each such Participant entitled to direct the vote of that number of shares representing the proportionate investment of his Accounts in such Company Stock Fund. The Trustee shall maintain the strict confidentiality of Member voting directions. (B) All Members entitled to direct such voting shall be notified by the Trustee of each occasion for the exercise of such voting rights within a reasonable time before such rights are to be exercised. (C) Such notification shall include all information distributed to shareholders regarding the exercise of such rights. 37 (D) Such Members shall be so entitled to direct the voting of fractional shares (or fractional rights to shares), provided, however, that the Trustee may, to the extent possible, vote the combined fractional shares (or fractional rights to shares) so as to reflect the aggregate direction of all Members giving directions with respect to allocated fractional shares (or fractional rights to shares). (E) In the event that a Member shall fail to direct the Trustee in whole or in part as to the exercise of voting rights arising with respect to the Company Stock Funds, then such voting rights shall be exercised by the Trustee only to the extent directed by such Member and any Company Stock with respect to which no direction is received shall be voted in accordance with subparagraph (F). (F) The Trustee shall vote (i) shares of Company Stock with respect to which a Participant has failed to exercise his voting rights and (ii) shares representing forfeited account values that have not been reallocated at the time of any proxy solicitation referred to in subparagraph (A), in the same proportion as Company Stock with respect to which voting rights have been exercised are voted. ARTICLE VII. VESTING AND FORFEITURES 7.1 VESTING IN BEFORE-TAX CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS. A Member shall have a fully-vested interest at all times in his Employee Accounts 2, 3, 4, 5, 7 and 9. 7.2 VESTING SCHEDULE FOR MATCHING CONTRIBUTIONS ACCOUNT. Subject to Section 7.3 below, a Member shall have a nonforfeitable interest in a portion of the value of his Employee Accounts 1, 6, and 8 in accordance with the following schedule: Completed Years of Vesting Service Vested Percentage --------------- ----------------- Less than 1 0% 1 but less than 2 10% 2 but less than 3 20% 3 but less than 4 30% 4 but less than 5 40% 5 but less than 6 60% 6 but less than 7 80% 7 or more 100% 38 Upon any amendment of this vesting schedule, for every Employee who is a Participant on the amendment adoption date or the amendment effective date, whichever is later, the nonforfeitable percentage (determined as of that date) of the Participant's right to the Employer - derived accrued benefit may not be less than the Participant's percentage figured under the Plan without regard to the amendment. 7.3 FULL VESTING OF CERTAIN EMPLOYEE ACCOUNTS. Notwithstanding Section 7.2, a Member shall have a Vested Percentage in Employee Accounts 1, 6, and 8 of 100 percent upon the occurrence of any of the following events prior to (or concurrent with) his Termination of Service: (a) the Member dies; (b) the Member attains age 65; or (c) the Member incurs a Total and Permanent Disability. 7.4 FORFEITURES. (a) GENERAL RULE. In the event that a Member's interest in Employee Accounts 1, 6, or 8 is not yet fully vested on his Termination of Service, the portion of such Account in which he is not yet vested under the foregoing Sections shall be immediately forfeited upon distribution to the Member or, if distribution has not occurred, such portion of his Account shall be held in a suspense account until the earlier of (1) the date that distribution occurs or commences, or (2) the date the Member incurs five consecutive Break Years, and such portion of his Account shall be forfeited upon the earlier of such dates. Forfeitures shall be attributable to the Plan Year quarter in which such forfeiture occurs (or the next subsequent Plan Year quarter if no allocation of forfeitures occurred in the Plan Year quarter in which such forfeiture occurs). If such Member does not return to employment as an Employee before incurring five consecutive Break Years, the nonvested portion of his Account shall be permanently forfeited and allocated in accordance with Section 4.6. (b) RESTORATION. If a Member suffers a forfeiture under subsection (a) of the portion of his Accounts which is not fully vested on his Termination of Service and is reemployed by the Company or an Affiliate prior to his incurring five or more consecutive Break Years, then the amounts forfeited under subsection (a) shall be restored to his Accounts, applying forfeitures pending allocation and Employer contributions, in that order, as necessary. Restored amounts shall be credited to the Member's Employee Accounts 1, 6, and 8 as soon as 39 administratively feasible and shall be invested in the Investment Fund designated by the Plan Administrator in a uniform and nondiscriminatory manner unless a different Investment Fund(s) is designated by the Member. (c) SPECIAL RULE FOR PRIOR DISTRIBUTIONS FROM EMPLOYEE ACCOUNTS 1, 6, AND 8. In the case of a Member who had previously received a distribution of his partially vested interest in Employee Accounts 1, 6, and 8, and who again incurs a Break Year before being fully vested in Employee Accounts 1, 6, and 8, such Member's vested interest in such Accounts on his Termination of Service shall be determined by the following formula: X = P(AB + D) - D For purposes of this formula: X is the vested amount; P is the Vested Percentage at the relevant time; AB is the balance in Employee Accounts 1, 6, and 8 at the relevant time; and D is the aggregate amount of all prior withdrawals and distributions from Employee Accounts 1, 6, and 8. ARTICLE VIII. IN-SERVICE WITHDRAWALS 8.1 ORDER OF WITHDRAWAL. Subject to Section 8.2, a Member may withdraw funds from his Account (valued as of the Valuation Date immediately preceding the date of the withdrawal payment) in the following order: (a) Supplemental After-Tax Contributions and earnings from Employee Account 5; (b) Basic After-Tax Contributions and earnings from Employee Account 4; (c) Rollover Contributions from Employee Account 7; (d) the vested portion of Basic Matching Contributions from Employee Account 1; (e) the vested portion of Discretionary Matching Contributions from Employee Account 6; (f) the vested portion derived from the Harrah's Plans in Employee Account 8; (g) all or any part of the amounts transferred from the Holiday Inns, Inc. Employee's Retirement Plan in Employee Account 9; (h) Supplemental Before-Tax Contributions from Employee Account 3 (and earnings credited to the analogous 40 account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 3); and (i) Basic Before-Tax Contributions from Employee Account 2 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 2). (j) Earnings credited to Before-Tax Contributions after December 31, 1988. Such a withdrawal shall be processed as soon as administratively feasible following receipt of notice of such withdrawal by the Member in accordance with the Rules of the Plan; provided, however, a Member must give at least 30 days advance written notice to the Plan Administrator (or such other advance written notice the Plan Administrator may allow in a uniform and nondiscriminatory manner) to withdraw funds from Employee Account 9. 8.2 WITHDRAWAL LIMITATIONS. (a) GENERAL RESTRICTION. If a Member makes a withdrawal under Section 8.1, except for a withdrawal under Section 8.1(a), such Member shall not be eligible for Matching Contributions for the six-month period beginning on the day after the withdrawal. (b) ADDITIONAL RESTRICTIONS ON WITHDRAWAL OF MATCHING CONTRIBUTIONS. No amounts may be withdrawn under Sections 8.1(d) and (e) unless the Member making the withdrawal has been participating in the Plan for at least 60 months or unless the amounts being withdrawn have been in the Fund for at least 24 months. (c) ADDITIONAL RESTRICTIONS ON WITHDRAWALS FROM EMPLOYEE ACCOUNTS 2, 3, 8, AND 9. (1) A withdrawal under Sections 8.1(f), (g), (h), (i) and (j) shall be permitted only upon a Member's Retirement Date or other Termination of Service, attainment of age 59-1/2, or financial hardship (except a withdrawal under 8.1(j) shall not be permitted upon a financial hardship). See also the provisions of Section 11.2 for distributions allowed upon plan termination and the restrictions thereon and also the provisions herein dealing with qualified domestic relations orders. (2) A withdrawal is on account of financial hardship only if it is made on account of an immediate and heavy financial need of the Member and is necessary to satisfy such financial need. 41 I. For this purpose, a withdrawal is not necessary to the extent it exceeds the amount necessary (including taxes) to relieve the need or to the extent the need may be satisfied from other resources reasonably available to the Member. Under this Plan, a financial hardship for purposes of a withdrawal on account of an immediate and heavy financial need of the Member shall exist if the withdrawal is for: (A) Expenses for medical care described in Code Section 213(d) previously incurred by the Member, the Member's spouse or any dependents of the Member (as defined in Code Section 152) or necessary for these persons to attain medical care described in Code Section 213(d); (B) Costs directly related to the purchase of a principal residence for the Member (excluding mortgage payments); (C) Payments of tuition and related educational fees for the next year of post-secondary education for the Member, for the Member's spouse, children, or dependents (as defined in Code Section 152); or (D) Payments necessary to prevent the eviction of the Member from the Member's principal residence or foreclosure on the mortgage of that residence. II. In general, Code Regulation 1.401(k)-1(d)(2)(iii) shall govern in determining whether the withdrawal is necessary to satisfy an immediate and heavy financial need. Under this Plan, a withdrawal shall generally be treated as necessary to satisfy a financial need if the Member represents in writing as follows (which the Plan Administrator or its delegee may rely upon unless the Plan Administrator or its delegee have actual knowledge to the contrary): (A) The withdrawal is required to meet an immediate and heavy financial need, the amount of the withdrawal is necessary to meet this need, and the requested amount does not exceed the amount necessary (including taxes) to relieve the need. (B) The need cannot reasonably be satisfied by any of the following: 42 (i) Through reimbursement or compensation by insurance or otherwise; (ii) By liquidation of the Member's assets or those of his spouse or minor children (which are reasonably available to the Member) without creating an additional and heavy financial need; (iii) By cessation of elective contributions or Employee contributions (Before-Tax or After-Tax Contributions) under the Plan; (iv) By other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer (including this Plan) or by any other employer, or by borrowing from commercial sources on reasonable commercial terms, in an amount sufficient to satisfy the need. For purposes of this subparagraph (B), a need cannot reasonably be relieved by one of the actions listed above if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a Plan loan if the loan would disqualify the Member from obtaining other necessary financing. (C) The Member understands that the withdrawal will result in Employer Matching Contributions being suspended for six months. (D) That the withdrawal is for one of the four purposes listed in paragraph I above and such purpose or purposes shall be identified by the Member. (E) The Member understands that the application for such a withdrawal will be reviewed by the Plan Administrator or its delegee for compliance with the Plan's requirements for a distribution on account of financial hardship. The Plan Administrator (or its delegee) shall determine whether a request for a hardship withdrawal meets the requirements of this paragraph (2) in accordance with uniform and nondiscriminatory procedures. (d) SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of Section 9.1(b), the Plan Administrator 43 shall not permit a withdrawal to a married Member who has a balance in Employee Account 9 of more than $3,500 (determined as of the date such Account was initially established under the Predecessor Plan) if such withdrawal is from such Employee Account 9. ARTICLE IX. DISTRIBUTIONS 9.1 ENTITLEMENT TO DISTRIBUTION UPON DEATH OF MEMBER. (a) DEATH OF MEMBER. In the event of a Member's death prior to the complete distribution of his Account balance, the Beneficiary of such Member shall be entitled to receive the entire balance remaining to the credit of such Member's Account as of the first Valuation Date coincident with or next following the Member's death, as provided in Sections 9.3 and 9.4. (b) DESIGNATION OF BENEFICIARY. (1) GENERAL RULE. Each Member may designate one or more persons as Beneficiary to receive his Account balance in the event of such Member's death. Each such designation shall be made on a form provided by the Plan Administrator, shall be effective only when filed in writing with the Plan Administrator, and shall revoke all prior designations, subject to the provisions of paragraph (2) below. Subject to paragraph (2) below, a trust may be named as a Beneficiary of a Member, but the trust itself will not be treated as a "designated beneficiary" under the Code or Code Regulations including Proposed Code Regulations. If the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are met, the beneficiaries of the trust will be treated as "designated beneficiaries" in accordance with and subject to the requirements of Proposed Code Regulation 1.401(a)(9)-1D and E and other applicable regulations. If a trust is named as Beneficiary and the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are not met, the Member will be treated as not having a "designated beneficiary" under the Proposed Code Regulations and accordingly distribution will be made to the trust in accordance with the five-year rule in Code Section 401(a)(9)(B)(ii). (2) RULE FOR SURVIVING SPOUSES. A Member's surviving spouse shall be his sole Beneficiary unless, prior to the Member's death, one or more other persons have been named pursuant to a qualified alternate designation (as defined in paragraph (3) below) made and filed with the Plan Administrator prior to the Member's death or unless the Plan 44 Administrator determines that the consent otherwise required under paragraph (3) could not have been obtained because the Member's spouse could not be located or because of such other circumstances as the Secretary of Treasury shall prescribe by Regulation. (3) QUALIFIED ALTERNATE DESIGNATION. A designation shall be a qualified alternate designation only if-- (A) the Member, in a signed written instrument, designates by name one or more persons to be Beneficiary in lieu of, or along with, his surviving spouse; (B) the Member's surviving spouse (if any), determined at the time of the Member's death, has consented in writing to the naming of such Beneficiary and has acknowledged the effect of such consent; and (C) such consent is witnessed by a notary public or the Plan Administrator. A qualified alternate designation may not be changed without spousal consent. Any spousal consent to a qualified alternate designation shall be irrevocable. (4) DEFAULT BENEFICIARY. If no person is otherwise designated under this subsection, or if a designation is revoked in whole or in part, or if no designated Beneficiary survives the Member, the Member's Beneficiary shall be his surviving spouse; or, if there is no surviving spouse, the surviving children of the Member in equal shares; or, if there are no surviving children, then the surviving parent(s) of the Member; or, if there are no surviving parents, the Member's estate. For purposes of the foregoing, the term "surviving children" shall include the children of a Member's deceased child. Such children shall share equally in any distribution that would have gone to the Member's child had he been alive. If any payment is made under the Plan to any Beneficiary, in reasonable reliance on (A) a written statement by the Member that he was unmarried, (B) a spousal consent that on its face conformed to the requirements set forth above, or (C) evidence establishing to the Plan Administrator's satisfaction that a Member's spouse could not be located at the time of a 45 Beneficiary designation, the Plan's liability for death benefits shall be satisfied, to the extent of such payment, and the Plan shall have no liability to any spouse to such extent. 9.2 DISTRIBUTION UPON TERMINATION OF SERVICE FOR REASONS OTHER THAN DEATH. Upon a Member's Termination of Service for reasons other than death, such Member shall be entitled to the Vested Balance of his Account as of the Valuation Date provided in Section 9.4. 9.3 FORM OF BENEFIT PAYMENTS. (a) PAYMENT TO MEMBER. Except as provided in Sections 9.4(b) and 9.6, the distribution of a benefit to a Member pursuant to Section 9.2 shall be made in either of the following ways, as the Member shall elect: (1) in a lump sum; or (2) in installments payable in substantially equal amounts or term certain annuities continuing over a period certain as elected by the Member, not exceeding the shorter of 15 years, the Member's life expectancy, or the life expectancy of the Member and his Beneficiary; provided that subject to the Code and Code Regulations the first distribution to a Member after Termination of Service may, at the Member's election, be a partial payment of his vested Account balance and any subsequent distribution shall conform to (1) or (2) above. (b) PAYMENT TO BENEFICIARY. Subject to the provisions below, a Beneficiary entitled to payment under this Article may elect to continue receiving the benefits under the method of payment in effect when the Member died or be paid the remaining Account balance in a single lump sum distribution. If a Member dies before the time the distribution is considered to have commenced in accordance with the Code or Code Regulations or Proposed Code Regulations (i.e. before April 1 of the year after the year that the Member reaches age 70 1/2), the method of distribution shall satisfy the following requirements: (1) any remaining portion of the Member's interest that is not payable to a designated beneficiary (as defined under Code Regulations or Proposed Code Regulations) will be distributed within five years after the Participant's death; and 46 (2) any portion of the Member's interest that is payable to a designated beneficiary (as defined in Code Regulations or Proposed Code Regulations) will be distributed either (i) within five years after the Member's death, or (ii) over the life of the Beneficiary or over a period certain not extending beyond the life expectancy of the Beneficiary, commencing not later than the end of the calendar year following the calendar year in which the Member died (or, if the designated Beneficiary is the Member's surviving spouse, commencing not later than the end of the calendar year following the calendar year in which the Member would have attained age 70 1/2). Subject to Sections 9.4(b) and 9.6 herein and further subject to the limitations of the Code and Code Regulations or Proposed Code Regulations, the distribution options described in Section 9.3(a) above will be offered to a designated beneficiary (as defined under Code or Proposed Code Regulations) whenever the Member dies. The distribution options in Section 9.3(a) will also be offered to satisfy subsection 9.3(b)(2)(ii) above, and for this purpose the term "Member" in Section 9.3(a) will refer to the designated beneficiary (except that if the designated beneficiary is not the Member's spouse, the words "or the life expectancy of the Member and his Beneficiary" at the end of 9.3(a)(2) shall not be applicable). Distribution options offered to a Beneficiary who is not an individual shall be those described in the first sentence of this Section 9.3(b) except that if the Member dies before April 1 of the year following his/her reaching age 70 1/2, the five-year rule of Code Section 401(a)(9)(B)(ii) shall apply. In the event a Beneficiary dies, any remaining balance payable to such Beneficiary shall be distributed to the Beneficiary's estate (except where the Beneficiary is the Member's spouse and such spouse had submitted a beneficiary form designating an individual as a Beneficiary prior to the spouse's death). The distribution options available to a deceased Beneficiary's estate or to a designated individual Beneficiary of a deceased spouse-Beneficiary will be a continuation of the payments being made to the deceased Beneficiary at the time of his/her death or a lump sum payment (but any distribution shall in any event be completed by the end of the normal life expectancy of the deceased Beneficiary (measured at the time of the Employee's death) or within five years after the Member's death if the five-year rule applies), PROVIDED that, in cases where the deceased Beneficiary is the spouse of a deceased Member, and if such spouse had, 47 prior to such spouse's death, submitted a beneficiary form to the Administrator designating an individual as his/her Beneficiary, then such individual Beneficiary may (in addition to the option of receiving a lump sum or the continuation of existing payments) elect to receive annual installments or a term certain annuity (commencing not later than December 31 of the year following the spouse-Beneficiary's death) over a period of up to 15 years, but in any event such period will not exceed the life expectancy of the individual Beneficiary (measured at the time of the spouse's death) named by the spouse and further will not exceed the life expectancy of the spouse (measured at the time of the Employee's death) if the spouse died after April 1 of the year following the Member's reaching age 70 1/2." (c) EARNINGS AND LOSSES. Amounts payable hereunder shall continue to accrue earnings and losses under Section 6.3 pending such payment. (d) COMPLIANCE WITH CERTAIN IRS REQUIREMENTS. Notwithstanding anything herein, distributions from the Plan will be made in accordance with the requirements of the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of Section 1.401(a)(9)-2 of the proposed Code Regulations. 9.4 TIME OF BENEFIT PAYMENTS. (a) GENERAL RULE. Except as otherwise provided in this Section 9.4 and Section 9.8, distribution of benefits under the Plan shall commence as soon as administratively feasible following the Member's Termination of Service and his request for his distribution from the Plan in accordance with the Rules of the Plan. (b) SMALL AMOUNTS. If a Member incurs a Termination of Service and the Vested Balance of his Account as of the first Valuation Date coincident with or next following such Termination of Service is not greater than $3,500 (or exceeded such amount at the time of a prior distribution under Article VIII), distribution shall be made in a single lump sum in cash as soon as administratively feasible in accordance with the Rules of the Plan. (c) DISTRIBUTIONS UPON DEATH. A distribution to a Beneficiary pursuant to Section 9.1 shall be made as soon as practicable following the first Valuation Date coincident with or next following the Member's death. 48 For purposes of Section 9.4(a) above, written consent of the Participant is required before the commencement of the distribution of any portion of an accrued benefit if the present value of the nonforfeitable total accrued benefit is greater than $3,500. The consent requirements are deemed satisfied if such value does not exceed $3,500 and the Plan may distribute such portion to the Participant as a single sum. Present value for this purpose shall be the Participant's Vested Balance of his or her Account as of the applicable Valuation Date. If the present value determined at the time of a distribution to the Participant exceeds $3,500, then the present value at any subsequent time shall be deemed to exceed $3,500. The foregoing consent requirements do not apply to situations where consent is not required by applicable law. (d) The notice required by Section 1.411(a)-11(c) of the Code Regulations will be provided no less than 30 days and no more than 90 days before the Annuity Starting Date. (e) If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Code Regulations is given, provided that: (1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution. 9.5 INCIDENTAL DEATH BENEFIT. Once distribution to the Member has commenced under Section 9.4, the minimum amount which must be distributed each calendar year shall be determined by dividing the balance in the Member's Account by the "applicable divisor." The "applicable divisor" shall be determined under Regulations issued under the incidental death benefit requirements of Code Section 401(a)(9). 9.6 DISTRIBUTION OF EMPLOYEE ACCOUNT 9. If a Member's Employee Account 9 exceeds $3,500 (determined as of the date such Account was initially established under the Predecessor Plan), distribution of such Employee Account 9 must conform with the following: 49 (a) NORMAL FORM OF PAYMENT. (1) UNMARRIED MEMBER. The form of benefit payable to an unmarried Member shall be the single life annuity described in subsection (c)(1) unless the Member consents to payment in another form. (2) MARRIED. The form of benefit payable to each married Member shall be the qualified joint and survivor annuity as defined in Code Section 417, unless he consents to another form of payment in accordance with the rules described in this Section. A Participant who elects to receive a distribution on or after the obtainment of the Participant's Early Retirement Date (that is, the earliest date on which the Participant can elect to receive retirement benefits from Employee Account 9 under the Plan), will receive the distribution in the form of a qualified joint and survivor annuity unless the Participant and the Participant's spouse consent to payment in another form. The "qualified joint and survivor annuity" is a reduced monthly benefit commencing on the Member's benefit commencement date and payable throughout his lifetime, with 50 percent of that monthly amount continuing for life to his surviving spouse, beginning on the first day of the month following his date of death. The qualified joint and survivor annuity shall be the actuarial equivalent of the single life annuity described in subsection (c)(1). (A) EXPLANATION OF QUALIFIED JOINT AND SURVIVOR ANNUITY. The Plan Administrator shall provide to each Member a written explanation of the qualified joint and survivor annuity between 30 and 90 days before the Member's Annuity Starting Date. The written communication shall explain the terms and conditions of the annuity; the Member's right to waive, and the effect of an election to waive the annuity; the right of the Member's spouse to refuse to consent to a waiver of the annuity; and the right to revoke, and the effect of a revocation of an election to waive the annuity; and the relative value of optional forms of payment available under the Plan. (B) WAIVER OF THE QUALIFIED JOINT AND SURVIVOR ANNUITY. The Member may elect to waive the qualified joint and survivor annuity, and may revoke any such election during the election period. Each election must be in writing and 50 must satisfy all of the following conditions: (i) the Participant's spouse consents in writing to the election and the spouse's consent is witnessed by a plan representative or notary public; (ii) the Participant's waiver and the spouse's consent state the specific non-spouse beneficiary (including any class of beneficiaries or contingent beneficiaries) and the particular optional form of benefit, neither of which may be further modified (except back to a qualified joint and survivor annuity) without subsequent spousal consent (unless expressly permitted by the spouse); and (iii) the spouse's consent acknowledges the effect of the election; provided that spousal consent shall not be required if the Participant provides the Administrator with satisfactory evidence that such consent cannot be obtained because his spouse cannot be located or because of other circumstances described in Treasury Regulations. (C) ELECTION PERIOD. The election period for waiving the qualified joint and survivor annuity shall be the 90-day period ending on the Member's Annuity Starting Date. (D) ELECTION OF 75 PERCENT SURVIVOR ANNUITY. The Member may elect to receive a 75 percent joint and survivor annuity with his spouse as his joint annuitant, which shall be the actuarial equivalent of the qualified joint and survivor annuity, and he shall not be required to have his spouse's consent to make the election. (b) ELECTION OF OPTIONAL FORM OF PAYMENT. Subject to the restrictions described in subsection (a), the Member who is entitled to elect an optional form of payment may elect, or revoke a previous election and make a new election, within the 90-day period ending on his Annuity Starting Date, to receive his benefits in one of the optional forms described in subsection (c). Each election shall be in writing on a form prescribed by the Plan Administrator. (c) DESCRIPTION OF OPTIONAL FORMS OF PAYMENT. The value of each optional form of payment shall be that which can be provided by the funds credited to the Member's Employee Account 9 as of the date benefits commence; and unless the Beneficiary is the Member's spouse, no option may be elected unless the periodic annuity payments payable to the Beneficiary do not exceed the 51 "applicable percentage" (as defined in Regulations issued under Code Section 401(a)(9)) of the annuity payments payable to the Member. (1) SINGLE LIFE ANNUITY. The single life annuity is a monthly benefit commencing on the Member's Annuity Starting Date and payable throughout his lifetime, ending with the last payment due on the first day of the month in which his death occurs. (2) JOINT AND SURVIVOR ANNUITY. An unmarried Member, or a married Member who has properly waived the qualified joint and survivor annuity under subsection (a), may elect to receive an annuity in the form of a reduced monthly benefit commencing on his Annuity Starting Date and payable throughout his lifetime, with either 25 percent, 50 percent, or 75 percent of that monthly amount continuing for life to his surviving joint annuitant, beginning on the first day of the month following the Member's date of death. (3) TEN YEARS CERTAIN AND LIFE ANNUITY. An unmarried Member or a married Member who has properly waived the qualified joint and survivor annuity may elect to receive his annuity in the form of a reduced monthly benefit commencing on his Annuity Starting Date and payable throughout his lifetime, ending with the last payment due on the first day of the month in which his death occurs; provided that if the Member dies within the ten-year period following his Annuity Starting Date, payments shall continue to his Beneficiary for the remainder of the ten-year period. In the event the Beneficiary dies within the ten-year period and there is no contingent Beneficiary, the actuarial equivalent of any remaining monthly payments shall be paid in a lump sum to the Member's estate. (4) OTHER FORMS OF PAYMENT. Subject to obtaining appropriate consents and waivers described in subsection (a) the Member may elect a lump sum payment or other form of payment permitted under Section 9.3. (d) EFFECT OF DEATH ON OPTIONAL FORMS OF PAYMENT. (1) DEATH BEFORE BENEFIT COMMENCEMENT DATE. In the event a Member has elected an optional form of payment and either the Member or his Beneficiary or joint annuitant dies before the Member's Annuity Starting Date, the election will not become effective. 52 (2) DEATH AFTER ANNUITY STARTING DATE. If both the Member who has elected an optional form of payment and his Beneficiary or joint annuitant are living on his Annuity Starting Date, the subsequent death of either shall not cancel or otherwise affect the elected form of payment. (e) PRERETIREMENT DEATH BENEFITS. (1) MARRIED MEMBER. The surviving spouse of the vested Member who dies before his Annuity Starting Date shall receive a monthly benefit in the form of a survivor annuity. This annuity is intended to satisfy the requirements of Code Section 417 related to qualified preretirement survivor annuities. The Plan shall provide the death benefit without any charge to the Member for the cost of coverage. The Participant may not waive this death benefit coverage. (2) AMOUNT OF SPOUSE'S BENEFIT. The surviving Spouse shall receive a monthly benefit equal to the amount that can be provided by one-half the value of the Member's Employee Account 9. In lieu of this monthly benefit, the surviving spouse may elect any other form of payment permitted under Section 9.3(b). (3) COMMENCEMENT DATE OF SPOUSE'S BENEFIT. The preretirement death benefit shall be payable to the surviving spouse of the Member who dies before his Normal Retirement Date, on the first day of each month commencing in the month following the date that would have been his Normal Retirement Date if he had survived, provided, however, that the surviving spouse may direct that such payments commence at any earlier date. The surviving spouse may direct the commencement of payments under the qualified pre-retirement survivor annuity within a reasonable time after the Member's death. A surviving spouse shall not be required to begin receiving benefits under a qualified pre-retirement survivor annuity prior to the time the Member would have obtained the later of age 62 or normal retirement age (as defined in Code Section 411(a)(8)), except where the present value of the nonforfeitable benefit does not exceed $3,500. The preretirement death benefit shall be payable to the surviving spouse of the Member who dies after his Normal Retirement Date, on the first day of each month commencing in the month following the Member's date of death. The 53 last payment shall be due on the first day of the month in which the surviving spouse's death occurs. (4) UNMARRIED MEMBER. A Member who is not legally married as of the date of his death shall have the balance in his Employee Account 9 distributed to his designated Beneficiary in accordance with Section 9.1. (f) DELAYED RETIREMENT. (1) BENEFIT COMMENCEMENT DATE. Benefits payable from Employee Account 9 to a Member who remains employed after his Normal Retirement Date shall commence on the first day of the month following his actual retirement. (2) NOTICE TO PARTICIPANTS. The Plan Administrator shall provide to each Member who postpones retirement, during the month next following the month in which he attains age 65, a written notice containing (A) a statement that his benefit payments will be suspended until the date he actually retires, except that benefits will be paid during any month when he fails to accrue at least 40 Hours of Service; (B) a description of the reasons why his benefit payments are being suspended; i.e., because he has continued employment after his Normal Retirement Date for at least 40 Hours of Service per month; (C) a general description of the Plan provisions relating to the suspension of benefit payments and a photocopy of this Section; (D) a statement that applicable Department of Labor Regulations may be found in Section 2530.203-3 of Title 29 of the Code of Federal Regulations; and (E) a statement that the Member may seek review of his benefit suspension by invoking the claims procedures described in Section 12.7. 9.7 [RESERVED] 9.8 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding the foregoing provisions of this Article IX, unless the Member otherwise elects in writing, distribution to a Member shall not take place later than the sixtieth day after the close of the Plan Year in which the latest of the following events occurs: (a) the Member attains age 65; (b) the Member attains the tenth anniversary of the date on which he commenced participation in the Plan; or 54 (c) the Member's Termination of Service. In any event, the payment of benefits to a Member shall commence no later than April 1 following the calendar year in which the Member attains age 70-1/2. All distributions under this Plan shall be made in accordance with Code Section 401(a)(9) and the Regulations thereunder. 9.9 ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. DEFINITIONS: (a) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. 55 (d) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 9.10 PLAN TO PLAN TRANSFERS. (a) TRANSFERS TO PRECEDESSOR PLAN. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a Participant who is entitled to a lump sum distribution within the meaning of Code Section 402(e) from the Plan may elect instead to have the amount of such distribution transferred to the Predecessor Plan if the Participant is or becomes employed by a participating employer in the Predecessor Plan. If elected by the Participant and authorized by the Plan Administrator, such a plan-to-plan transfer must be made to the recipient plan by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. To the extent permitted by applicable law, the provisions of subsection (a) shall also be applicable to former employees of The Promus Companies Incorporated (i) who were participants in the Predecessor Plan and (ii) who terminated their employment with The Promus Companies Incorporated or its affiliates on or prior to the Spin-Off Date and (iii) whose unvested account balances under the Predecessor Plan were transferred to the Plan on or after the Spin-Off Date and (iv) who are reemployed by The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or any of its subsidiaries after the Spin-Off Date and based upon such reemployment are Eligible Employees under the Predecessor Plan before incurring five consecutive break years (as defined in the Predecessor Plan) since termination of their employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). (b) TRANSFERS TO PLAN B. Subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a former Participant in the Plan who ceases to be an Eligible Employee but remains an Employee of an Employer and is an eligible employee under the terms of Plan B who is actively participating in Plan B, shall have his Account under the Plan transferred to Plan B. If authorized by the Plan Administrator, such a plan-to-plan transfer must be made to Plan B by the Trustee 56 within the period established by the Plan Administrator on a uniform and non-discriminatory basis. (c) TRANSFER TO QUALIFIED PLANS. Subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a former Participant in the Plan who ceases to be an Eligible Employee and an Employee of an Employer and is an eligible employee under the terms of another plan qualified under Code Section 401(a) of his new employer, may elect to have his Account under the Plan transferred to such qualified plan. If elected by the former Participant and authorized by the Plan Administrator, such a plan-to-plan transfer must be made to the qualified plan by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. ARTICLE X. LOANS TO MEMBERS 10.1 ADMINISTRATOR AUTHORIZED TO MAKE LOANS. (a) CURRENT EMPLOYEES. Upon application of a Member who is currently employed by the Company or an Affiliate, the Plan Administrator may direct the Trustee to make a cash loan to the Member from the Vested Balance of the Member's Account. Whether such loans are made, as well as their amounts and terms, shall be in the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner) subject to the provisions of this Article. Appropriate disclosure shall be made pursuant to the Truth in Lending Act to the extent applicable. A Member cannot have more than one loan outstanding at any one time, except the Plan Administrator, in his direction, may permit a Member to have two outstanding loans if one such loan is for the purpose of acquiring, constructing, reconstructing, or substantially rehabilitating the principal residence of such Member or a person in his immediate family. (b) OTHER ELIGIBLE PERSONS. Loans shall also be available on a reasonably equivalent basis to a Member or Beneficiary who is a party in interest, as such term is defined in ERISA Section 3(14). (c) OWNER-EMPLOYEES AND SHAREHOLDER-EMPLOYEES. Notwithstanding any other provision of this Article, no loan shall be made to an owner-employee, a member of the family of an owner-employee, or a shareholder-employee, as such terms are defined in Code Section 4975(d), except as permitted under the applicable provisions of ERISA and the Code and Regulations promulgated thereunder. 57 10.2 AMOUNT OF LOANS. (a) MINIMUM AMOUNT. The minimum amount of any loan permitted under this Article shall be $500. (b) MAXIMUM AMOUNT. The amount of such loan (when added to the outstanding balance of all loans to the Member from his Account) shall not exceed the lesser of-- (1) $50,000, reduced by the excess (if any) of-- (A) the highest outstanding balance of loans from the Plan during the one-year period ending on the day before the loan was made, over (B) the outstanding balance of loans from the Plan on the date the loan is made; or (2) 50 percent of the Vested Balance of the Member's Account at the relevant time. (c) COLLATERAL. The Vested Balance of the Account equal to the amount of the loan shall be used as collateral to secure the loan. (d) ADMINISTRATIVE FEE. The Plan Administrator may impose administrative charges and processing fees for loans under the Plan in a nondiscriminatory and uniform manner. 10.3 INTEREST. Each loan made under the Plan shall bear a reasonable rate of interest fixed by the Plan Administrator which shall be set forth in the Rules of the Plan and shall be commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. For loans approved prior to March 18, 1996, the interest rate shall be the average of the rates charged by The Hospitality Credit Union on loans secured by passbook savings accounts, adjusted as necessary to ensure that the rate charged on a Plan loan shall provide a return commensurate with the interest rates charged by persons in the business of lending money under similar circumstances. The interest rate shall remain unchanged for the life of the loan. The Plan Administrator shall periodically review the interest rate. 10.4 TERM. A loan shall be for the term (in whole year increments) requested by the Member but shall not exceed five years (except in the case of loans used to acquire the principal residence of the Member, which shall be for a reasonable term determined at the time the loan is made). Loans shall be made as of a Valuation Date chosen by the Plan Administrator. 58 10.5 REPAYMENT. (a) Loans shall be repaid in equal installments, one per pay period (but in no event less than quarterly), representing a combination of interest and principal, sufficient to amortize the loan during its term. (b) Payments by active Employees shall be made through payroll withholding or such other means acceptable to the Plan Administrator in his sole and absolute discretion. (c) Loans may be prepaid in full at any time pursuant to the procedures established by the Plan Administrator. (d) Beneficiaries and Members who are not currently employed, and who are parties-in-interest as defined in ERISA Section 3(14), must repay any loan either in one full amount or in accordance with the terms of a promissory note signed by such Beneficiary or Member. (e) Participants who are on a leave of absence authorized by the Employer either without pay or at a rate of pay (after income and employment tax withholding) that is less than the amount of the installment payments required under the terms of the loan may suspend the installment payments on their outstanding loans under the Plan for up to one year provided that such loans are repaid by the latest date permitted under Code Section 72(p)(2)(B). 10.6 ACCOUNTING FOR LOANS. Loan proceeds distributed to the Member shall be charged, on a PRO RATA basis, to each Investment Fund in which his Account is invested. Repayments of principal and interest shall be allocated on a PRO RATA basis according to his investment election as to future contributions at the time of such repayment. 10.7 DOCUMENTS. No loan under this Article shall be made until the Member has completed on the appropriate form, and submitted to the Plan Administrator, the following: (a) a loan application setting forth such information as the Plan Administrator deems appropriate; and (b) a promissory note designating the Trustee as payee; stating the amount, term, repayment schedule, interest rate, and other terms and conditions consistent with this Article; authorizing the Employer to make payroll withholdings equal to the installment amounts determined under Section 10.5(a); and granting a conditional security interest in the Member's Vested Balance in his Account to the Trustee as security for repayment of the loan. 59 10.8 DEFAULT. A loan shall be considered in default when all or any part of a scheduled payment shall be more than 60 days past due. The Plan Administrator may grant an additional grace period of 30 days in a uniform and nondiscriminatory manner. Loan payments may be suspended for up to one year during a Participant's authorized leave of absence as described in Section 10.5(e). Upon default of a loan, the total principal and interest remaining due shall be deducted from the Member's Account and treated as if it were a distribution made to the person receiving the loan. Notwithstanding the foregoing, upon default by an Eligible Employee under the age of 59 l/2, the portion of the outstanding loan balance related to the Employee's Before-Tax Contributions or earnings thereon shall remain an outstanding loan without accruing additional interest until such time as the Employee terminates employment or attains age 59 l/2. An Eligible Employee with a loan in default may not receive a distribution of the loan collateral until such time as the loan has been completely repaid. 10.9 SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of Section 9.1(b), the Plan Administrator shall not permit a loan to a married Member who has a balance in Employee Account 9 of more than $3,500 (determined as of the date such Account was initially established under the Predecessor Plan) if such loan is to be secured, all or in part, by such Employee Account 9. Written spousal consent to the use of a Participant's accrued benefit under Account 9 as security for a loan must be obtained within the 90-day period ending on the date on which the loan is to be secured. ARTICLE XI. AMENDMENT AND TERMINATION 11.1 AMENDMENT AND TERMINATION. The Company expects the Plan to be permanent, but the Company must necessarily and does hereby reserve the right to amend or modify in any respect, or to terminate, the Plan at any time, for any reason whatsoever, by the action of the Board of Directors. The Company may make any modifications or amendments to the Plan, retroactively if necessary or appropriate, to qualify or maintain the Plan as a plan meeting the requirements of Code Section 401(a) or of ERISA, or the Regulations issued thereunder. No amendment of the Plan shall cause any part of the Fund to be used for or diverted to purposes other than the exclusive benefit of the Members, their surviving spouses, or their Beneficiaries covered by the Plan. No plan amendment may decrease the accrued benefit of any Member. Retroactive plan amendments may not decrease the accrued benefit of any Member determined as of the time the amendment was adopted. The Chief Executive Officer shall have the right to amend or modify the Plan; provided, however, that such amendments shall be administrative in nature, or mandated by any applicable law. 60 The Plan may be amended or terminated under this Section without the vote of the stockholders of the Company, except to the extent that stockholder approval is required by Rule 16b-3, promulgated under Section 16 of Securities Exchange Act of 1934, as amended. 11.2 VESTING ON TERMINATION OR PARTIAL TERMINATION. Upon a complete or partial termination of the Plan or complete discontinuance of contributions to the Plan (within the meaning of Treasury Regulation Section 1.411(d)-2), no further contributions shall be made under the Plan; all accrued benefits credited to the Account of each Member (or, in the case of a partial termination, each affected Member within the meaning of Treasury Regulation 1.411(d)-2) shall fully vest; and, except as otherwise provided in this Section 11.2, the Accounts of any affected Members shall be distributed at the time and in the manner specified in Article IX. Amounts attributable to elective contributions (Basic Before-Tax Contributions and earnings thereon and Supplemental Before-Tax Contributions and earnings thereon) may not be distributed earlier than upon one of the following events: (1) The Employee's retirement, death, disability or separation from service. (2) The Employee's attainment of age 59 1/2 or the Employee's financial hardship as described in Section 8.1(c)(2) except that earnings credited to any Before-Tax Contributions after December 31, 1988 may not be withdrawn on account of an Employee's financial hardship. (3) The termination of the Plan without establishment or maintenance of another defined contribution plan (other than an Employee Stock Ownership Plan as defined in Code Section 4975(e) or 409 or a simplified employee pension as defined in Code Section 408(k)) subject to the provisions of 1.401(k)-1(d)(3) of the Code Regulations. (4) The date of the sale or other disposition by an Employer that is a corporation of substantially all the assets (within the meaning of Section 409(d)(2)) used by such Employer in a trade or business of such Employer to an unrelated corporation. (5) The date of the sale or other disposition by an Employer that is a corporation of its interest in an Employer subsidiary (within the meaning of Code Section 409(d)(3) to an unrelated entity or individual. Notwithstanding any provision herein to the contrary, to the extent permitted by law, upon a complete termination of 61 the Plan, each Member shall receive an immediate lump sum distribution of his Account maintained under the Plan for his benefit, except that the portion of his Account, if any, attributable to Employee Account 9 which the Member may receive as an annuity in the form described in Section 9.6(a)(1) and (2), if applicable. Upon a complete termination of the Plan, no Employee who is not a Participant on the termination date shall thereafter become a Participant. 11.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or consolidation of the Plan with, or any transfer of assets and liabilities of the Plan to, any other plan, provision shall be made so that each Member would, if the Plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then been terminated. 11.4 EFFECT OF CHANGE IN CONTROL. The following provisions shall govern in the event that an Employer or Division, or any part of the assets of an Employer, is acquired by, or merged into, a nonaffiliated company, or in the event a nonaffiliated company acquires substantially all the outstanding stock of an Employer: (a) The amounts credited to the Accounts of the Employees who are involved in such acquisition or merger shall become 100 percent vested whether or not this Plan is continued or assumed and whether or not the successor company has or establishes a comparable plan. An Employee of an Employer (other than the Company) or Division shall be deemed "involved" if his employment is terminated by reason of the acquisition or merger or transferred (from the controlled group consisting of the Company and its Affiliates) by reason of the acquisition or merger. Employees of the Company shall be deemed "involved" if their employment is terminated by reason of the acquisition or merger or if they continue in the employment of the Company after control of the Company changes hands. (b) Subject to subsection (a), if the nonaffiliated successor company shall have agreed to establish, or shall have, a plan substantially comparable to this Plan (as determined by the Trustees), then the Plan assets allocable to the Employees involved in the acquisition or merger may be transferred to the plan so established by the successor company subject, however, to the receipt of a favorable determination letter from the Internal Revenue Service or opinion of counsel of the successor company satisfactory to the Trustees that 62 such successor plan is a tax-exempt plan and trust under the applicable provisions of the Code. (c) Subject to subsection (a), if a nonaffiliated successor company acquires substantially all of the stock or assets of the Company by merger or acquisition or otherwise, then such successor company may assume this Plan as the sponsoring company. (d) If an Affiliate or other entity that owns 50 percent or more of the Company's outstanding common stock acquires the Company or substantially all of its assets or stock, then the affiliated company may assume the Plan and the Plan shall then continue in effect without interruption and without an acceleration in vesting. For a corporate transaction that does not constitute a merger or acquisition, the Human Resources Committee shall determine, in its sole and absolute discretion, whether a change in control has occurred and whether the provisions of this Section 11.4 shall apply with respect to affected Employees. ARTICLE XII. ADMINISTRATION OF THE PLAN 12.1 PLAN ADMINISTRATOR. (a) The general administration of the Plan shall be carried out by Promus Hotels, Inc. or its delegates, who shall act as the "administrator" within the meaning of Title 1 of ERISA. The Plan Administrator and the Trustees shall be the "named fiduciaries" within the meaning of Title I of ERISA. To the extent not prohibited by law or applicable rules or regulations, the Plan Administrator shall have the authority to delegate to one or more persons the duties and responsibilities of the Plan Administrator. (b) The Plan Administrator shall also have the authority and discretion to engage an Administrative Delegate who shall perform, without discretionary authority or control, administrative functions within the framework of policies, interpretations, rules, practices, and procedures made by the Plan Administrator or other Plan fiduciary. Any action made or taken by the Administrative Delegate may be appealed by an affected Member to the Plan Administrator in accordance with the claims review procedures provided in Section 12.7. Any decisions which call for interpretations of Plan provisions not previously made by the Plan Administrator shall be made only by the Plan Administrator. Except to the extent the Administrative Delegate exercises discretionary authority or control over the assets of the Plan, the Administrative Delegate shall not be considered a fiduciary with respect to the services it provides. 63 (c) Notwithstanding subsections (a) and (b), each Member shall be a named fiduciary for purposes of Section 403(a) of ERISA but solely with respect to the issuance of instructions to the Trustee-- (1) to tender or not to tender the Member's Company Stock Share pursuant to Section 14.1 of the Trust Agreement; and (2) to vote Company Stock pursuant to Section 6.4(d) of the Plan. 12.2 APPOINTMENT AND RESIGNATION OF TRUSTEES. The Board of Directors may remove any Trustee at any time. In the event of the removal, death, resignation, or inability to act of a Trustee, said Board of Directors may appoint a successor. A Trustee may resign at any time, effective upon delivering a written resignation to the Board of Directors or the Secretary or Assistant Secretary of the Company. 12.3 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except as to powers and duties and the determination of questions expressly reserved herein to the Trustees, the Plan Administrator shall have full charge of the administration of this Plan with all discretionary powers and authority to enable it properly to carry out its duties including (without limitation) the authority to determine all questions relating to (a) the interpretation of the Plan; (b) the eligibility of Participants; (c) the dates and other considerations regarding participation or termination of employment; (d) the benefit to which any Member or his surviving spouse or beneficiary may become entitled hereunder; (e) to construe the Plan and the Rules of the Plan; (f) to determine questions of eligibility and vesting of Participants; (g) to determine entitlement to allocations of contributions and forfeitures and to distributions of Participants, former Participants, Beneficiaries, and all other persons; (h) to make findings of fact as necessary to make any determinations and decisions in the exercise of such discretionary power and authority; (i) to conduct claims procedures as provided in Section 12.7; and (j) to delegate any power or duty to any firm or person engaged under Section 12.8 or to any other person or persons. The Plan Administrator shall also have the right to authorize disbursements under the Plan, subject to any required withholdings. All interpretations under the Plan and all determinations of fact made in good faith by the Plan Administrator (or delegees thereof) and the Trustees shall be binding on the Members and all other interested persons. 12.4 ACTION BY MAJORITY OF THE PLAN ADMINISTRATOR. To the extent that the Plan Administrator has delegated its power and authority to a committee, all action by such committee hereunder shall be authorized either by a majority vote of all members of such committee present at a meeting (provided a quorum of all 64 members is present), or by a writing signed by a majority of all members of such committee. 12.5 RULES AND REGULATIONS OF THE PLAN ADMINISTRATOR. The Plan Administrator may make such rules and regulations in connection with its administration of the Plan as are consistent with the terms and provisions hereof (the "Rules of the Plan"). 12.6 CONCLUSIVENESS OF REPORTS, ETC. The Trustees, the Plan Administrator and the Company and any other Employer and their officers and directors, shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any enrolled actuary selected by the Plan Administrator, upon all certificates and reports made by any accountant selected by the Plan Administrator, the Company, or any other Employer, and upon all opinions given by any legal counsel selected by the Plan Administrator (which may include in-house counsel of the Company). The Trustees, the Plan Administrator and the Company and any other Employers and their officers and directors, shall be fully protected with respect to any action taken or suffered by them in good faith in reliance upon any such actuary, or counsel, and all action so taken or suffered shall be conclusive upon all persons. 12.7 CLAIMS PROCEDURE. If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within 90 days after receipt of the claim (or within an additional 90 days if special circumstances require an extension of time, and written notice of the extension shall be furnished to the claimant). Notice of the denial shall set forth the following information: (a) the specific reason or reasons for the denial; (b) specific reference to pertinent Plan provisions on which denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; (d) an explanation that a full and fair review by the Plan Administrator of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Plan Administrator, within 60 days after such notice has been received, a written request for such review; and (e) if such request is so filed, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in subsection (d) above. 65 The decision of the Plan Administrator upon review shall be made promptly, and not later than 60 days after the Plan Administrator's receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If the claim is denied, wholly or in part, the claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the denial, shall include specific references to the pertinent Plan provisions on which the denial is based, and shall be written in a manner calculated to be understood by the claimant. The Plan Administrator's decision on the appeal may be reviewed by the Board of Directors which shall have the right to overrule the Plan Administrator. The Plan Administrator and the Board of Directors shall have full discretionary power and authority to construe the Plan and the Rules of the Plan, to determine questions of eligibility, vesting and entitlements and to make findings of fact as under Section 12.3 and, to the extent permitted by law, the decision of the Plan Administrator (if no review is properly requested) or the decision of the Board of Directors on review, as the case may be, shall be final and binding on all parties except to the extent found by a court of competent jurisdiction to constitute an abuse of discretion. 12.8 EMPLOYMENT OF AGENTS. The Plan Administrator may employ or designate agents, including without limitation custodians, accountants, consultants, or attorneys, to exercise and perform the powers and duties of the Plan Administrator as the Plan Administrator delegate to them, and to render such services to the Plan Administrator as the Plan Administrator may determine, and the Trustees may enter into agreements setting forth the terms and conditions of such services. The Plan Administrator may appoint an independent public accountant to audit the Plan. The compensation of these agents shall be an expense chargeable in accordance with Section 12.9. 12.9 COMPENSATION AND EXPENSES OF TRUSTEES. Unless otherwise determined by the Company, the Plan Administrator and the Trustees shall serve without compensation for services as such, but all expenses of the Trustees shall be paid in accordance with the provisions of Section 16.4. Such expenses shall include any expenses incident to the functioning of the Plan, including without limitation attorneys' fees and the compensation of other agents, accounting and clerical charges, expenses, if any, of being bonded as required by ERISA, and any other costs of administering the Plan. 12.10 INDEMNITY FOR LIABILITY. To the maximum extent allowed by law and to the extent not otherwise indemnified, the Company shall indemnify each Trustee (and former Trustee) and Plan Administrator, and any other current or former Employee, officer, or director of the Company or the Employers, against any and all 66 claims, losses, damages, expenses, including counsel fees, incurred by any such person on account of such person's action, or failure to act, in connection with the Plan, including, in the case of amounts paid in settlement, only such amounts as are paid with the Employer's approval. 12.11 EFFECT OF MISTAKE. In the event of a mistake or misstatement as to the eligibility, participation, investments, or service of any Member, or the amount of contributions made on behalf of, or payments made to, any Member or Beneficiary, the Plan Administrator (or a designated agent or agents thereof and the Plan Administrator) may determine whether or not a mistake has occurred and may make any adjustment to a Member's or Beneficiary's Account, or make any adjustment to payments made or being made to a Member or Beneficiary, which will, in the Plan Administrator's sole judgment (or in the sole judgments of a designated agent or agents of the Plan Administrator and the Plan Administrator), correct such mistake or misstatement. In addition, if the Administrator accepts a contribution or transfer pursuant to Section 4.9 of the Plan and later determines that it was improper to do so, in whole or in part, the Plan shall refund the necessary amount to the Participant. ARTICLE XIII. TRUST ARRANGEMENTS 13.1 APPOINTMENT OF TRUSTEE. The Trustees for the Plan shall be named in the Trust Agreement, and, upon acceptance thereof, each Trustee shall perform the duties and exercise the authority of a Trustee as set forth in the Plan and in said Trust Agreement. A Trustee shall be named, and may be removed, in accordance with the provisions of Article XII. 13.2 CHANGE IN TRUST AGREEMENTS. The Company may from time to time enter into such further agreements with the Trustees or other parties and make such amendments to Trust Agreements, as it may deem necessary or desirable to carry out the Plan and may take such other steps and execute such other instruments as may be deemed necessary or desirable to put the Plan into effect or to execute it. 13.3 TRUST FUND. All deposits under this Plan shall be paid to the Trustees and deposited in the Fund. All assets of the Fund, including investment income, shall be retained for the exclusive benefit of Members and beneficiaries and shall be used to pay benefits under the Plan or to pay administrative expenses of the Plan and of the Fund to the extent not permanently paid by the Company or an Employer in its sole discretion, and shall not revert to or inure to the benefit of the Company or an Employer, except as provided in Section 13.6. 13.4 APPOINTMENT OF AN INVESTMENT MANAGER. The Trustees shall have exclusive authority and discretion to manage and control the Fund; provided, however, that the Trustees may employ or appoint an Investment Manager(s) (within the meaning of ERISA Section 67 3(38)) to manage all or any part of the Fund or a custodian to hold such investments. The Trustees may also appoint an investment advisor. An Investment Manager or custodian shall acknowledge in writing its appointment and shall serve until removed by the Trustees or a proper resignation is received by the Trustees. An Investment Manager shall have sole responsibility for the investment of the portion of the Fund which such Investment Manager is appointed to manage. Neither the Trustees nor the Administrator shall have any responsibility for, or incur any liability for, the investment of such portion or for the loss to or diminution in value of the Fund resulting from any action directed, taken, or omitted by an Investment Manager or custodian. The Trustees shall require each Investment Manager and custodian to furnish such periodic and other reports to the Trustees as the Trustees deem to be in the best interests of the Trust. Neither the Trustees nor the Plan Administrator shall be under any duty to question, but shall be entitled to rely upon, any certificate, report, opinion, direction, or lack of direction provided by an Investment Manager or custodian and shall be fully protected in respect of any action taken or suffered by them in reliance thereon. Such Investment Manager or custodian may maintain cash balances in the Investment Fund(s) they are appointed to manage; provided that such cash balances shall be limited to the amount needed to meet the current cash requirements of the Plan, to make any cash distributions, to pay any expenses, or to exercise applicable rights under the Plan. 13.5 DIVERSIFICATION OF INVESTMENTS. Trust investments in the Investment Funds (other than the Company Stock Fund, if any) shall consist only of those in which a prudent man familiar with the objectives of the Plan and acting with the care, skill, prudence, and diligence under the circumstances then prevailing, would invest in the conduct of an enterprise of a like character and with the aims, diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. Members or Employers shall not have any right to direct particular investments within any Fund. 13.6 REVERSION OF EMPLOYER CONTRIBUTIONS. (a) Notwithstanding anything to the contrary contained in this Plan, if the Internal Revenue Service issues a determination letter stating that the Plan does not meet the requirements of Code Section 401 with respect to its initial qualification, then within one year of the issuance of such letter the Employer shall be entitled to receive a return of its contributions made hereunder and each Participant shall be entitled to receive a return of his Basic Before-Tax Contributions, Supplemental Before-Tax Contributions, Basic After-Tax Contributions, and Supplemental After-Tax Contributions. 68 (b) That portion of a contribution made by a mistake of fact shall be returned to the Employer within one year after the payment of the contribution; provided, that, if the contribution to be returned is a Participant's Basic Before-Tax Contribution, Supplemental Before-Tax Contribution, Basic After-Tax Contribution, or Supplemental After-Tax Contribution, such contribution shall be returned to the Participant. (c) That portion of a contribution made by the Employer that is conditioned upon deductibility of the contribution under Code Section 404 and disallowed by the Internal Revenue Service as a deduction under Code Section 404 shall be returned to the Employer within one year after the Internal Revenue Service disallows the deduction; provided, that, if the contribution to be returned is a Participant's Basic Before-Tax Contribution or Supplemental Before-Tax Contribution, such contribution shall be returned to the Participant. (d) Earnings attributable to the contributions to be returned under this Section shall not be returned (except with respect to Section 13.6(a)) and any losses attributable to such contributions shall reduce the amount returned. ARTICLE XIV. TOP-HEAVY PLAN PROVISIONS 14.1 APPLICATION OF TOP-HEAVY PROVISIONS. (a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2) below, if as of the Applicable Determination Date the aggregate of the Account balances of Key Employees under the Plan exceeds 60 percent of the aggregate amount of the Account balances of all Employees (other than former Key Employees) under the Plan, the Plan will be top-heavy and the provisions of this Article shall become applicable. For the purposes of this Article-- (1) Account balances shall include the aggregate amount of any distributions made with respect to the Employee during the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of said Applicable Determination Date; and (2) the Account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions, rollovers, and 69 transfers shall be taken into account, shall be made in accordance with Code Section 416 and the Regulations thereunder which are incorporated herein by reference. (b) AGGREGATION GROUP DETERMINATION. (1) If as of the Applicable Determination Date the Plan is a member of a Required Aggregation Group which is top-heavy, the provisions of this Article shall become applicable. For purposes of this subsection (b), an Aggregation Group shall be top-heavy, as of the Applicable Determination Date, if the sum of-- (A) the aggregate of account balances of Key Employees under all defined contribution plans in such group, and (B) the present value of accrued benefits for Key Employees under all defined benefit plans in such group exceeds 60 percent of the same amounts determined for all employees (other than former Key Employees) under all plans included within the Aggregation Group. Account balances and accrued benefits shall be adjusted for any distribution made in the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of the Applicable Determination Date. The account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions (including distributions from terminated plans), rollovers, and transfers are taken into account, shall be made in accordance with Code Section 416 and the Regulations thereunder. (2) If the Plan is top-heavy under subsection (a) above, but the Aggregation Group is not top-heavy, this Article shall not be applicable. (c) THE TRUSTEES. The Trustees shall have responsibility to make all calculations to determine whether the Plan is top-heavy. 70 14.2 DEFINITIONS. For purposes of this Article, the following definitions apply. (a) AGGREGATION GROUP means a required aggregation group or a permissive aggregation group as follows: (1) REQUIRED AGGREGATION GROUP. All plans maintained by the Company and the Affiliates in which a Key Employee participates shall be aggregated to determine whether or not the plans, as a group, are top-heavy. Each other plan of the Company and the Affiliates which enables this Plan to meet the requirements of Code Section 401(a) or Section 410 shall also be aggregated. (2) PERMISSIVE AGGREGATION GROUP. One or more plans maintained by the Company and the Affiliates, which are not required to be aggregated, may be aggregated with each other or with plans under paragraph (1) if such group would continue to meet the requirements of Code Sections 401(a)(4) and 410 with such plan(s) being taken into account. (b) APPLICABLE DETERMINATION DATE shall mean, with respect to the Plan, the Determination Date for the Plan Year of reference and, with respect to any other plan, the Determination Date for any plan year of such plan which falls within such calendar year as the Applicable Determination Date of the Plan. (c) DETERMINATION DATE shall mean, with respect to the initial plan year of a plan, the last day of such plan year and, with respect to any other plan year of a plan, the last day of the preceding plan year of such plan. (d) VALUATION DATE. For all top-heavy purposes, a Valuation Date shall be the annual date on which Plan assets must be valued for the purpose of determining the value of account balances or the date on which liabilities and assets of a defined benefit plan are valued. For the purpose of the top-heavy test, the Valuation Date for a defined benefit plan shall be the same Valuation Date used for computing plan costs for minimum funding. The Valuation Date for a defined contribution plan shall be the most recent valuation for a defined contribution plan date within a 12-month period ending on the Determination Date. (e) KEY EMPLOYEE shall mean any Employee or former Employee who at any time during the Plan Year containing the Determination Date or the four preceding Plan Years, is or was (1) an officer of the Employer having annual compensation for such Plan Year which is in excess of 71 50 percent of the dollar limit in effect under Code Section 415(b)(1)(A) for the calendar year in which such Plan Year ends; (2) one of the ten Employees having annual compensation from the Employer for a Plan Year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and owning (or considering as owning within the meaning of Code Section 318) more than a one-half percent interest as well as one of the ten largest interests in the Employer; (3) a five percent owner of the Employer; or (4) a one percent owner of the Employer having annual compensation from the Employer for a Plan Year of more than $150,000. For purposes of determining five-percent and one-percent owners, neither the aggregation rules nor the rules of subsections (b), (c) and (m) of Code Section 414 apply. Beneficiaries of an Employee acquire the character of the Employee who performed service for the Employer. Inherited benefits will retain the character of the benefits of the Employee who performed services for the Employer. (f) COMPENSATION. Compensation to be used for determining a minimum benefit or minimum contribution for top-heavy purposes is the amount set forth in Box 10 of Form W-2 (or the successor method of reporting income under Code Sections 6041, 6051 and 6052). The same definition of compensation shall be used for all top-heavy purposes, except that for the purpose of determining whether an Employee is a Key Employee, with respect to Plan Years beginning on or after January 1, 1989, the compensation to be used is the aforesaid definition but including Employer contributions made pursuant to a salary reduction arrangement. 14.3 VESTING REQUIREMENTS. If the Plan is determined to be top-heavy with respect to a Plan Year under the provisions of Section 14.1, then a Member's interest in Employee Accounts 1, 6, and 8 shall vest in accordance with the following schedule: Years of Vesting Service Vested Percentage ------------------------ ----------------- Less than 1 0% 1 10% 2 20% 3 40% 4 60% 5 80% 6 100% If in a subsequent Plan Year the Plan is no longer top-heavy, the vesting provisions that were in effect prior to the time the Plan became top-heavy shall be reinstated; provided, however, that any portion of a Member's Account which was vested prior to the time the Plan was no longer top-heavy shall remain vested, and 72 provided further that a Member who has at least three Years of Vesting Service at the start of such Plan Year shall have the option of remaining under the vesting schedule in effect while the Plan was top-heavy. 14.4 MINIMUM CONTRIBUTION. For each Plan Year with respect to which the Plan is top-heavy, the minimum amount contributed by the Employer under the Plan and the Company and the Affiliates under all other qualified defined contribution plans maintained by the Company and the Affiliates for the benefit of each Participant who is not a Key Employee and who is otherwise eligible for such a contribution shall be the lesser of -- (a) 3 percent of the non-key Participant's compensation for only the Plan, or (b) the non-key Participant's compensation times a percentage equal to the largest percentage of the first $150,000 of such compensation of any Key Employee allocated under any of such plans with respect to any Key Employee for the Plan Year. This minimum contribution is determined without regard to any social security contribution and shall be in accordance with the requirements of Code Regulation 1.416-1. Solely with respect to Key Employees, contributions attributable to a salary reduction, matching contributions, or similar arrangement shall be taken into account. The minimum contribution provisions stated above shall not apply to any Participant who was not employed by the Company or an Affiliate on December 31 of the Plan Year. For a year in which the Plan is top-heavy, each non-Key Employee will receive a minimum contribution if the Participant has not separated from service at the end of the Plan Year, regardless of whether the non-Key Employee has less than 1,000 hours of service (or the equivalent) and regardless of whether such Employee declines to make a mandatory contribution to a plan that generally requires such a contribution. This section shall not apply to a Participant covered under a qualified defined benefit plan or a qualified defined contribution plan maintained by the Company or the Affiliates if the Participant's vested benefit thereunder satisfies the requirements of Code Section 416(c). Amounts contributed under this Section shall be credited to a Member's Employee Account 6, and shall be subject to the vesting provisions of this Plan applicable to said Account. 14.5 LIMIT ON ANNUAL ADDITIONS; COMBINED PLAN LIMIT. If the Plan is determined to be top-heavy, Code Sections 415(e)(2)(B) and 415(e)(3)(B) shall be applied by substituting "1.0" for "1.25." This limitation shall not be applicable, however, if-- (a) the Plan would not be top-heavy if "90 percent" is substituted for "60 percent" in Sections 14.1(a) and 14.1(b)(1) above; and 73 (b) for each Plan Year with respect to which the Plan is top-heavy, an Employer contribution is made for Participants who are not Key Employees equal to the sum of l percent of the non-key Participant's compensation for the Plan Year plus the amount of the contribution determined under Section 14.4 above. ARTICLE XV. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE 15.1 PARTICIPATION IN THE PLAN. Any Affiliate which desires to become an Employer hereunder may elect, with the written consent of the Chief Executive Officer, to become a party to the Plan and Trust Agreement by adopting the Plan for the benefit of its eligible Employees, effective as of the date specified in such adoption. The adoption resolution or decision may contain such specific changes and variations in Plan or Trust Agreement terms and provisions applicable to such adopting Employer and its Employees as may be acceptable to the Company and the Trustees. However, the sole, exclusive right of any other amendment of whatever kind or extent to the Plan or Trust Agreement is reserved by the Company. The adoption resolution or decision shall become, as to such adopting organization and its employees, a part of this Plan (as then amended or thereafter amended) and the related Trust Agreement. It shall not be necessary for the adopting organization to sign or execute the original or then amended Plan and Trust Agreement documents or to sign other documents to participate. The effective date of the Plan for any such adopting organization shall be that in the resolution or decision of adoption, and from and after such effective date, such adopting organization shall assume all the rights, obligations, and liabilities of an individual employer entity hereunder and under the Trust Agreement. The administrative powers and control of the Company, as provided in the Plan and Trust Agreement, including the sole right of amendment, and of appointment and removal of the Trustees, and their successors, shall not be diminished by reason of the participation of any such adopting organization in the Plan and Trust Agreement. 15.2 WITHDRAWAL FROM THE PLAN. An Employer or Division may withdraw from, or otherwise cease to participate in, the Plan by giving the Plan Administrator and the Trustees 30 days written notice of its intention to do so, in which event the Trustees shall, as promptly as is practicable, provide for the withdrawal or segregation of the share of the assets in the Fund attributable to the Participants of that Employer or Division and, if such Employer or Division so requests, the former Participants of such Employer or Division; provided, however, that the Plan Administrator, in its sole and absolute discretion, may waive the 30-day notice requirement and provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an employee of an Employer or Division which continues to participate in the Plan, such Participant may designate the 74 portion of the assets in the Fund attributable to such Participant which shall be withdrawn or segregated in accordance with this Section 15.2. The amount of such pro rata share shall be the net value of the Fund attributable to the Participants and, if applicable, the former Participants of that Employer or Division, determined as of the latest Valuation Date. The Trustees shall select the assets of the Fund to be withdrawn or segregated in such amount. (a) If the withdrawal of such Employer or Division from this Plan has the effect of a termination of the plan so far as that Employer or Division is concerned, then the rights of that Employer's Participants, former Participants and Beneficiaries shall be governed by the provisions of Section 11.2 relating to partial terminations. (b) Subject to Section 11.4, if an Employer ceases to participate in the Plan and adopts a substantially similar plan for the benefit of its employees, the withdrawal from this Plan by that Employer shall not be regarded as a termination of the Plan so far as that Employer and its Employees are concerned; the rights of that Employer's Members and Beneficiaries shall be governed in accordance with the provisions of that substantially similar plan so adopted by that Employer for their benefit as if no withdrawal from this Plan had taken place. Provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an Employee of an Employer or Division which continues to participate in the Plan will have the right to designate in writing to the Plan Administrator, not later than twenty days after the withdrawal of the Employer or Division, the percentage of the Participant's vested Account that will be withdrawn or segregated in accordance with this Section 15.2, which designated percentage shall apply to all subaccounts, investment funds and other financial amounts allocated to such Participant, and such Participant's Account will be valued for such purposes as of the Valuation Date coincident with or immediately preceding the effective date of the Employer's or Division's withdrawal from the Plan; if such written designation is not timely received, then such Participant's Account will not be withdrawn or segregated under this Section 15.2. The Plan Administrator may grant a reasonable extension of the time limit for making this designation with respect to Employees whose status as an employee of both a continuing Employer or Division and a withdrawing Employer or Division is not immediately known or ascertained, and the Valuation Date for such later designation will be the Valuation Date coincident with 75 or immediately preceding the date the designation is submitted to the Plan Administrator. In the event of such designation, Accounts may be transferred to the new Plan as qualifying rollover distributions or plan to plan transfers subject to the applicable requirements of the Code and ERISA. ARTICLE XVI. MISCELLANEOUS 16.1 NO EMPLOYMENT RIGHTS CREATED. Neither the establishment nor the continuation of the Plan, nor anything contained within the Plan, shall be deemed to give any person the right to continued employment by the Company or the Affiliates, or to affect the right of the Company or the Affiliates to terminate the employment of any individual. 16.2 RIGHTS TO FUND ASSETS. No Employee or beneficiary shall have any right to, or interest in, any assets of the Fund upon termination of his employment or otherwise, except as specifically provided under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or beneficiary out of the assets of the Fund. All payments of benefits as provided for in this Plan shall be made solely out of assets of the Fund and neither the Company, the Affiliates, nor any fiduciary shall be liable therefor in any manner. 16.3 NONALIENATION OF BENEFITS. Except to the extent permissible under Code Sections 401(a)(13) and 414(p), benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder, shall be void. The Fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. The preceding paragraph shall also apply to the creation, assignment, or recognition of a right to any interest or benefit payable with respect to a Member pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order (as defined in Code Section 414(p)). The Trustees (or a designated agent or agents thereof) shall establish reasonable plan procedures to determine the qualified status of domestic relations orders and to administer and pay distributions under such qualified orders. Amounts vested hereunder and payable pursuant to a qualified domestic relations order may be paid to the spouse or other alternate payee 76 designated in such order regardless of the Member's age or such spouses's or alternate payee's age. Notwithstanding any provision of this Plan to the contrary and regardless of whether the Member is an Employee or former Employee and regardless of the Employee's or former Employee's age, such amounts may be paid immediately (as soon as practical after the Plan Administrator receives the qualified domestic relations order) in a single cash lump sum or in such other manner as may be paid to a terminated Member as provided in such an order which complies with the Plan's procedures for qualified domestic relations orders. 16.4 EXPENSES. All reasonable expenses of the Plan and Fund shall constitute a charge upon the Fund and shall be paid from Member's Accounts in proportion to the balance of such Accounts, except to the extent that the Company or an Employer elects to pay such expenses, provided that the Company or an Employer may advance such expenses on behalf of the Plan in which case the Company or Employer will be reimbursed for such payment by the Plan from fund assets. Such expenses shall include any expenses incident to the functioning of the Plan, including, without limitation, attorneys' fees and the compensation of actuaries and other agents, accounting and clerical charges, expenses, if any, of being bonded as required by ERISA, and any other costs of administering the Plan. 16.5 SEVERABILITY. In the event that any provision of this Plan is held invalid or illegal for any reason, such invalidity or illegality shall not affect the remaining parts of the Plan and the Plan shall be enforced and construed as if such provision had never been inserted herein. 16.6 GOVERNING STATE. The Plan shall be construed in accordance with the laws of the State of Tennessee except where such laws have been preempted by laws of the United States. 16.7 FACILITY OF PAYMENT. If the Plan Administrator shall find that any person to whom a benefit is payable from the Fund is unable to care for his affairs because of illness or accident, any payments due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to the recipient's spouse, child, parent, brother or sister, or to any person deemed by the Trustees to have incurred expense for such person otherwise entitled to payment. Any such payment shall be a complete discharge of any liability under the Plan therefor. 16.8 MISSING PERSONS. If the Plan Administrator is unable to locate a proper payee within 18 months after a benefit becomes payable, the Plan Administrator may treat the benefit as a forfeiture and allocate it to the Accounts of other Participants under Section 4.6(a); however, if a claim for benefits is subsequently presented by a person entitled to a payment, the forfeited amount (determined as of the Valuation Date immediately before the forfeiture) shall be recredited from such funds or 77 resources as the Plan Administrator deems appropriate (i.e., forfeitures, earnings, or additional Employer contributions) upon verification of the claim in a manner satisfactory to the Plan Administrator. 16.9 TELEPHONIC/ELECTRONIC DECISIONS. Notwithstanding anything in this Plan to the contrary, pay reduction agreements and cancellations or amendments thereto, investment elections, changes and transfers, loans, withdrawal decisions, and any other decision or election by a Member or other person under this Plan may be accomplished by electronic or telephonic means which are not prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Plan Administrator or its delegees. 16.10 TITLES. The titles of sections are included only for convenience and shall not be construed as part of this Plan or in any respect affecting or modifying its provisions. * * * * * IN WITNESS WHEREOF, PROMUS HOTEL CORPORATION has caused this instrument to be executed by its duly authorized officer, effective as of the date specified in Article I above. PROMUS HOTEL CORPORATION By: /s/ Raymond E. Schultz ---------------------------- President and Chief Executive Officer 78 ADDENDUM A 1. Notwithstanding any of the other provisions of this Plan or the Predecessor Plan, effective April 1, 1991, the assets of Investment Fund I under the Predecessor Plan invested as of March 31, 1991 in a guaranteed annuity contract issued by Executive Life Insurance Company (the "Executive Life Contract") were withdrawn from Investment Fund I and transferred to a separate segregated investment fund denominated Investment Fund IA of the Predecessor Plan. The amount transferred to Investment Fund IA of the Predecessor Plan was the amount ("March 1991 Book Value") reflected on the books and records of the Trustees of the Predecessor Plan as invested in the Executive Life Contract as of March 31, 1991. 2. A portion of each Member's Account invested in Investment Fund I under the Predecessor Plan as of March 31, 1991 was transferred to Investment Fund IA of the Predecessor Plan. The transferred portion was an amount equal to the value of such Member's Account invested in Investment Fund I of the Predecessor Plan as of March 31, 1991 multiplied by a fraction, the numerator of which is March 1991 Book Value, and the denominator of which is the value, as reflected on the books and records of the Trustees, of Investment Fund I of the Predecessor Plan as of March 31, 1991. The Executive Life Contract was subsequently assumed by Aurora National Life Assurance Company. 3. The Executive Life Fund shall be administered in accordance with the terms of this Addendum A. It is intended that the Predecessor Plan will transfer to the Executive Life Fund of this Plan an amount equal to the value of the accounts invested in Investment IA of the Predecessor Plan allocable to individuals who became Participants in the Plan on the Spin-Off Date and who are Participants or Members in this Plan with an Account invested in part in the Executive Life Fund on the date of such transfer. It is further intended that the portion of the Executive Life Contract allocable to such amounts and the analogous amounts transferred to Plan B will be split from the Executive Life Contract to create a separate contract between Aurora National Life Assurance Company and the Company (the "PHC Contract") (for periods prior to the execution of such PHC Contract, the term "PHC Contract" means the portion of the Executive Life Contract allocable to such amounts). A portion of such PHC Contract will be allocable to the Executive Life Fund under the Plan (the "Plan A Executive Life Contract") and a portion of such PHC Contract will be allocable to the Executive Life Fund under the Promus Hotel Corporation Savings and Retirement Plan - B (the "Plan B Executive Life Contract"). Effective as of January 1, 1996, the amount equal to the value of the accounts invested in the Executive Life Fund which were allocable to individuals who became Participants in Plan B on January 1, 1996 were transferred to the Executive Life Fund of Plan B. 4. No Member shall be permitted to make or change investment elections with respect to, or elect to transfer, any portion of his Account invested in the Executive Life Fund. Accordingly, pursuant to the provisions of this Addendum A, any change or transfer directions received by the Plan Administrator with respect to the Executive Life Fund shall not be honored. 5. No investments, contributions, reallocated forfeitures, or loan repayments shall be made to the Executive Life Fund. 6. The portion of a Member's Account invested in the Executive Life Fund shall not be taken into account in determining the amount he may borrow from the Plan, and no loan made to a Member may be made from or charged to the portion of the Member's Account invested in the Executive Life Fund. 7. No distributions or withdrawals shall be made from the Executive Life Fund until such time as the Trustees determine that such distributions or withdrawals are appropriate, except as provided in the following paragraph. 8. Notwithstanding the preceding paragraph, if a Member, Beneficiary or alternate payee under a qualified domestic relations order ("Distributee") is required under Section 9.8 of the Plan, Section 411(d)(6) of the Code or section 204(g)(2) of ERISA to receive a distribution or is entitled to a distribution on account of death or other termination of service ("Required Distribution") and if some or all of the Member's Account is invested in the Executive Life Fund, the Trustees shall, to the extent necessary to make the Required Distribution, distribute to the Distributee (A) in cash, an amount equal to the percentage ("Distribution Percentage") of the Distributee's Account remaining invested in the Executive Life Fund, after reductions for prior distributions or disbursements, valued based on the portion of the March 1991 Book Value allocable to the Plan A Executive Life Contract (the "Plan A March 1991 Book Value"), that is equal to the percentage of his Account being distributed in the Required Distribution, and (B) in kind, the Distributee's share ("Final Interest Component") of an undivided interest in the amount ("Excess Value"), if any, by which the Final Market Value (as defined below) of the Executive Life Fund exceeds the Plan A March 1991 Book Value. The value of Distributee's Final Interest Component with respect to any Required Distribution shall be determined at the time the Final Market Value is determined, and shall be adjusted to reflect an early distribution if the cash portion of the Required Distribution was distributed on or before June 30, 1992. The Final Interest Component shall be determined in a manner that is not inconsistent with the terms of settlement of the Executive Life Contract. The Final Interest Component shall be an amount equal to the Excess Value multiplied by a fraction, the numerator of which is the amount of the cash portion of the Required Distribution, and the denominator of which is the Plan A March 1991 Book Value; the value thus determined shall be prorated by multiplying it by a fraction, the numerator of which is the number of days (not in excess of 457) elapsed between March 31, 1991 and the date the Required Distribution is made, and the denominator of which is 457; PROVIDED that the manner of determining the Final Interest Component may be modified by the Plan Administrator to be consistent with the terms of settlement of the Executive Life Contract. 9. To the extent cash distributions are made with respect to a Distributee's interest in the Executive Life Fund and (after repaying Company Loans as provided below) there is not sufficient cash in the Executive Life Fund to make such distribution, the Trustees may borrow funds from the Company ("Company Loans"), on terms consistent with Prohibited Transaction Class Exemption 80-26. Company Loans shall not be treated as contributions to the Plan. Company Loans shall be repaid from time to time as follows: (A) If and to the extent a payment is made to the Plan in respect of the PHC Contract in any month on account of a distribution to a Member or his beneficiaries ("Distribution Payment") at a time when Company Loans are outstanding, the portion of such Distribution Payment allocable to the Plan A Executive Life Contract shall be applied to reduce (but not below zero) the outstanding balance of Company Loans before being applied to make Distribution Payments. (B) If and to the extent the PHC Contract is settled in one or more payments ("Contract Payments") to the Plan in termination of the PHC Contract, a portion of each Contract Payment allocable to the Plan A Executive Life Contract will be applied to repay the Company Loans. The amount of any such repayment shall be limited to a percentage (which, when aggregated with all such repayments to the Company, shall not exceed 100%) of the aggregate outstanding balance of the Company Loans. Such percentage shall be determined by dividing the portion of the Contract Payment allocable to the Plan A Executive Life Contract by the Plan A March 1991 Book Value. 10. In the event the Trustees determine that the total amount paid to the Plan in respect of the Executive Life Fund ("Final Market Value") is less than the Plan A March 1991 Book Value, the difference between (a) the Plan A March 1991 Book Value reduced by the aggregate outstanding balance of Company Loans, and (b) the Final Market Value shall be paid to the Plan by the Company. Such amount shall be treated as an amount paid in settlement of a claim under the Plan, and all outstanding Company Loans shall be cancelled upon such payment. 11. The purpose of this Addendum A is to provide special administrative procedures protective of the interests of Plan Members and their Beneficiaries in light of the court-supervised conservatorship of Executive Life Insurance Company. The Trustees may make such rules and regulations regarding transactions (including, but not limited to, investments, loans and distributions) involving Members' Accounts as they deem necessary or appropriate in light of the status or condition of the Executive Life Fund. The Trustees shall have authority and discretion to administer the provisions of this Addendum A, and their determinations with respect thereto shall be final and binding upon all parties. The Chief Executive Officer may, with the advice of the Trustees, amend the Plan as appropriate in light of developments involving Executive Life Insurance Company and their effect on the Executive Life Fund. EXHIBIT 1 THE RESTATEMENT OF THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - A The provisions of the Restatement of The Promus Hotel Corporation Savings and Retirement Plan - A are generally effective as of January 1, 1996. However, the provisions set forth below are effective as follows: SECTIONS EFFECTIVE DATE -------- -------------- 10.3 and 10.5(c) March 18, 1996 1 EX-10.4(B) 7 EXHBIT 10(4)(B) EXHIBIT 10(4)(b) AMENDMENT TO PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN A DATED MARCH 11, 1996 WHEREAS, Promus Hotel Corporation (the "Company"), a Delaware corporation, finds it necessary to amend the Promus Hotel Corporation Savings and Retirement Plan A (the "Plan") in order to clarify the meaning intended to be ascribed to certain provisions of the Plan pursuant to Section 11.1 of the Plan, the Plan is hereby amended, effective January 1, 1996 as follows. 1. Section 12.12 is amended to read as follows: 12.12 RESTORATIVE PAYMENTS. In the event of a breach of fiduciary duty or an administrative error that results in a loss to the Accounts of any Participants, the Plan may accept a restorative payment from any individual or entity responsible (either directly or through the actions its agent or designee) for such breach or error, or any insurer thereof, in an amount equal to the principal amount of such loss and any earnings thereon, as determined by the Plan Administrator or the Trustees, or any lesser amount which the Plan is able to recover from such individual, entity or insurer. Any such restorative payment shall not be subject to the allocation provisions of Article IV but instead shall be allocated to the Account of each Participant affected by such loss in an amount equal to the portion of such loss incurred by such Participant and any earnings thereon, as determined by the Plan Administrator or the Trustees; provided, however, that if the amount of any restorative payment made pursuant to this Section 12.12 is less than the amount of the total loss incurred by the Accounts of each of the affected Participants and the earnings thereon, if any, such restorative payment shall be allocated to the Account of each such Participant in an amount determined by multiplying such payment by the ratio which the loss suffered by such Participant bears to the loss of all of the affected Participants. In addition, the Plan Administrator or the Trustees, in their discretion, shall take any and all additional actions which it or they deem necessary or appropriate to remedy any breach or error which gives rise to a restorative payment under this Section 12.12. Any restorative payment made pursuant to this Section 12.12 shall not be a contribution to the Plan for purposes of Code Sections 401(a)(4), 404, 415 and 4972. Executed this 11th day of March, 1996. /s/ Raymond E. Schultz ------------------------------ Raymond E. Schultz Chief Executive Officer EX-10.4(C) 8 EXHIBIT 10(4)(C) EXHIBIT 10(4)(C) AMENDMENT TO THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - A Whereas, Promus Hotel Corporation (the "Company"), a Delaware corporation, finds it desirable to amend the Promus Hotel Corporation Savings and Retirement Plan - A (the "Plan") in order to add additional provisions to the Plan regarding qualified nonelective contributions and qualified matching contributions. Pursuant to Section 11.1 of the Plan, the Plan is hereby amended, effective as of June 30, 1995 or the earliest date permitted by law, as follows: 1. Section 2.1 of Article II of the Plan is hereby amended by adding a new Subsection (j) to the end thereof to read as follows: (j) EMPLOYEE ACCOUNT 10 means the portion of a Member's Account which evidences the value of the Qualified Contributions, if any, made on his behalf by the Employer, and also any gains and losses of the Fund attributable thereto. 2. Article II of the Plan is hereby further amended by adding new subsections 2.36A, 2.36B and 2.36C thereof to read as follows: 2.36A QUALIFIED NONELECTIVE CONTRIBUTIONS means the qualified nonelective contributions within the meaning of Internal Revenue Code Section 401(m)(4)(C) and Code Regulation 1.401(k)-(1)(g)(13)(ii), if any, made by an Employer pursuant to Sections 4.7(a)(2)(i)(B) and 4.7(b) of the Plan. 2.36B QUALIFIED MATCHING CONTRIBUTIONS means the qualified matching contributions within the meaning of Code Regulation 1.401(k)- (1)(g)(13)(i)), if any, made by an Employer pursuant to Sections 4.7(a)(2)(i)(B) and 4.7(b) of the Plan. 2.36C QUALIFIED CONTRIBUTIONS means Qualified Nonelective Contributions and Qualified Matching Contributions. 3. Section 2.46 of Article II of the Plan is hereby amended to read in its entirety as follows: 2.46 VESTED BALANCE as of a given date means the Vested Percentage of the Member's Employee Accounts 1, 6, and 8 plus the aggregate balances of the Member's Employee Accounts 2, 3, 4, 5, 7, 9 and 10. 4. Article IV of the Plan is hereby amended by adding the following new Subsection 4.4A thereof to read as follows: 4.4A QUALIFIED CONTRIBUTIONS a. QUALIFIED CONTRIBUTIONS. To the extent permitted by Code Section 401(k) and 401(m) and the regulations thereunder, each Employer may make Qualified Nonelective Contributions and Qualified Matching Contributions on behalf of some or all of its non-Highly Compensated Employees, pursuant to Section 4.7 of the Plan. b. TIMING AND ALLOCATION OF QUALIFIED CONTRIBUTIONS. Qualified Nonelective Contributions and Qualified Matching Contributions, if any, shall be made as soon as practicable after the Plan Year to which they relate. Qualified Nonelective Contributions and Qualified Matching Contributions shall be allocated to Employee Account 10 as soon as administratively feasible following the payment of such contributions to the Fund. 5. The second and third paragraphs preceding Section 4.7(a)(2)(i) of the Plan are hereby amended in their entirety as follows: The deferral percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Before-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent permitted by applicable regulations, the Plan Administrator, in its discretion, may elect to take Qualified Nonelective Contributions and/or Qualified Matching Contributions into account in applying the deferral percentage test of this subsection (a)(2). To the extent necessary to conform to the limitation set forth in this subsection (a)(2), the Plan Administrator may reduce Before-Tax Contributions made on behalf of the Highly Compensated Employees. Such reduction shall be effected by reducing contributions made on behalf of Highly Compensated Employees (in the order of their actual deferral percentage) beginning with the Highly Compensated Employees who elected the highest percentage of such contributions. Any such reduction in the Before-Tax Contributions made on behalf of any Member shall be recharacterized as After-Tax Contributions or refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. If recharacterized, such excess contributions shall be recharacterized as soon as practicable. In no event, however, shall such excess contributions be left unrecharacterized later than two and one-half months following the Plan Year in which such contributions were made. 2 In addition to the foregoing, if the Plan Administrator determines during the course of a Plan Year or after the Plan Year that the discrimination test of Code Section 401(k)(3) otherwise might not be met for the Plan Year, the Plan Administrator may take the following actions: (A) reduce, at any time, the maximum percentage of Compensation at which Highly Compensated Employees may elect Before-Tax Contributions to such percentage as the Plan Administrator determines appropriate to ensure that such test shall be met for such Plan Year; or (B) to the extent permitted by the Code Section 401(a)(4), Code Regulation 1.401(k)-1(b)(5) (which are incorporated herein by this reference) and other applicable regulations, the Company may make a Qualified Nonelective Contribution and/or a Qualified Matching Contribution to the Accounts 10 of certain Participants and/or Eligible Employees (including Employees who are considered eligible for purposes of the testing described in this Section 4.7(a)(2)) which contribution shall be allocated to Participants and/or Eligible Employees in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant or Eligible Employee receiving the first allocation) with each Participant or Eligible Employee who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant or Eligible Employee with greater Compensation receives any allocation, until such contribution is fully allocated. For purposes of determining the lowest compensated Participants and Eligible Employees, the Plan Administrator, in its discretion, may (or to the extent required by law, shall) annualize Compensation for part-time employees. In order to conform to the limitation provided in this subsection (a)(2), in the discretion of the Plan Administrator, the correction methods described in this Section 4.7(a) may be combined. 6. The second paragraph of Section 4.7(b) of the Plan is hereby amended in its entirety as follows: The contribution percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Matching Contributions and After-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator may: 3 (i) reduce Matching Contributions and After-Tax Contributions made on behalf of the Highly Compensated Employees in a manner similar to the method described in subsection (a), or (ii) to the extent permitted by Code Section 401(a)(4), Code Regulation Section 1.401(m)-1(b)(5) (which are incorporated herein by this reference) and other applicable regulations, the Company may make a Qualified Nonelective Contribution and/or a Qualified Matching Contribution to the Accounts 10 of certain Participants and/or Eligible Employees (including employees who are considered eligible for purposes of the testing described in this Section 4.7(b)) which contribution shall be allocated to Participants and/or Eligible Employees in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant or Eligible Employee receiving the first allocation) with each Participant or Eligible Employee who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant or Eligible Employee with greater Compensation receives any allocation, until such contribution is fully allocated. For purposes of determining the lowest compensated Participants and Eligible Employees, the Plan Administrator, in its discretion, may (or to the extent required by law, shall) annualize Compensation for part-time employees. Any reduction in the Matching Contributions pursuant to item (i) above or After-Tax Contributions pursuant to item (i) above made on behalf of any Member (including income and losses allocable thereto) shall be paid to the Member if vested, or treated as a forfeiture (if forfeitable). If refunded, Matching Contributions (and the income allocable to Matching Contributions) that are not vested (determined without regard to any increase in vesting that may occur after the date of the forfeiture) may also be forfeited to correct excess aggregate contributions. To the extent permitted by applicable Regulations, the Plan Administrator may elect to take Before-Tax Contributions and Qualified Nonelective Contributions into account in applying the contribution percentage test of this subsection (b). 7. Section 4.7(b)(ix) of the Plan is hereby amended in its entirety to read as follows: (ix) Before-Tax Contributions and/or Qualified Nonelective Contributions may be treated as matching contributions only if the conditions described in Code Section 401(a)(4) and Code Regulation 1.401(m)-1(b)(5) are satisfied. 4 In order to conform to the limitation provided in this subsection (b), the correction methods described in this subsection (b) may be combined. 8. Section 4.8(a)(i) is hereby amended in its entirety to read as follows: (i) all Company and Affiliate contributions made for the Participant under "any defined contribution plan" for the year (including Qualified Contributions); 9. Section 4.7(d) of the Plan is hereby amended in its entirety as follows: (d) ADDITIONAL LIMITATION. The limits of this subsection shall comply with the provisions of Code Regulation 1.401(m)-2 for "multiple use of the alternative limitation" and for this purpose the provisions of Section 1.401(m)-2(d) of the Code Regulations are incorporated herein by reference. Correction of the multiple use of the alternative limitation shall occur by first reducing the actual contribution percentages for only those Highly Compensated Employees who are eligible in both the arrangement subject to Code Section 401(k) and the plan subject to Code Section 401(m). If this is insufficient to make the correction, then the actual deferral percentage shall be reduced for these Employees in a manner that complies with Code Regulations. Notwithstanding any other provision in this subsection (d), instead of making such reductions described in this subsection (d), an Employer may eliminate the "multiple use of the alternative limitation" by making Qualified Nonelective Contributions in accordance with Code Regulations 1.401(k)-1(b)(5) and (f)(1) and Code Regulations 1.401(m)-1(b)(5) and (e)(1). 10. Section 7.1 of Article VII of the Plan is hereby amended in its entirety to read as follows: 7.1 VESTING IN BEFORE-TAX CONTRIBUTIONS, ROLLOVER CONTRIBUTIONS AND QUALIFIED CONTRIBUTIONS. A Member shall have a fully-vested interest at all times in his Employee Accounts 2, 3, 4, 5, 7, 9 and 10. 11. Section 8.1 of Article VIII of the Plan is hereby amended in its entirety to read as follows: 8.1 ORDER OF WITHDRAWAL. Subject to Section 8.2, a Member may withdraw funds from his Account (valued as of the Valuation Date immediately preceding the date of the withdrawal payment) in the following order: (a) Supplemental After-Tax Contributions and earnings from Employee Account 5; 5 (b) Basic After-Tax Contributions and earnings from Employee Account 4; (c) Rollover Contributions from Employee Account 7; (d) Qualified Contributions from Employee Account 10; (e) the vested portion of Basic Matching Contributions from Employee Account 1; (f) the vested portion of Discretionary Matching Contributions from Employee Account 6; (g) the vested portion derived from the Harrah's Plans in Employee Account 8; (h) all or any part of the amounts transferred from the Holiday Inns, Inc. Employee's Retirement Plan in Employee Account 9; (i) Supplemental Before-Tax Contributions from Employee Account 3 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 3); and (j) Basic Before-Tax Contributions from Employee Account 2 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 2). (k) Earnings credited to Before-Tax Contributions after December 31, 1988. Such a withdrawal shall be processed as soon as administratively feasible following receipt of notice of such withdrawal by the Member in accordance with the Rules of the Plan; PROVIDED, HOWEVER, a Member must give at least 30 days advance written notice to the Plan Administrator (or such other advance written notice the Plan Administrator may allow in a uniform and nondiscriminatory manner) to withdraw funds from Employee Account 9. 12. Section 8.2(b) of Article VIII of the Plan is hereby amended in its entirety to read as follows: (b) ADDITIONAL RESTRICTIONS ON WITHDRAWAL OF MATCHING CONTRIBUTIONS. No amounts may be withdrawn under Sections 8.1(e) and (f) unless the Member making the withdrawal has been participating in the Plan for at 6 least 60 months or unless the amounts being withdrawn have been in the Fund for at least 24 months. 13. Section 8.2(c)(1) of Article VIII of the Plan is hereby amended in its entirety to read as follows: (c) ADDITIONAL RESTRICTIONS ON WITHDRAWALS FROM EMPLOYEE ACCOUNTS 2, 3, 8, 9 AND 10. (1) A withdrawal under Sections 8.1(d), (g), (h), (i), (j) and (k) shall be permitted only upon a Member's Retirement Date or other Termination of Service, attainment of age 59 1/2, or financial hardship (except a withdrawal under 8.1(k) shall not be permitted upon a financial hardship). See also the provisions of Section 11.2 for distributions allowed upon plan termination and the restrictions thereon and also the provisions herein dealing with qualified domestic relations orders. 14. Section 11.2(2) of Article XI of the Plan is hereby amended in its entirety to read as follows: (2) The Employee's attainment of age 59 1/2 or the Employee's financial hardship as described in Section 8.2(c)(2) except that earnings credited to any Before-Tax Contributions after December 31, 1988 may not be withdrawn on account of an Employee's financial hardship. Executed on this 10th day of September, 1996. /s/ Raymond E. Schultz --------------------------------------------- Raymond E. Schultz Chief Executive Officer 7 EX-10.5(A) 9 EXHIBIT 10(5)(A) EXHIBIT 10(5)(a) THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - B TABLE OF CONTENTS PAGE ---- Article I. The Plan........................................................ 1 1.1 Establishment of Plan.............................................. 1 1.2 Applicability of the Plan.......................................... 1 1.3 Purpose of Plan.................................................... 1 Article II. Definitions.................................................... 2 2.1 Account............................................................ 2 2.2 Administrative Delegate ........................................... 3 2.3 Affiliate.......................................................... 3 2.4 After-Tax Contributions............................................ 4 2.5 Annuity Starting Date.............................................. 4 2.6 Basic Contributions................................................ 4 2.7 Before-Tax Contributions........................................... 4 2.8 Beneficiary........................................................ 4 2.9 Board of Directors................................................. 4 2.10 Break Year........................................................ 4 2.11 Chief Executive Officer........................................... 4 2.12 Code.............................................................. 4 2.13 Company........................................................... 4 2.14 Company Stock..................................................... 4 2.15 Compensation...................................................... 5 2.16 Division.......................................................... 5 2.17 Eligible Employee................................................. 5 2.18 Employee.......................................................... 6 2.19 Employer.......................................................... 6 2.20 Enrollment Form................................................... 6 2.21 Entry Date........................................................ 6 2.22 ERISA............................................................. 6 2.23 Fund.............................................................. 6 2.24 Highly Compensated Employee....................................... 6 2.25 Holiday Plan...................................................... 8 2.26 Hour of Service................................................... 8 2.27 Human Resources Committee......................................... 12 2.28 Investment Fund .................................................. 12 2.29 Matching Contributions............................................ 12 2.30 Member............................................................ 12 2.31 Participant....................................................... 12 2.32 Plan.............................................................. 12 2.33 Plan Administrator................................................ 12 2.34 Plan Year......................................................... 13 2.35 Predecessor Effective Date........................................ 13 2.36 Predecessor Plan.................................................. 13 2.37 Retirement Date................................................... 13 2.38 Rollover Contributions............................................ 13 2.39 Spin-Off Date..................................................... 13 2.40 S&RP.............................................................. 13 2.41 S&RP Spin-Off Date................................................ 13 i PAGE ---- 2.42 Supplemental Contributions........................................ 13 2.43 Termination of Service............................................ 13 2.44 Total and Permanent Disability.................................... 13 2.45 Trust Agreement................................................... 14 2.46 Trustees.......................................................... 14 2.47 Valuation Date.................................................... 14 2.48 Vested Balance.................................................... 14 2.49 Vested Percentage................................................. 14 2.50 Year of Eligibility Service....................................... 14 2.51 Year of Vesting Service........................................... 14 Article III. Eligibility and Participation................................. 15 3.1 Eligibility........................................................ 15 3.2 Participation...................................................... 15 3.3 Eligible Employees................................................. 16 3.4 Rehired Employees.................................................. 16 3.5 Loss of Status as Eligible Employee................................ 17 3.6 Leased Employees................................................... 17 Article IV. Contributions and Allocations.................................. 18 4.1 Before-Tax Contributions........................................... 18 4.2 After-Tax Contributions............................................ 19 4.3 Pay Reduction Agreements........................................... 19 4.4 Matching Contributions............................................. 20 4.5 [Reserved]......................................................... 21 4.6 Allocation of Forfeitures.......................................... 21 4.7 Limitations on Contributions....................................... 22 4.8 Limitations on Annual Additions.................................... 29 4.9 Rollover Contributions and Plan to Plan Transfers.................. 31 Article V. [Reserved]....................................................... 33 Article VI. Members' Accounts; Investment Funds............................ 33 6.1 Investment Elections by Members.................................... 33 6.2 Plan Expenses...................................................... 34 6.3 Valuation; Allocation of Investment Earnings and Losses............ 35 6.4 Company Stock Funds............................................... 36 Article VII. Vesting and Forfeitures....................................... 38 7.1 Vesting in Before-Tax Contributions and Rollover................... 38 7.2 Vesting Schedule for Matching Contributions Account................ 39 7.3 Full Vesting of Certain Employee Accounts.......................... 39 7.4 Forfeitures........................................................ 39 ii PAGE ---- Article VIII. In-Service Withdrawals....................................... 40 8.1 Order of Withdrawal................................................ 40 8.2 Withdrawal Limitations............................................. 41 Article IX. Distributions.................................................. 44 9.1 Entitlement to Distribution Upon Death of Member................... 44 9.2 Distribution Upon Termination of Service for Reasons Other Than Death................................................... 46 9.3 Form of Benefit Payments........................................... 46 9.4 Time of Benefit Payments........................................... 48 9.5 Incidental Death Benefit........................................... 50 9.6 Distribution of Employee Account 9................................. 50 9.7 [Reserved]......................................................... 55 9.8 Limitations on Distributions....................................... 55 9.9 Eligible Rollover Distributions.................................... 55 9.10 Plan to Plan Transfers............................................ 56 Article X. Loans to Members................................................ 57 10.1 Administrator Authorized to Make Loans............................ 57 10.2 Amount of Loans................................................... 58 10.3 Interest.......................................................... 58 10.4 Term.............................................................. 59 10.5 Repayment......................................................... 59 10.6 Accounting for Loans.............................................. 59 10.7 Documents......................................................... 60 10.8 Default........................................................... 60 10.9 Spousal Consent................................................... 60 Article XI. Amendment and Termination...................................... 60 11.1 Amendment and Termination......................................... 60 11.2 Vesting on Termination or Partial Termination..................... 61 11.3 Merger, Consolidation, or Transfer................................ 62 11.4 Effect of Change in Control....................................... 62 Article XII. Administration of the Plan.................................... 63 12.1 Plan Administrator................................................ 63 12.2 Appointment and Resignation of Trustees........................... 64 12.3 Powers and Duties of the Plan Administrator....................... 64 12.4 Action by Majority of the Plan Administrator...................... 65 12.5 Rules and Regulations of the Plan Administrator................... 65 12.6 Conclusiveness of Reports, Etc.................................... 65 12.7 Claims Procedure.................................................. 65 12.8 Employment of Agents.............................................. 66 12.9 Compensation and Expenses of Trustees............................. 66 12.10 Indemnity for Liability.......................................... 67 12.11 Effect of Mistake................................................ 67 iii PAGE ---- Article XIII. Trust Arrangements........................................... 67 13.1 Appointment of Trustee............................................ 67 13.2 Change in Trust Agreements........................................ 67 13.3 Trust Fund........................................................ 68 13.4 Appointment of an Investment Manager.............................. 68 13.5 Diversification of Investments.................................... 68 13.6 Reversion of Employer Contributions............................... 69 Article XIV. Top-Heavy Plan Provisions..................................... 69 14.1 Application of Top-Heavy Provisions............................... 69 14.2 Definitions....................................................... 71 14.3 Vesting Requirements.............................................. 72 14.4 Minimum Contribution.............................................. 73 14.5 Limit on Annual Additions; Combined Plan Limit.................... 74 Article XV. Participation in and Withdrawal................................ 74 15.1 Participation in the Plan......................................... 74 15.2 Withdrawal from the Plan.......................................... 75 Article XVI. Miscellaneous................................................. 76 16.1 No Employment Rights Created...................................... 76 16.2 Rights to Fund Assets............................................. 76 16.3 Nonalienation of Benefits......................................... 76 16.4 Expenses.......................................................... 77 16.5 Severability...................................................... 77 16.6 Governing State................................................... 77 16.7 Facility of Payment............................................... 77 16.8 Missing Persons................................................... 78 16.9 Telephonic/Electronic Decisions................................... 78 16.10 Titles........................................................... 78 iv THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - B ARTICLE I. THE PLAN 1.1 ESTABLISHMENT OF PLAN. The Promus Hotel Corporation (the "Company") established the Promus Hotel Corporation Savings and Retirement Plan (the "S&RP") for its eligible Employees, effective as of June 30, 1995 (the "S&RP Spin-off Date"). The S&RP is a spin-off of The Promus Companies Incorporated Savings and Retirement Plan (now, the "Harrah's Entertainment, Inc. Savings and Retirement Plan" (the "Predecessor Plan")), which spin-off was pursuant to the distribution of a dividend of common stock in the Company to the shareholders of The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). The S&RP was amended effective June 30, 1995 and on November 15, 1995. As of December 31, 1995, the S&RP consisted of two plans, a profit-sharing plan and a stock bonus plan ("ESOP"). Effective as of December 31, 1995, the ESOP was spun-off from the S&RP. Following the spin-off of the ESOP, the S&RP was further split into two plans on December 31, 1995 by spinning off the portion of the S&RP attributable to the following participants: (1) Embassy Suitekeepers, (2) Hampton Room Attendants and (3) Homewood Suitekeepers and such plan was named The Promus Hotel Corporation Savings and Retirement Plan - B (the "Plan"). In order to document said spin-offs of the ESOP and the Plan from the S&RP and to make certain other administrative changes to the Plan, the Plan has been adopted by a resolution of the Board of Directors of the Company on November 15, 1995, effective as of January 1, 1996, except as otherwise provided in Exhibit 1. 1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are applicable only to Employees in the employ of the Company or an Affiliate on or after January 1, 1996, except as otherwise specifically provided herein. 1.3 PURPOSE OF PLAN. The purpose of the Plan is to allow eligible Employees to accumulate capital for their retirement. The Plan is intended to qualify as a profit sharing plan, and it, together with all related trusts, is intended to meet the requirements of Sections 401(a), 401(k), 401(m) and 501(a) of the Code. ARTICLE II. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below unless otherwise expressly provided. Any masculine terminology shall be deemed to refer either to a male or a female, and the definition of any term in the singular shall also include the plural, whichever is appropriate in the context. 2.1 ACCOUNT means the separate account maintained under the Plan for each Member, which represents his total proportionate interest in the Fund as of any Valuation Date and which consists of the sum of the following subaccounts: (a) EMPLOYEE ACCOUNT 1 means the portion of a Member's Account which evidences the value of-- (1) the Base Matching Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan and/or the S&RP; (2) the noncontributory portion of the Holiday Plan as in effect on December 31, 1977; and (3) forfeitures allocated to such Account under Section 4.6(a). Employee Account 1 also includes any gains and losses of the Fund attributable to paragraphs (1), (2), and (3). (b) EMPLOYEE ACCOUNT 2 means the portion of a Member's Account which evidences the value of the Basic Before-Tax Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan and/or S&RP, and also including any gains and losses of the Fund attributable thereto. (c) EMPLOYEE ACCOUNT 3 means the portion of a Member's Account which evidences the value of the Supplemental Before-Tax Contributions made on his behalf by an Employer, including the value of such contributions transferred from the Predecessor Plan and/or S&RP, and also including any gains and losses of the Fund attributable thereto. (d) EMPLOYEE ACCOUNT 4 means the portion of a Member's Account which evidences the value of his Basic After-Tax Contributions, including the value of such contributions transferred from the Predecessor Plan and/or S&RP, and also including any gains and losses of the Fund attributable thereto. 2 (e) EMPLOYEE ACCOUNT 5 means the portion of a Member's Account which evidences the value of his Supplemental After-Tax Contributions, including the value of such contributions transferred from the Predecessor Plan and/or the S&RP, and also including any gains and losses of the Fund attributable thereto. (f) EMPLOYEE ACCOUNT 6 means the portion of a Member's Account which evidences the value of the Discretionary Matching Contributions made on his behalf by an Employer, the value of such contributions transferred from the Predecessor Plan and/or the S&RP, and the value of forfeitures allocated to such Account under Section 4.6(a), including any gains and losses of the Fund attributable thereto. (g) EMPLOYEE ACCOUNT 7 means the portion of a Member's Account which evidences the value of his Rollover Contributions, including the value of such contributions transferred from the Holiday Plan, the Predecessor Plan and/or the S&RP, and also including any gains and losses of the Fund attributable thereto. (h) EMPLOYEE ACCOUNT 8 means the portion of a Member's Account transferred from the Predecessor Plan and/or the S&RP which is attributable to the Member's accounts from the Harrah's Retirement Plan and the Holiday Casino Profit Sharing Plan (collectively referred to as the "Harrah's Plans") which were previously merged into the Holiday Plan, and the value of forfeitures allocated to such Account under Section 4.6(b), including any gains and losses of the Fund attributable thereto. (i) EMPLOYEE ACCOUNT 9 means the portion of a Member's Account transferred from the Predecessor Plan and/or the S&RP which evidences the value of the portion of his account from the Holiday Plan attributable to direct transfers from the Holiday Inns, Inc. Employee's Retirement Plan and from any plan subject to Code Section 417, including any gains and losses of the Fund attributable thereto. 2.2 ADMINISTRATIVE DELEGATE means one or more persons or institutions to whom the Plan Administrator has delegated certain administrative functions pursuant to a written agreement. 2.3 AFFILIATE means a member of the same controlled group of corporations (as defined in Code Section 414(b)) as the Employer, a trade or business that is under common control (as defined in Code Section 414(c)) with the Employer; an organization which, along with the Employer, is a member of an affiliated service group (as defined in Code Section 414(m)); or any other entity while it is required to be aggregated with the Employer under 3 Code Section 414(o) and related Regulations. Notwithstanding anything in this Section to the contrary, for purposes of Section 4.8 (regarding annual limitations on additions to a Participant's Account), a determination as to whether an entity is an Affiliate shall be made in accordance with Code Section 415. 2.4 AFTER-TAX CONTRIBUTIONS mean the contributions made by a Participant under Section 4.2, which are derived from a Member's taxable compensation, and which shall include both Basic After-Tax Contributions and Supplemental After-Tax Contributions. 2.5 ANNUITY STARTING DATE means the first day of the first period for which a benefit is paid as an annuity or in any other form. 2.6 BASIC CONTRIBUTIONS mean those contributions on which Matching Contributions are made, and shall include Basic Before-Tax Contributions and Basic After-Tax Contributions. 2.7 BEFORE-TAX CONTRIBUTIONS mean the contributions made by an Employer on behalf of a Participant pursuant to the Participant's election to reduce Compensation, as described in Sections 4.1 and 4.3, and shall include both Basic Before-Tax Contributions and Supplemental Before-Tax Contributions. 2.8 BENEFICIARY means the person or persons designated under Section 9.1 to receive benefits under the Plan. 2.9 BOARD OF DIRECTORS means the board of directors of the Company, the Human Resources Committee, or any other committee of the Board of Directors designated by the Chief Executive Officer, with authority to act in matters related to the Plan. 2.10 BREAK YEAR means a Plan Year in which the Employee is credited with no more than 500 Hours of Service. 2.11 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Company. 2.12 CODE means the Internal Revenue Code of 1986, as amended from time to time. A reference to a provision of the Code shall, if such provision is amended, refer to the successor to such provision to the extent required by law. 2.13 COMPANY means Promus Hotel Corporation or any successor thereto that agrees to assume and continue this Plan. 2.14 COMPANY STOCK means the common stock of the Company or an Affiliate, as the Plan Administrator shall determine. 4 2.15 COMPENSATION. (a) Except as otherwise specified in subsections (b) and (c), Compensation means base pay paid to the Employee by the Employer (determined prior to such Employee's election to reduce wages under Code Section 125 or 401(k)); including shift premiums, commissions, and tips reported to the Employer for additional withholding of Federal income tax (not to exceed actual tips received); and excluding overtime, bonuses, and other forms of additional remuneration. (b) For purposes of determining whether an individual is a Highly Compensated Employee, "Compensation" means an Employee's compensation, as defined in Code Section 414(q)(7) and the applicable Treasury Regulations. (c) For purposes of satisfying the limits on contributions described in Section 4.7, Compensation means an Employee's compensation as defined in Code Section 414(s) and, at the Plan Administrator's election, may be increased by amounts excluded from wages by reason of an Employee's election to reduce wages under Code Sections 125 and 401(k). (d) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the annual compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of an Employee for purposes of this limitation, Code Section 414(q)(6) shall apply, except in applying such Section, the term "family" shall include only the Employee's spouse and any lineal descendants of the Employee who have not attained age 19 before the close of the Plan Year. 2.16 DIVISION means an Employer, Affiliate, group, or other identifiable unit of the Company. 2.17 ELIGIBLE EMPLOYEE means an Employee described in Section 3.3. 5 2.18 EMPLOYEE means any individual employed by the Company or an Affiliate. No individual shall be considered an Employee under the Plan by reason of service to the Company or an Affiliate solely as a director or during a period of service pursuant to an agreement designating such service as that of a consultant. 2.19 EMPLOYER means the Company and any Affiliate which is participating hereunder or which elects or determines, with the consent of the Chief Executive Officer, to participate hereunder. An Affiliate that employs a nonresident alien who is participating in this Plan under Section 3.3(a) shall be deemed an Employer only with respect to such nonresident alien. 2.20 ENROLLMENT FORM means the form described in Section 3.2. 2.21 ENTRY DATE means January 1, 1996, or any January 1 or July 1 thereafter. 2.22 ERISA means the Employee Retirement Income Security Act of 1974, as in effect at the time with respect to which such term is used. 2.23 FUND means the trust fund established under Article XIII to hold the assets of the Plan. It shall be composed of separate Investment Funds as permitted by the Plan Administrator and the Trustees. A separate Investment Fund exists to hold the Aurora National Life Assurance Company investment, formerly Executive Life investment, of certain Members (the "Executive Life Fund"). (See Addendum A attached hereto.) The Plan Administrator and the Trustees shall have the discretion to establish, amend, and terminate such Investment Funds as they shall deem appropriate. 2.24 HIGHLY COMPENSATED EMPLOYEE means an Employee who performs service during the determination year and is described in one or more of the following groups: (a) An Employee who is a 5% owner, as defined in Code Section 416(i)(1)(A)(iii), at any time during the determination year or the look-back year. (b) An Employee who receives compensation in excess of $75,000, (indexed in accordance with Code Section 415(d)) during the look-back year. (c) An Employee who receives compensation in excess of $50,000 (indexed in accordance with Code Section 415(d)) during the look-back year and is a member of the top-paid group for the look-back year. (d) An Employee who is an officer, within the meaning of Code Section 416(i), during the look-back year and who receives compensation in the look-back year greater than 50% of the dollar limitation in effect under Code 6 Section 415(b)(1)(A) for the calendar year in which the look-back year begins. (e) An Employee who is both described in paragraph (b), (c) or (d) above when these paragraphs are modified to substitute the determination year for the look-back year and one of the 100 employees who receive the most compensation from the Employer during the determination year. For purposes of the definition of Highly Compensated Employee: (1) The determination year is the Plan Year for which the determination of who is highly compensated is being made. (2) The look-back year is the 12 month period immediately preceding the determination year, or if the Employer elects, the calendar year ending with or within the determination year. (3) The top-paid group consists of the top 20% of Employees ranked on the basis of compensation received during the year. For purposes of determining the number of Employees in the top-paid group, Employees described in Code Section 414(q)(8) and Q & A 9(b) of Section 1.414(q)-1T of the Code Regulations are excluded. (4) The number of officers is limited to 50 (or, if lesser, the greater of 3 Employees or 10% of Employees) excluding those Employees who may be excluded in determining the top-paid group. (5) When no officer has compensation in excess of 50% of the Code Section 415(b)(1)(A) limit, the highest paid officer is treated as highly compensated. (6) Compensation means compensation within the meaning of Code Section 415(c)(3), including elective or salary reduction contributions to a cafeteria plan, cash or deferred arrangement or tax-sheltered annuity. (7) Employers aggregated under Code Section 414(b), (c), (m), or (o) are treated as a single Employer. For purposes of the requirements of Code Section 414(q), a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees is subject to the family aggregation rules of Code Section 414(q)(6). For purposes of the family aggregation rules, the term "family" means, with 7 respect to any Employee, such Employee's spouse and lineal ascendants and descendants and the spouses of such lineal ascendants and descendants. 2.25 HOLIDAY PLAN means the Holiday Corporation Savings and Retirement Plan, as in effect immediately before the Predecessor Effective Date. 2.26 HOUR OF SERVICE. (a) GENERAL RULE. "Hour of Service" means each hour for which the Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate-- (1) for the performance of duties, (2) on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, or (3) for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate; provided, however, that no hour shall be credited as an Hour of Service under more than one of the preceding paragraphs. For Employees who are paid on other than an hourly basis, Hours of Service shall be credited for each payroll period of the Employee for which the Employee receives or is entitled to receive compensation according to the following chart: Payroll Period Hours of Service Credited -------------- ------------------------- (1) Daily 10 (2) Weekly 45 (3) Bi-Weekly 90 (4) Semi-Monthly 95 (5) Monthly 190 (b) APPLICABLE COMPUTATION PERIOD. (1) Hours of Service described in subsection (a)(1) shall be credited to the computation period (as defined below) in which the duties are performed. (2) Hours of Service described in subsection (a)(2) shall be credited to the computation period in which the Employee is compensated for such Hours of Service. (3) Hours of Service described in subsection (a)(3) shall be credited to the computation period to 8 which the award or agreement for back pay pertains, rather than the computation period in which the award, agreement, or payment is made. (4) The term "computation period" means-- (A) the Plan Year, when crediting Hours of Service for purposes of determining Years of Vesting Service; and (B) the appropriate 12-month period determined under Section 2.50 for purposes of determining Years of Eligibility Service. (c) HOURS NOT COUNTED. This subsection limits the Hours of Service credited for periods during which no duties are performed and applies whether or not Hours of Service otherwise would have been counted for such periods under subsection (a)(2). (1) UNPAID TIME. An hour for which an Employee is not paid, either directly or indirectly, shall not be credited except in the case of an approved leave of absence or military leave (as defined below). (2) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT COMPENSATION. An hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which the Employee performed no duties shall not be credited if such payment is made or due under a plan maintained solely for the purpose of complying with an applicable workers' compensation, disability insurance, or unemployment compensation law. (3) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited for a payment which solely reimburses the Employee for medical or medically-related expenses incurred by the Employee. (4) 501 HOUR LIMITATION. Except in the case of an approved leave of absence or military leave and except as required by the Family and Medical Leave Act of 1993, not more than 501 Hours of Service shall be credited under subsection (a)(2) on account of any single period during which the Employee performs no duties (whether or not such period occurs in a single computation period). (d) MILITARY LEAVE. An Employee shall be credited with an Hour of Service for each hour of the normally scheduled workweek for each week during any period in which he is absent from work, without pay, with the Company and its 9 Affiliates for voluntary or involuntary military service with the armed forces of the United States of America, but not to exceed the period required under the laws pertaining to veteran's reemployment rights; provided, however, that if he fails to return to the employ of the Company or an Affiliate at the end of such absence during which he has reemployment rights under the applicable laws, he shall not receive credit for hours on such leave. (e) MATERNITY AND PATERNITY ABSENCE. Solely for purposes of determining whether a Break Year has occurred, an Employee shall be credited with an Hour of Service for each hour which would have been credited to such Employee but for such Employee's absence from employment for maternity or paternity reasons. In any case in which the Plan Administrator is unable to determine the hours which would have been credited to such Employee but for such absence, the Employee shall be credited with eight Hours of Service for each day of the normally scheduled workweek the Employee is absent from work for maternity or paternity reasons. An absence from work for maternity or paternity reasons shall mean an absence-- (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. Except as required by the Family and Medical Leave Act of 1993, no more than 501 Hours of Service shall be credited under this subsection for any such absence. Hours of Service under this subsection shall be credited in the Plan Year in which the absence from employment commences if the crediting is necessary to prevent a Break Year (and only to prevent a Break Year) or, in all other cases, such Hours of Service shall be credited in the following Plan Year (and only for the purpose of preventing a Break Year in such Plan Year). (f) SPECIAL RULE FOR FORMER EMPLOYEES OF THE PROMUS COMPANIES INCORPORATED. (1) Notwithstanding any other provision of this Section 2.26, for purposes of Sections 2.50 and 2.51, with respect to an Employee who was an 10 employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan), including for purposes of this Section 2.26(f) Harrah's Entertainment, Inc. or any of its subsidiaries, at any time prior to the S&RP Spin-Off Date and who becomes an Employee of the Company or an Affiliate under either of the circumstances described below, "Hour of Service" shall include, to the extent reasonably determinable by the Plan Administrator, each "Hour of Service" credited to such Employee under the Predecessor Plan through the date determined in accordance with the following: (A) any such employee who was employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) on the day immediately preceding the S&RP Spin-Off Date and who becomes employed by the Company or any Affiliate on or after the S&RP Spin-Off Date but prior to January 1, 1996, or who becomes concurrently employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) and the Company or an Affiliate as of the S&RP Spin-Off Date, shall be credited with such "Hours of Service" through the date of commencement of such Employee's employment or concurrent employment with the Company or Affiliate; or (B) any such employee who becomes employed by the Company or any Affiliate after December 31, 1995 but within five years after the S&RP Spin-Off Date shall be credited with such "Hours of Service" through the S&RP Spin-Off Date only. (2) Notwithstanding any other provision of this Section 2.26, for purposes of Section 2.50 and 2.51, with respect to an Employee who (i) is a former employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) participating in the Predecessor Plan, (ii) was, on the S&RP Spin-Off Date, employed by The Promus Companies Incorporated in a position in its Administrative Systems Department or Computer Operations Department in a capacity supporting the Human Resources and Financial Computer Systems for the hotel business of The Promus Companies Incorporated, (iii) terminates employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as 11 defined in the Predecessor Plan) within thirty months following the S&RP Spin-Off Date and (iv) within thirty days following such termination is employed by the Company or one of its Affiliates in a capacity substantially similar to the capacity in which such employee was employed by The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as defined in the Predecessor Plan), "Hour of Service" shall include, in addition to each "Hour of Service" credited to such employee during the period preceding and including the S&RP Spin-Off Date, each "Hour of Service" credited to such Employee under the Predecessor Plan during the period following the S&RP Spin-Off Date until the date of such termination of employment, to the extent that such service is reasonably determinable by the Plan Administrator. (g) CONSTRUCTION. This Section is intended to be consistent with the requirements of Section 2530.200b-2 of Department of Labor Regulations and shall be so construed. 2.27 HUMAN RESOURCES COMMITTEE means the committee of that name appointed by the Board of Directors, or any successor to such committee. 2.28 INVESTMENT FUND means one of the investment funds of the Fund which is authorized by the Plan Administrator and the Trustees at the time of reference, and may include a fund solely or primarily invested in Company Stock (the "Company Stock Fund"). 2.29 MATCHING CONTRIBUTIONS mean the contributions made by an Employer under Section 4.4 and shall include both Base Matching Contributions and Discretionary Matching Contributions. Matching Contributions shall also include forfeitures which are allocated based upon elective (Before-Tax) or Matching Contributions or Employee After-Tax Contributions. 2.30 MEMBER means a Participant, or a former Participant who still has a balance in his Account. 2.31 PARTICIPANT means any Employee of an Employer who has met and continues to meet the active participation requirements of the Plan as set forth in Article III. 2.32 PLAN means the Promus Hotel Corporation Savings and Retirement Plan - B, as set forth herein. 2.33 PLAN ADMINISTRATOR means the Promus Hotels, Inc. acting through one or more of its officers or their respective delegates. 12 2.34 PLAN YEAR means the calendar year. 2.35 PREDECESSOR EFFECTIVE DATE means February 6, 1990. 2.36 PREDECESSOR PLAN means The Promus Companies Incorporated Amended and Restated Savings and Retirement Plan (now, the Harrah's Entertainment, Inc. Savings and Retirement Plan), as in effect immediately before the S&RP Spin-Off Date, unless otherwise required by the context to include the Harrah's Entertainment, Inc. Savings and Retirement Plan, as in effect after the S&RP Spin-Off Date. 2.37 RETIREMENT DATE under the Plan includes the following: (a) NORMAL RETIREMENT DATE means the Employee's sixty-fifth birthday. (b) EARLY RETIREMENT DATE means the date on or after the Employee's fifty-fifth birthday, but before his sixty-fifth birthday, on which he retires. 2.38 ROLLOVER CONTRIBUTIONS mean the contributions made under Section 4.9. 2.39 SPIN-OFF DATE means December 31, 1995. 2.40 S&RP means the Promus Hotel Corporation Savings and Retirement Plan. 2.41 S&RP SPIN-OFF DATE means June 30, 1995 which is the date of the distribution of a dividend of common stock in the Company to the shareholders of The Promus Companies Incorporated when the S&RP was spun off of the Predecessor Plan. 2.42 SUPPLEMENTAL CONTRIBUTIONS mean those employee contributions that are not eligible for Matching Contributions, and shall include Supplemental Before-Tax Contributions and Supplemental After-Tax Contributions. 2.43 TERMINATION OF SERVICE means the last date on which the individual is an Employee of the Company or an Affiliate. 2.44 TOTAL AND PERMANENT DISABILITY means any physical or mental injury or disease which causes an Employee to be permanently incapable of continuing employment with his or her Employer or securing any gainful employment. Such disability shall be established by certification to the Plan Administrator. Such certification shall be by: (a) a physician selected by the Employee and approved by the Plan Administrator; (b) three physicians, one selected by the Employee, one selected by the Plan Administrator, and one selected 13 by the physicians selected by the Employee and Plan Administrator; (c) an award to receive Social Security disability benefits; or (d) approval of waiver of premiums under the Employer's group life insurance plan. 2.45 TRUST AGREEMENT means the agreement under which Plan assets are held and invested pursuant to Article XIII. 2.46 TRUSTEES means the person or persons acting as trustee under the Trust Agreement. 2.47 VALUATION DATE means any day that the New York Stock Exchange is open for business or any other date designated by the Plan Administrator and the Trustees. 2.48 VESTED BALANCE as of a given date means the Vested Percentage of the Member's Employee Accounts 1, 6, and 8 plus the aggregate balances of the Member's Employee Accounts 2, 3, 4, 5, 7 and 9. 2.49 VESTED PERCENTAGE means the percentage determined under Section 7.2 or 7.3 of the Plan, whichever is applicable. 2.50 YEAR OF ELIGIBILITY SERVICE. An Employee shall receive credit for a Year of Eligibility Service for each 12-month period during which the Employee completes 1,000 or more Hours of Service, beginning on (1) the earlier of the Employee's first day of compensated work for the Company or an Affiliate or, to the extent applicable pursuant to Section 2.26(f), The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or an affiliate thereof (as defined in the Predecessor Plan) or (2) any January 1 thereafter. 2.51 YEAR OF VESTING SERVICE. (a) GENERAL RULE. An Employee shall be credited with a Year of Vesting Service for each Plan Year in which he is credited with at least 1,000 Hours of Service; provided however, that no Employee shall be credited with more than one Year of Vesting Service for any Plan Year, notwithstanding that an Employee may have 1,000 or more Hours of Service with more than one Company or Affiliate or other entity during the Plan Year. (b) EFFECT OF BREAK IN SERVICE. An Employee's Years of Vesting Service completed prior to a Break Year shall be disregarded if (1) the Employee was not vested in any part of his Employee Accounts 1, 6, or 8 prior to such Break Year and (2) the number of such consecutive Break Years equals or exceeds the greater of five or 14 the aggregate number of Years of Vesting Service completed prior to such Break Year. In determining the aggregate number of Years of Vesting Service for purposes of this subsection (c), the aggregate number of Years of Vesting Service completed prior to a Break Year shall not include Years of Vesting Service disregarded by reason of any prior Break Year. (c) SPECIAL RULE FOR FIRST YEAR OF VESTING SERVICE. Solely for the purpose of determining an Employee's Vested Percentage, if the Employee completes a Year of Eligibility Service but does not complete a Year of Vesting Service in the Plan Year (or preceding Plan Year) in which the Employee completes such Year of Eligibility Service, the Employee shall be credited with a Year of Vesting Service for the Plan Year in which he completes a Year of Eligibility Service. ARTICLE III. ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY. Each Eligible Employee who was eligible to participate in the S&RP on the Spin-Off Date shall be eligible to become a Participant in this Plan on January 1, 1996, provided that he is then an Eligible Employee. Each other Employee who becomes an Eligible Employee after January 1, 1996 shall be eligible to become a Participant on the latest of: (a) the Entry Date coincident with or next following the date on which he becomes an Eligible Employee; (b) the Entry Date coincident with or next following his completion of one Year of Eligibility Service; or (c) any business day. 3.2 PARTICIPATION. (a) An Employee who became a Participant under Section 3.1 on January 1, 1996, and who was a participant in the S&RP on the Spin-Off Date, shall be enrolled in the Plan as of January 1, 1996 at the same contribution rates, and with the same investment elections and beneficiary designation, that were in effect for him under the S&RP on the Spin Off Date; provided, however, that such Employee may change these contribution and investment elections and beneficiary designation by submitting an Enrollment Form (as described in subsection (b)) at the time and in the manner specified by the Plan Administrator. (b) An Employee who shall from time to time qualify to become a Participant in accordance with Section 3.1 may enroll in the Plan, with regard to the elective contributions described in Sections 4.1 and 4.2, as of 15 the Entry Date coincident with or next following the date on which he satisfies the requirements of Section 3.1, or any business day thereafter, by submitting an Enrollment Form at the time and in the manner specified by the Plan Administrator. Such Enrollment Form shall serve as-- (1) a pay reduction agreement pursuant to Section 4.3; (2) a Beneficiary designation pursuant to Section 9.1; (3) an investment election pursuant to Section 6.1; and (4) a pre-authorization to effect future changes to his investment election under paragraph (3) as directed by the Participant telephonically or by written instruction to the Administrative Delegate. 3.3 ELIGIBLE EMPLOYEES. (a) GENERAL RULE. Subject to the provisions of subsection (b), the term "Eligible Employee" shall mean an Employee of an Employer who is classified by the Company as an (1) Embassy Suitekeeper, (2) Hampton Room Attendant or (3) Homewood Suitekeeper and shall include a nonresident alien who receives no United States source income from an Employer who has been designated by an Employer as eligible to participate in this Plan; provided, however, that such Employee has attained age 21. (b) EXCLUDED EMPLOYEES. There shall be excluded from the class of "Eligible Employees" any Employees included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, unless such agreement specifically provides for participation in the Plan. In addition, there shall be excluded from the class of "Eligible Employees" any Employees who (1) are nonresident aliens and receive no United States source income from an Employer unless specifically designated as "Eligible Employees" by the Employer, or (2) reside in Puerto Rico or are otherwise subject to the income tax code of Puerto Rico unless such Employee is designated as an Eligible Employee by the Employer. 3.4 REHIRED EMPLOYEES. Each reemployed Employee who was an Eligible Employee and who had completed a Year of Eligibility Service prior to his Termination of Service but was not then a Participant shall be eligible to become a Participant on the 16 Entry Date coincident with or next following his satisfying the requirements of Section 3.3, or on any business day thereafter, provided he completes an appropriate Enrollment Form. A former Eligible Employee who was a Participant and is re-employed as an Eligible Employee will be eligible to participate in the Plan immediately upon his or her reemployment commencement date by completing an appropriate enrollment form. Each Participant who ceases to be an Eligible Employee because he no longer classified by the Company as an (1) Embassy Suitekeeper, (2) Hampton Room Attendant or (3) Homewood Suitekeeper and who is subsequently retransferred into a position which qualifies him as an Eligible Employee under Section 3.3 will be eligible to participate in the Plan immediately upon such retransfer by completing an enrollment form. Each other former Employee who is subsequently rehired by the Company or an Affiliate as an Eligible Employee shall, upon reemployment, become a Participant in accordance with Sections 3.1 and 3.2. 3.5 LOSS OF STATUS AS ELIGIBLE EMPLOYEE. For any period during which a Member either-- (a) remains in the employ of the Company or Affiliate, but ceases to be an Eligible Employee within the meaning of Section 3.3; or (b) is no longer an Employee but has an Account balance under the Plan, no contributions of any kind shall be made on his behalf to his Account, but such individual shall remain a Member for all other purposes until the earlier of his death or the complete distribution (and/or forfeiture) of his Account. 3.6 LEASED EMPLOYEES. A person who is treated as an Employee of an Employer or an Affiliate pursuant to Code Section 414(n) or (o) and the regulations thereunder shall be considered a "leased employee" and shall not be considered an Employee for purposes of the Plan. If such a person participates in the Plan as a result of subsequent employment with an Employer or Affiliate, he shall receive Years of Eligibility Service and Years of Vesting Service for his employment as a leased employee. Notwithstanding the preceding provisions of this Section, a leased employee shall be treated as an Employee for purposes of applying the requirements described in Code Section 414(n)(3) and in determining the number and identity of Highly Compensated Employees. 17 ARTICLE IV. CONTRIBUTIONS AND ALLOCATIONS 4.1 BEFORE-TAX CONTRIBUTIONS. (a) BASIC BEFORE-TAX CONTRIBUTIONS. Each Employer shall contribute to the Fund, on behalf of each Participant of such Employer, Basic Before-Tax Contributions in an amount equal to the amount by which the Participant's Compensation has been reduced for such contributions under a Pay Reduction Agreement described in Section 4.3. Such reduction for Basic Before-Tax Contributions shall be a specified whole percentage of Compensation of no more than six percent and shall be subject to Section 4.3(d). (b) SUPPLEMENTAL BEFORE-TAX CONTRIBUTIONS. Provided that a Participant is making Basic Before-Tax contributions at a rate of 6 percent, such Participant's Employer shall contribute to the Fund, on his behalf, Supplemental Before-Tax Contributions in an amount equal to the amount by which the Participant's Compensation has been reduced for such contributions under a pay reduction agreement described in Section 4.3; provided, however, that a Highly Compensated Employee may not make Supplemental Before-Tax Contributions. Such reduction for Supplemental Before-Tax Contributions shall be a specified whole percentage of Compensation and shall be within limits established from time to time by the Chief Executive Officer and communicated to all Participants. (c) LIMIT ON BEFORE-TAX CONTRIBUTIONS. The maximum Before-Tax Contributions are as follows: (A) 14% for non-Highly Compensated Employees. (B) 6% for Highly Compensated Employees. (d) TIMING AND ALLOCATION OF BEFORE-TAX CONTRIBUTIONS. Before-Tax Contributions shall be paid to the Fund as soon as practicable after each payroll period, provided that in no event shall contributions under this Section for any Plan Year be made later than (1) the date prescribed by law for the Employer to obtain a federal income tax deduction for the Plan Year for which such contributions are made or (2) the date required under ERISA and the regulations thereunder, if earlier. Basic Before-Tax Contributions shall be allocated to Employee Account 2 and Supplemental Before-Tax Contributions shall be allocated to Employee Account 3 as soon as administratively feasible following such payments to the Fund. 18 4.2 AFTER-TAX CONTRIBUTIONS. (a) BASIC AFTER-TAX CONTRIBUTIONS. A Participant may contribute to the Fund Basic After-Tax Contributions in an amount specified by him in the pay reduction agreement described in Section 4.3. Such Basic After-Tax Contributions shall be a specified whole percentage of Compensation and, when added to a Participant's Before-Tax Contributions, shall not exceed 6 percent of such Participant's Compensation and shall be subject to Section 4.3(d). (b) SUPPLEMENTAL AFTER-TAX CONTRIBUTIONS. Provided that a Participant has made the maximum Basic After-Tax Contributions permitted under subsection (a), he may contribute to the Fund Supplemental After-Tax Contributions in an amount equal to an amount specified by him in the pay reduction agreement described in Section 4.3. Such Supplemental After-Tax Contributions shall be a specified whole percentage of Compensation and, when added to a Participant's Before-Tax Contributions and Basic After-Tax Contributions, shall not exceed 16 percent of such Participant's Compensation. (c) TIMING AND ALLOCATION OF AFTER-TAX CONTRIBUTIONS. After-Tax Contributions shall be made at the time described in Section 4.1(d). Basic After-Tax Contributions shall be allocated to Employee Account 4 and Supplemental After-Tax Contributions shall be allocated to Employee Account 5 as soon as administratively feasible following such payment to the Fund. 4.3 PAY REDUCTION AGREEMENTS. (a) GENERAL RULE. In order to make Before-Tax Contributions and After-Tax Contributions, an Eligible Employee who has satisfied the requirements of Section 3.1 must enter into a pay reduction agreement, which shall be part of the Enrollment Form, whereby such Eligible Employee agrees to reduce his Compensation for such contribution within the limits described in Sections 4.1 and 4.2. A Participant's pay reduction agreement shall remain effective until canceled or amended. (b) CANCELLATION. A pay reduction agreement may be canceled by a Participant at any time during the Plan Year by filing notice thereof with the Plan Administrator. Such cancellation shall take effect as soon as administratively feasible following its receipt by the Plan Administrator. 19 (c) AMENDMENT. A pay reduction agreement may be amended by a Participant to increase or decrease his Before-Tax Contributions and After-Tax Contributions, or to reallocate the amount of contributions between Before-Tax Contributions and After-Tax Contributions, at any time during the Plan Year by filing notice thereof with the Plan Administrator. Such amendment shall take effect as soon as administratively feasible following its receipt by the Plan Administrator. (d) LIMITATION. No pay reduction agreement shall be effective unless it provides for reduction of a specified whole percentage of Compensation of at least two percent for Basic Before-Tax Contributions or Basic After-Tax Contributions, or any combination of the two. 4.4 MATCHING CONTRIBUTIONS. (a) BASE MATCHING CONTRIBUTIONS. Each Employer shall make Base Matching Contributions on behalf of each of its Employees, in an amount equal to 100 percent of an Employee's Basic Contributions (which shall not exceed 6 percent of such Employee's Compensation). (b) DISCRETIONARY MATCHING CONTRIBUTIONS. For each Plan Year, each Employer may make Discretionary Matching Contributions to Participants who are employed by an Employer or a Division that achieves its budgeted pretax profit for such Plan Year, as determined by the Chief Executive Officer in his sole and absolute discretion. The amount of any such Discretionary Matching Contributions, which shall be expressed as a percentage of the Participant's Basic Contributions, shall also be determined by the Chief Executive Officer and be subject to the approval of the Human Resources Committee. (c) TIMING AND ALLOCATION OF MATCHING CONTRIBUTIONS. Matching Contributions shall be made, in cash or Company Stock, as soon as practicable after the end of the pay period to which they relate, provided that in no event shall contributions under this Section for any Plan Year be made later than the date as prescribed by law for the Employer to obtain a federal income tax deduction for the Plan Year for which such contributions are made. Basic Matching Contributions shall be allocated to Employee Account 1 and Discretionary Matching Contributions shall be allocated to Employee Account 6 as soon as administratively feasible following the payment of such consideration to the Fund. Amounts allocated to Employee Account 6 may, at the Chief Executive Officer's discretion, be credited to the Investment Fund invested solely or primarily in Company Stock. 20 4.5 [RESERVED] 4.6 ALLOCATION OF FORFEITURES. (a) FORFEITED MATCHING CONTRIBUTION. To the extent not otherwise applied under Section 7.4(b) for purposes of restoration of forfeitures for reemployed Members, forfeitures of Matching Contributions attributable to a Plan Year quarter in accordance with Section 7.4 and 16.8, shall be allocated as of the end of such Plan Year quarter to Participants who are in active employment on the last day of such Plan Year quarter; provided, however, if Section 401(a)(28) requires a transfer to the Plan pursuant to Section 4.9(d) prior to the end of a Plan Year quarter but following the end of the next preceding calendar quarter, such allocation shall be made on the last date such that such transfer is required under Section 401(a)(28) to Participants who are in active employment or such date. The amount of forfeitures allocated to each Participant under this subsection shall be a proportion equal to -- (1) the Basic Contributions made by the eligible Participant during the Plan Year quarter for which the allocation is made, divided by (2) the Basic Contributions made by all eligible Participants for such Plan Year quarter. Amounts allocated pursuant to this subsection shall be credited to the Employee Account from which such forfeitures were derived. (b) EMPLOYEE ACCOUNT 8. To the extent not otherwise applied under Section 7.4(b) for purposes of restoration of forfeitures from Employee Account 8 for reemployed Members, forfeitures of Employee Account 8 attributable to a Plan Year quarter in accordance with Section 7.4 and 16.8 shall be allocated as of the end of such Plan Year quarter to those Participants who are in active employment on the last day of such Plan Year quarter, and who have a balance in Employee Account 8 at that time; provided, however, if Section 401(a)(28) requires a transfer to the Plan pursuant to Section 4.9(d) prior to the end of a Plan Year quarter but following the end of the next preceding calendar quarter, such allocation shall be made on the last date such that such transfer is required under Section 401(a)(28) to Participants who are in active employment or such date and who have a balance in Employee Account 8 at that time. The amount of forfeitures allocated to each Participant under this subsection shall be a portion of the total of such forfeitures equal to -- 21 (1) the balance in such Participant's Employee Account 8 as of the last Valuation Date of the Plan Year quarter, divided by (2) the total balance in Employee Account 8 for all such Participants as of the last Valuation Date in the Plan Year quarter; and amounts allocated pursuant to this subsection shall be credited to Employee Account 8. 4.7 LIMITATIONS ON CONTRIBUTIONS. (a) BEFORE-TAX CONTRIBUTIONS. (1) In no event shall any Employer make Before-Tax Contributions for any calendar year with respect to any Member, which, when aggregated with other deferrals in such calendar year by the Member pursuant to any other cash or deferred arrangement maintained by the Company or an Affiliate under Section 401(k), are in excess of $7,000 (or such greater amount as may be determined under Code Section 402(g)). If a Member has Before-Tax Contributions in excess of $7,000 (or such greater amount as may be permitted under Code Section 402(g)) for a Plan Year, such excess shall be refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. A Member retains the right to make changes in his contributions as provided in Section 4.3(a), except a Member may not change his or her contributions to exceed the maximum permitted by law or by this Plan. (2) In no event shall any Employer make Before-Tax Contributions for any Plan Year that would result in the actual deferral percentage of the group of Highly Compensated Employees eligible to participate in the Plan exceeding the actual deferral percentage of the group of all other eligible Employees by more than the greater of-- (A) one and one-quarter times; or (B) the lesser of two times or two percentage points. The deferral percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each 22 eligible Employee in each group) of (i) the Before-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator shall reduce Before-Tax Contributions made on behalf of the Highly Compensated Employees. Such reduction shall be effected by reducing contributions made on behalf of Highly Compensated Employees (in the order of their actual deferral percentage) beginning with the Highly Compensated Employees who elected the highest percentage of such contributions. Any such reduction in the Before-Tax Contributions made on behalf of any Member shall be recharacterized as After-Tax Contributions or refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. If recharacterized, such excess contributions shall be recharacterized as soon as practicable. In no event, however, shall such excess contributions be left unrecharacterized later than two and one-half months following the Plan Year in which such contributions were made. In addition to the foregoing, if the Plan Administrator determines during the course of a Plan Year that the discrimination test of Code Section 401(k)(3) otherwise might not be met for the Plan Year, the Plan Administrator may reduce, at any time, the maximum percentage of Compensation at which Highly Compensated Employees may elect Before-Tax Contributions to such percentage as the Plan Administrator determines appropriate to ensure that such test shall be met for such Plan Year. For purposes of determining whether the Plan satisfies the actual deferral percentage test of Code Section 401(k), the following provisions shall apply: (i) All elective contributions that are made under two or more plans that are aggregated for purposes of Code Section 401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)) are to be treated as made under a single plan and if two or more plans are permissively aggregated for purposes of Code Section 401(k), the aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b) as 23 though they were a single plan. Plans that are aggregated must have the same Plan Year. (ii) In calculating the actual deferral percentage for purposes of Code Section 401(k), the actual deferral ratio of a Highly Compensated Employee will be determined by treating all cash or deferred arrangements under which the Highly Compensated Employee is eligible (other than those that may not be permissively aggregated) as a single arrangement. (iii) In the case of a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees and is thereby subject to the family aggregation rules of Code Section 414(q)(6), the actual deferral ratio (ADR) for the family group (which is treated as one Highly Compensated Employee) is the ADR determined by combining the elective contributions, compensation, and amounts treated as elective contributions of all eligible family members. Except to the extent taken into account in the preceding sentence, the elective contributions, compensation, and amounts treated as elective contributions of all family members are disregarded in determining the actual deferral percentages for the groups of Highly Compensated Employees and non-Highly Compensated Employees. (iv) In the case of a Highly Compensated Employee whose ADR is determined under the family aggregation rules, the determination of the amount of excess contributions shall be as follows: The ADR is reduced in accordance with the "leveling" method described in Code Section 1.401(k)-1(f)(2) of the Code Regulations and the excess contributions are allocated among the family members in proportion to the contributions of each family member that have been combined. (v) The amount of excess contributions to be distributed or recharacterized shall be reduced by excess deferrals previously distributed for the taxable year ending in the same Plan Year and excess deferrals to be distributed for a taxable year will be reduced by excess contributions previously distributed or recharacterized for the Plan Year beginning in such taxable year. (vi) The distribution of excess contributions will include the income allocable thereto. The income allocable to excess contributions will include income for the Plan Year for which the excess 24 contributions were made and will be equal to the sum of the allocable gain or loss for the Plan Year. The Plan will allocate income to excess contributions by multiplying the income for the Plan Year allocable to the Employee's elective contributions (Before-Tax Contributions) and amounts treated as elective contributions by the following fraction: The numerator of the fraction is the excess contributions for the Employee for the Plan Year and the denominator of the fraction is equal to the sum of: (1) the total Account balance of the Employee attributable to elective contributions (Before-Tax Contributions) and amounts treated as elective contributions as of the beginning of the Plan Year, plus (2) the Employee's elective contributions (Before-Tax Contributions) and amounts treated as elective contributions for the Plan Year. (vii) Excess contributions will be corrected by the close of the Plan Year following the Plan Year for which they were made, since the failure to make such corrections by the close of the Plan Year following the Plan Year for which they were made will cause the Plan to fail to satisfy the requirements of Code Section 401(k)(3) for the Plan Year for which the excess contributions were made and for all subsequent years they remain in the trust. In addition, the Plan will endeavor to correct excess contributions within 2 1/2 months after the close of the Plan Year for which they were made since it is understood that the Employer will be liable for a 10% excise tax on the amount of excess contributions unless they are corrected within such 2 1/2 month period. (viii) Recharacterized excess contributions will remain subject to the nonforfeitability requirements and distribution limitations that apply to elective contributions. (b) MATCHING CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS. In no event shall Matching Contributions and After-Tax Contributions for any Plan Year be made which would result in the contribution percentage of the group of Highly Compensated Employees eligible to participate in the Plan exceeding the contribution percentage of the group of all other eligible Employees by more than the greater of-- (1) one and one-quarter times; or (2) the lesser of (A) two times or (B) two percentage points. 25 The contribution percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Matching Contributions and After-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator shall reduce Matching Contributions and After-Tax Contributions made on behalf of the Highly Compensated Employees in a manner similar to the method described in subsection (a). Any such reduction in the Matching Contributions or After-Tax Contributions made on behalf of any Member (including income and losses allocable thereto) shall be paid to the Member if vested, or treated as a forfeiture (if forfeitable). To the extent permitted by applicable Regulations, the Plan Administrator may elect to take Before-Tax Contributions into account in applying the contribution percentage test of this subsection (b). The Plan Administrator may comply with the requirements of this Section by combining contributions under this Plan with contributions under any other defined contribution plan maintained by the Company or an Affiliate, or in any other manner permissible under Code Section 401(k)(3) or 401(m)(2), as applicable. Any such combination shall be done in compliance with such guidelines, if any, established by the Secretary of the Treasury. The following provisions shall apply for purposes of determining whether the Plan satisfies the actual contribution percentage test of Code Section 401(m): (i) All Employee and matching contributions that are made under two or more plans that are aggregated for purposes of Code Section 401(a)(4) and 410(b) (other than Code Section 410(b)(2)(A)(ii)) are to be treated as made under a single plan and if two or more plans are permissively aggregated for purposes of Code Section 401(m), the aggregated plans must also satisfy Code Section 401(a)(4) and 410(b) as though they were a single plan. To be aggregated, the plans must have the same Plan Year. (ii) In calculating the actual contribution percentage for purposes of Code Section 401(m), the actual contribution ratio of a Highly Compensated Employee will be determined by treating all plans 26 subject to Code Section 401(m) under which the Highly Compensated Employee is eligible (other than those that may not be permissively aggregated) as a single plan. (iii) In the case of a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees and is thereby subject to the family aggregation rules of Code Section 414(q)(6), the actual contribution ratio (ACR) for the family group (which is treated as one Highly Compensated Employee) is the ACR determined by combining the contributions and compensation of all eligible family members. Except to the extent taken into account in the preceding sentence, the contributions and compensation of all family members are disregarded in determining the actual contribution percentages for the groups of Highly Compensated Employees and non-Highly Compensated Employees. (iv) In the case of a Highly Compensated Employee whose ACR is determined under the family aggregation rules, the determination of the amount of excess aggregate contributions shall be made as follows: the ACR is reduced in accordance with the "leveling" method described in Section 1.401(m)-1(e)(2) of the Code Regulations and the excess aggregate contributions are allocated among the family members in proportion to the contributions of each family member that have been combined. (v) The amount of excess aggregate contributions for a Plan Year shall be determined only after first determining the excess contributions that are treated as Employee contributions due to recharacterization. (vi) The distribution (or forfeiture, if applicable) of excess aggregate contributions will include the income allocable thereto. The income allocable to the excess aggregate contributions shall include income for the Plan Year for which the excess aggregate contributions were made and will be equal to the sum of the allocable gain or loss for the Plan Year. The Plan will allocate income to excess aggregate contributions by multiplying the income for the Plan Year allocable to the Employee's employee contributions (After-Tax Contributions), Matching Contributions, and amounts treated as Matching Contributions by the following fraction: The numerator of the fraction is the excess aggregate contributions for the 27 Employee for the Plan Year and the denominator of the fraction is equal to the sum of: (1) the total account balance of the Employee attributable to employee contributions (After-Tax Contributions) and Matching Contributions and amounts treated as Matching Contributions as of the beginning of the Plan Year, plus (2) the Employee's employee contributions (After-Tax Contributions) and Matching Contributions and amounts treated as Matching Contributions for the Plan Year. (vii) A method of correcting excess aggregate contributions shall meet the nondiscrimination requirements of Code Section 401(a)(4). Accordingly, the Plan shall not use a method under which Employee contributions are distributed to Highly Compensated Employees to the extent necessary to meet the requirements of Code Section 401(m)(2) while matching contributions attributable to such Employee contributions remain allocated in the Employee's account. If it is necessary to distribute Employee contributions that have been matched to a Highly Compensated Employee, then a pro-rata share of Employer Matching Contributions will also be distributed to such Employee so that Matching Contributions that remain allocated to Employee accounts will meet the requirements of Code Section 401(a)(4). (viii) Excess aggregate contributions shall be corrected by the close of the Plan Year following the Plan Year for which they were made. It is understood that if such correction is not made by the close of the Plan Year following the Plan Year for which they were made, such failure will cause the Plan to fail to satisfy the requirements of Code Section 401(a)(4) for the Plan Year for which the excess aggregate contributions were made and for all subsequent years they remain uncorrected. The Plan shall endeavor to correct excess aggregate contributions within 2 1/2 months after the close of the Plan Year for which they are made since it is understood the Employer will be liable for a 10% excise tax on the amount of excess aggregate contributions unless they are so corrected. (ix) Elective contributions and/or qualified nonelective contributions may be treated as matching contributions only if the conditions described in Section 1.401(m)-1(b)(5) of the Code Regulations are satisfied. (c) [RESERVED] 28 (d) ADDITIONAL LIMITATION. The limits of this subsection shall comply with the provisions of Code Regulation 1.401(m)-2 for "multiple use of the alternative limitation" and for this purpose the provisions of Section 1.401(m)-2(d) of the Code Regulations are incorporated herein by reference. Correction of the multiple use of the alternative limitation shall occur by first reducing the actual contribution percentages for only those Highly Compensated Employees who are eligible in both the arrangement subject to Code Section 401(k) and the plan subject to Code Section 401(m). If this is insufficient to make the correction, then the actual deferral percentage shall be reduced for these Employees in a manner that complies with Code Regulations. 4.8 LIMITATIONS ON ANNUAL ADDITIONS. The provisions of this Section 4.8 shall apply to Plan Years (which shall be the "limitation years" under this Plan for purposes of Code Section 415). (a) ANNUAL ADDITION. "Annual Addition" means, for any Participant for any Plan Year, an annual addition as defined in Code Sections 415(c)(2) and 415(c)(6), generally including the sum of: (1) all Company and Affiliate contributions made for the Participant under "any defined contribution plan" for the year; (2) the Participant's after-tax contributions for the year to "any defined contribution plan;" (3) any forfeitures or employer contributions allocated to him for the year under "any defined contribution plan"; except as otherwise specified in Code Section 415(c)(6) for an employee stock ownership plan that satisfies certain nondiscrimination requirements; and (4) contributions to an individual, post-retirement medical account for the Participant, to the extent required by Code Section 415(1) or 419A(d)(2). "Any defined contribution plan" means all qualified defined contribution plans of the Employers and Affiliates that are considered as one plan under Code Sections 414 and 415. (b) LIMITATION. Notwithstanding the foregoing provisions of this Article IV, for any Plan Year the Annual Addition of a Participant shall not exceed the lesser of-- 29 (1) $30,000 (or other amount for a particular Plan Year as may be determined under Code Sections 415(c)(1) and 415(d) and related Regulations); or (2) 25 percent of the Participant's wages and all other payments of compensation (for such Plan Year) as reported on Form W-2 (currently entitled "wages, tips, other compensation") (or the successor method of reporting income under Code Sections 6041, 6051 and 6052) and as described in Treas. Reg. Section 1.415-2(d)(11)(i). (c) ADDITIONAL LIMITATION. If in any Plan Year a Participant is both a participant in any defined contribution plan and a participant in any qualified defined benefit plan of the Employer or an Affiliate, the sum of the defined benefit fraction (as defined in Code Section 415(e)(2)) and the defined contribution fraction (as defined in Code Section 415(e)(3)) shall not exceed 1.0. In calculating the defined contribution fraction, the Plan Administrator may, in his discretion, make the election provided under Code Section 415(e)(6). Before any contributions are reduced under this Plan, the benefit under a defined benefit plan shall be reduced to the extent necessary to ensure that the sum of the defined benefit fraction and defined contribution fraction does not exceed 1.0. (d) REDUCTION IN ANNUAL ADDITIONS. (1) If in any Plan Year a Member's Annual Addition exceeds the limitation determined above, such excess shall not be allocated to his accounts in any defined contribution plan. In accordance with the provisions of Code Section 415 and the Regulations thereunder, the Plan Administrator will distribute elective deferrals (within the meaning of Code Section 402(g)(3)) or return voluntary Employee contributions to the extent that the distribution or return will reduce the excess amounts in the Member's Account. Amounts equal to any gains attributable to the returned elective deferrals and voluntary Employee contributions will also be returned to the Member if necessary to insure that a Member's Annual Addition does not exceed the limitation determined above. If gains attributable to the returned elective deferrals or returned voluntary Employee contributions are not returned to the Member, such earnings will be considered as an Employee contribution for the limitation Plan Year for which the returned contribution was made. (2) If the foregoing distributions do not completely reduce the excess amounts in the Member's account, then the remaining excess amounts in the Member's Account will be placed in a suspense account and used to reduce Employer contributions for the next Plan Year and succeeding 30 Plan Years as necessary (referred to as the "Next Plan Year"). Such remaining excess amounts will be held unallocated in the suspense account for the limitation Plan Year and will be allocated and reallocated in the next Plan Year to the Accounts of all Participants in accordance with applicable Code Regulations. Such suspense account shall share in the gains and losses of the Fund on the same basis as other Accounts. Excess amounts that are allocated to Participants will be used to reduce Employer contributions for the Plan Year in which such allocation occurs. For purposes of this Section 4.8(d)(2), excess amounts will not be distributed to Participants or former Participants. 4.9 ROLLOVER CONTRIBUTIONS AND PLAN TO PLAN TRANSFERS. (a) ROLLOVER CONTRIBUTIONS. Any Eligible Employee, including an individual who has not satisfied the service requirements of Article III, may, with the approval of the Plan Administrator, contribute lump sum cash amounts to the Plan which are attributable to eligible rollover distributions within the meaning of Code Sections 402(c) or 403(a) or qualifying rollover distributions within the meaning of Code Section 408(d)(3); provided, however, that if such amounts are not contributed to the Plan in a direct transfer within the meaning of Code Section 401(a)(31), such amounts shall be contributed to the Plan within sixty days following the day on which the Employee received the distribution from a qualified trust, annuity plan, individual retirement account or individual retirement annuity. Such amounts shall be credited to the Employee Account 7 established for the Employee. An Eligible Employee who has not yet satisfied the service requirements of Article III shall be treated as a Member solely with regard to his Employee Account 7. (b) TRANSFERS FROM PREDECESSOR PLAN. In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner), the Plan will accept the direct transfer from the Predecessor Plan of an amount which if paid to the Participant instead of the Plan would have constituted a lump sum distribution within the meaning of Code Section 402(e). Such a plan-to-plan transfer must be for a person who has been admitted or readmitted to the Plan as a Participant and be received by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. To the extent possible, as determined in the sole discretion of the Plan Administrator, such amount shall be credited to the subaccounts of this Plan which are analogous to the subaccounts of the Predecessor Plan in which such amounts were held immediately prior to such transfer; 31 otherwise, the transferred amount shall be credited to the Participant's Employee Account 7. To the extent permitted by applicable law, the provisions of this Section 4.9(b) shall also be applicable to former employees of The Promus Companies Incorporated or its affiliates (i) who were participants in the Predecessor Plan and (ii) who terminated their employment with The Promus Companies Incorporated or its affiliates on or prior to the S&RP Spin-Off Date and (iii) whose unvested account balances under the Predecessor Plan were retained by the Predecessor Plan after the S&RP Spin-Off Date and (iv) who subsequently become Eligible Employees under the Plan before incurring five consecutive break years as defined in the Predecessor Plan since termination of their employment with The Promus Companies Incorporated or its affiliates. (c) TRANSFERS FROM PLAN A. In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, the Plan may accept the direct transfer from Plan A of the total amount credited to an Eligible Employee's account under Plan A who immediately prior to his satisfaction of the eligibility requirements under Section 3.3 of the Plan was an eligible employee under the terms of Plan A and a participant thereunder. (d) TRANSFERS FROM EMPLOYER'S TERMINATED PLANS. In the event that the Employer maintains another defined contribution plan that is qualified under Section 401(a) and such plan is terminated, in the discretion of the Plan Administrator, the Plan will accept a direct transfer of the value of the account balance in such plan of any individual who does not accept a lump-sum distribution of such account balance upon termination. (e) TRANSFERS OF DIVERSIFIED AMOUNTS. In the event that any Participant in the Promus Hotel Corporation Employee Stock Ownership Plan (the "ESOP") diversifies the investment of his account in the ESOP a manner that satisfies Code Section 401(a)(28) and elects, within 90 days after the close of each Plan Year in the qualified election period (as defined in the ESOP), to transfer the amount subject to the diversification election to the Plan and invest such amount in any one or more of the Investment Funds offered by the Plan (which Funds are not inconsistent with IRS Regulations), the Plan shall accept such amounts and any such investment option selected by the qualified Participant shall be implemented no later than 90 days after the last day of the period during which the election can be made. A Member who chooses to diversify his ESOP by investing 32 in any one or more of the Investment Funds offered by the Plan may not elect to receive this portion of his Account in Company Stock. (f) TRANSFERS FROM QUALIFIED PLANS In the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner), the Plan may accept the direct transfer from a plan qualified under Code Section 401(a) of an amount which if paid to the Participant or Eligible Employee (who would be a Participant but for the requirement under Section 3.1(b) that he complete one Year of Eligibility Service) instead of the Plan would have constituted a lump sum distribution within the meaning of Code Section 402(e). Such a plan-to-plan transfer must be received by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. To the extent possible, as determined in the sole discretion of the Plan Administrator, such amount shall be credited to the subaccounts of this Plan which are analogous to the accounts of the qualified plan in which such amounts were held immediately prior to such transfer; otherwise, the transferred amount shall be credited to the Participant's Employee Account 7. ARTICLE V. [RESERVED] ARTICLE VI. MEMBERS' ACCOUNTS; INVESTMENT FUNDS 6.1 INVESTMENT ELECTIONS BY MEMBERS. (a) INITIAL ELECTION. Upon becoming a Participant, each Member may file with the Plan Administrator such Member's direction with respect to what percentage, if any, of the Member's Account (derived from contributions made pursuant to Sections 4.1, 4.2, 4.4, 4.6, and 4.9) is to be invested in any one or more of the Investment Funds except the Executive Life Fund described in Addendum A. The percentages so specified by the Member shall be stated in one percent increments or such other increments as may be approved by the Plan Administrator in a nondiscriminatory manner. If by a date designated by the Plan Administrator, a Member fails to make a valid investment election when submitting an Enrollment Form, any amounts allocated to such Member's Account shall be invested entirely in the Investment Fund designated by the Plan Administrator in a uniform and nondiscriminatory manner. (b) CHANGE OF ELECTION AND TRANSFER AMONG FUNDS. A Participant may change his or her investment election as to future contributions (in accordance with the 33 limitations described in Section 6.1(a)) as provided in the Rules of the Plan. Except with respect to the Investment Fund described in Addendum A, a Participant may elect to transfer amounts allocated to his Account among Investment Funds in increments of one percent (or such other increments as approved by the Plan Administrator in a nondiscriminatory manner) as provided in the Rules of the Plan. Subject to the transfer restrictions stated hereinbelow, such changes or transfers shall take effect as soon as administratively feasible after the request is received by the Plan Administrator; provided, however in connection with establishing, amending, or terminating any Investment Fund including establishing a new Investment Fund, the Plan Administrator may establish reasonable rules and procedures on a uniform and nondiscriminatory basis in connection with changes or transfers by Members in transitioning with respect to such Fund. A Participant who is subject to Section 16 of the Securities Exchange Act of 1934, as amended (""Rule 16b-3"), or other securities laws, regulations or rules that relate to investments in the Company Stock Fund may effect the transfer of an existing Account balance into or out of any Company Stock Fund only as provided in the Rules of the Plan which shall be according to the applicable exemptive conditions of Rule 16b-3 and, in the Plan Administration's discretion, the applicable conditions of such other securities laws, regulations or rules; PROVIDED, HOWEVER, that if the Plan Administrator reasonably determines that contractual, legal or administrative considerations no longer require such conditions be met, then the Plan Administrator may permit other transfers or establish other time requirements for transfers on a uniform and nondiscriminatory basis except as otherwise required by law. The Plan Administrator will impose limits on transfers between Investment Funds on a uniform and nondiscriminatory basis if the Plan Administrator determines that such other available funds would not be sufficient for such transfers. The Plan Administrator may adopt other Rules of the Plan to govern transfers which will be approved on a uniform and nondiscriminatory basis except as otherwise required by law. 6.2 PLAN EXPENSES. (a) INVESTMENT FEES, ETC. Expenses attributable to the management and investment of each of the Funds shall be charged against the respective Fund. (b) ADMINISTRATIVE EXPENSES, ETC. All fees paid to the Trustee for trustee services, all fees paid for 34 recordkeeping services performed by the Trustee, the Plan Administrator and any third-party service provider, and any other costs or expenses described in Sections 12.9 and 16.4, shall constitute a charge upon the Fund and shall be paid from Members' Accounts in proportion to the balance of such Accounts except to the extent that the Company or an Employer elects to pay such fees, costs or expenses; provided that the Company or an Employer may advance fees, costs or expenses on behalf of the Plan in which case the Company or Employer will be reimbursed for such payment by the Plan from Fund assets. 6.3 VALUATION; ALLOCATION OF INVESTMENT EARNINGS AND LOSSES. (a) GENERAL RULE. Except as provided in subsections (b) and (c), Accounts and Funds shall be valued at their fair market values as of each Valuation Date. Except as provided in subsections (b) and (c), earnings, gains, and losses (realized or unrealized) for each Fund shall be allocated to the portion ("subaccount") of a Member's Account maintained with respect to that Fund, in the same ratio that the value of his subaccount (determined as of the Valuation Date) bears to the sum of the values of all Members' subaccounts maintained with respect to the Fund. For the purpose of determining this ratio, the value of a subaccount shall be the value of the subaccount as of the last preceding Valuation Date. After the allocation of earnings, gains, and losses, each Member's Account shall be adjusted for contributions, reallocated forfeitures, loan repayments, interfund transfers, distributions, withdrawals, and expenses made or incurred since the last preceding Valuation Date. (b) UNALLOCATED EARNINGS. Except as provided in subsection (c), earnings, gains, and losses which have not been allocated to Members' Accounts during the Plan Year under subsection (a), shall be allocated as of the last day of the Plan Year to all Members who have a balance in their Account as of such date. Each such Member shall receive a percentage of the total amount allocated under this subsection (b) equal to-- (1) the balance in the Member's Account as of the last Valuation Date of the Plan Year, divided by (2) the total balance of the Accounts of all eligible Members as of the last Valuation Date of the Plan Year. Amounts allocated under this subsection (b) shall be credited to the various subaccounts and invested in the various Investment Funds in accordance with uniform and 35 nondiscriminatory procedures established by the Plan Administrator. (c) UNIT VALUES. The Plan Administrator or the Trustees (or their designated agent or agents) or the Administrative Delegate may, for administrative purposes, establish unit values for one or more Investment Fund, including any Company Stock Fund, (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Investment Fund (or any portion thereof), the value of a Member's interest in that Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Member. 6.4 COMPANY STOCK FUNDS. (a) VALUATION. (i) Subject to the special valuation rules set forth in subsection (ii), Company Stock in any Company Stock Fund shall be initially valued at the purchase price paid by the Trust and thereafter shall be valued at its most recent closing price on the New York Stock Exchange as of the Valuation Date. The Plan Administrator or the Trustees (or their designated agent or agents) may, for administrative purposes, establish unit values for any Company Stock Fund, (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Company Stock Fund (or any portion thereof), the value of a Member's interest in that Company Stock Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Company Stock Fund (or any portion 36 thereof) multiplied by the number of units then credited to the Member. (ii) If Company Stock ceases to be publicly traded or if it is being valued in connection with a transaction between the Plan and a "party in interest" (as defined in ERISA Section 3(14)) or a "disqualified person" (as defined in Section 4975(e)(2) of the Code) or in connection with an extraordinary transaction or event, its value shall be determined by the Trustees in good faith based on all relevant factors. (b) COMPANY STOCK DIVIDENDS. Company Stock Dividends received on shares in the Company Stock Fund shall be allocated as soon as administratively feasible following the date such dividends are paid, to each Member's Account in an amount which will bear substantially the same proportion to the total number of shares received as the number of shares of Company Stock in each Account as of the Valuation Date next preceding the date of such allocation bears to the total number of shares of Company Stock allocated to all Accounts as of such Valuation Date. (c) RIGHTS, WARRANTS, OR OPTIONS. Company Stock rights (including warrants and options) issued with respect to Company Stock shall be exercised by the Trustee on behalf of Members. (d) VOTING RIGHTS. (A) Members shall not have voting rights or other decision rights with respect to any investment in any Fund, including Company Stock in the Company Stock Fund, if any, all such rights being vested in the Trustee. Notwithstanding the foregoing, in the event of any "solicitation" of "proxies" as such terms are defined in Regulation 14a-l under the Securities Exchange Action of 1934, as amended, which is opposed by management of the Company, all voting rights in Company Stock held in any Company Stock Fund shall be voted in accordance with the directions to the Trustee of the Members who have any portion of their Accounts invested in any such Company Stock Fund, with each such Participant entitled to direct the vote of that number of shares representing the proportionate investment of his Accounts in such Company Stock Fund. The Trustee shall maintain the strict confidentiality of Member voting directions. 37 (B) All Members entitled to direct such voting shall be notified by the Trustee of each occasion for the exercise of such voting rights within a reasonable time before such rights are to be exercised. (C) Such notification shall include all information distributed to shareholders regarding the exercise of such rights. (D) Such Members shall be so entitled to direct the voting of fractional shares (or fractional rights to shares), provided, however, that the Trustee may, to the extent possible, vote the combined fractional shares (or fractional rights to shares) so as to reflect the aggregate direction of all Members giving directions with respect to allocated fractional shares (or fractional rights to shares). (E) In the event that a Member shall fail to direct the Trustee in whole or in part as to the exercise of voting rights arising with respect to the Company Stock Funds, then such voting rights shall be exercised by the Trustee only to the extent directed by such Member and any Company Stock with respect to which no direction is received shall be voted in accordance with subparagraph (F). (F) The Trustee shall vote (i) shares of Company Stock with respect to which a Participant has failed to exercise his voting rights and (ii) shares representing forfeited account values that have not been reallocated at the time of any proxy solicitation referred to in subparagraph (A), in the same proportion as Company Stock with respect to which voting rights have been exercised are voted. ARTICLE VII. VESTING AND FORFEITURES 7.1 VESTING IN BEFORE-TAX CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS. A Member shall have a fully-vested interest at all times in his Employee Accounts 2, 3, 4, 5, 7 and 9. 38 7.2 VESTING SCHEDULE FOR MATCHING CONTRIBUTIONS ACCOUNT. Subject to Section 7.3 below, a Member shall have a nonforfeitable interest in a portion of the value of his Employee Accounts 1, 6, and 8 in accordance with the following schedule: Completed Years of Vesting Service Vested Percentage --------------- ----------------- Less than 1 0% 1 but less than 2 10% 2 but less than 3 20% 3 but less than 4 30% 4 but less than 5 40% 5 but less than 6 60% 6 but less than 7 80% 7 or more 100% Upon any amendment of this vesting schedule, for every Employee who is a Participant on the amendment adoption date or the amendment effective date, whichever is later, the nonforfeitable percentage (determined as of that date) of the Participant's right to the Employer - derived accrued benefit may not be less than the Participant's percentage figured under the Plan without regard to the amendment. 7.3 FULL VESTING OF CERTAIN EMPLOYEE ACCOUNTS. Notwithstanding Section 7.2, a Member shall have a Vested Percentage in Employee Accounts 1, 6, and 8 of 100 percent upon the occurrence of any of the following events prior to (or concurrent with) his Termination of Service: (a) the Member dies; (b) the Member attains age 65; or (c) the Member incurs a Total and Permanent Disability. 7.4 FORFEITURES. (a) GENERAL RULE. In the event that a Member's interest in Employee Accounts 1, 6, or 8 is not yet fully vested on his Termination of Service, the portion of such Account in which he is not yet vested under the foregoing Sections shall be immediately forfeited upon distribution to the Member or, if distribution has not occurred, such portion of his Account shall be held in a suspense account until the earlier of (1) the date that distribution occurs or commences, or (2) the date the Member incurs five consecutive Break Years, and such portion of his Account shall be forfeited upon the earlier of such dates. Forfeitures shall be attributable to the Plan Year quarter in which such forfeiture occurs (or the next subsequent Plan Year quarter if no allocation of forfeitures occurred in the Plan Year quarter in which such forfeiture occurs). If 39 such Member does not return to employment as an Employee before incurring five consecutive Break Years, the nonvested portion of his Account shall be permanently forfeited and allocated in accordance with Section 4.6. (b) RESTORATION. If a Member suffers a forfeiture under subsection (a) of the portion of his Accounts which is not fully vested on his Termination of Service and is reemployed by the Company or an Affiliate prior to his incurring five or more consecutive Break Years, then the amounts forfeited under subsection (a) shall be restored to his Accounts, applying forfeitures pending allocation and Employer contributions, in that order, as necessary. Restored amounts shall be credited to the Member's Employee Accounts 1, 6, and 8 as soon as administratively feasible and shall be invested in the Investment Fund designated by the Plan Administrator in a uniform and nondiscriminatory manner unless a different Investment Fund(s) is designated by the Member. (c) SPECIAL RULE FOR PRIOR DISTRIBUTIONS FROM EMPLOYEE ACCOUNTS 1, 6, AND 8. In the case of a Member who had previously received a distribution of his partially vested interest in Employee Accounts 1, 6, and 8, and who again incurs a Break Year before being fully vested in Employee Accounts 1, 6, and 8, such Member's vested interest in such Accounts on his Termination of Service shall be determined by the following formula: X = P(AB + D) - D For purposes of this formula: X is the vested amount; P is the Vested Percentage at the relevant time; AB is the balance in Employee Accounts 1, 6, and 8 at the relevant time; and D is the aggregate amount of all prior withdrawals and distributions from Employee Accounts 1, 6, and 8. ARTICLE VIII. IN-SERVICE WITHDRAWALS 8.1 ORDER OF WITHDRAWAL. Subject to Section 8.2, a Member may withdraw funds from his Account (valued as of the Valuation Date immediately preceding the date of the withdrawal payment) in the following order: (a) Supplemental After-Tax Contributions and earnings from Employee Account 5; (b) Basic After-Tax Contributions and earnings from Employee Account 4; (c) Rollover Contributions from Employee Account 7; 40 (d) the vested portion of Basic Matching Contributions from Employee Account 1; (e) the vested portion of Discretionary Matching Contributions from Employee Account 6; (f) the vested portion derived from the Harrah's Plans in Employee Account 8; (g) all or any part of the amounts transferred from the Holiday Inns, Inc. Employee's Retirement Plan in Employee Account 9; (h) Supplemental Before-Tax Contributions from Employee Account 3 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 3); and (i) Basic Before-Tax Contributions from Employee Account 2 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 2). (j) Earnings credited to Before-Tax Contributions after December 31, 1988. Such a withdrawal shall be processed as soon as administratively feasible following receipt of notice of such withdrawal by the Member in accordance with the Rules of the Plan; provided, however, a Member must give at least 30 days advance written notice to the Plan Administrator (or such other advance written notice the Plan Administrator may allow in a uniform and nondiscriminatory manner) to withdraw funds from Employee Account 9. 8.2 WITHDRAWAL LIMITATIONS. (a) GENERAL RESTRICTION. If a Member makes a withdrawal under Section 8.1, except for a withdrawal under Section 8.1(a), such Member shall not be eligible for Matching Contributions for the six-month period beginning on the day after the withdrawal. (b) ADDITIONAL RESTRICTIONS ON WITHDRAWAL OF MATCHING CONTRIBUTIONS. No amounts may be withdrawn under Sections 8.1(d) and (e) unless the Member making the withdrawal has been participating in the Plan for at least 60 months or unless the amounts being withdrawn have been in the Fund for at least 24 months. (c) ADDITIONAL RESTRICTIONS ON WITHDRAWALS FROM EMPLOYEE ACCOUNTS 2, 3, 8, AND 9. 41 (1) A withdrawal under Sections 8.1(f), (g), (h), (i) and (j) shall be permitted only upon a Member's Retirement Date or other Termination of Service, attainment of age 59-1/2, or financial hardship (except a withdrawal under 8.1(j) shall not be permitted upon a financial hardship). See also the provisions of Section 11.2 for distributions allowed upon plan termination and the restrictions thereon and also the provisions herein dealing with qualified domestic relations orders. (2) A withdrawal is on account of financial hardship only if it is made on account of an immediate and heavy financial need of the Member and is necessary to satisfy such financial need. I. For this purpose, a withdrawal is not necessary to the extent it exceeds the amount necessary (including taxes) to relieve the need or to the extent the need may be satisfied from other resources reasonably available to the Member. Under this Plan, a financial hardship for purposes of a withdrawal on account of an immediate and heavy financial need of the Member shall exist if the withdrawal is for: (A) Expenses for medical care described in Code Section 213(d) previously incurred by the Member, the Member's spouse or any dependents of the Member (as defined in Code Section 152) or necessary for these persons to attain medical care described in Code Section 213(d); (B) Costs directly related to the purchase of a principal residence for the Member (excluding mortgage payments); (C) Payments of tuition and related educational fees for the next year of post-secondary education for the Member, for the Member's spouse, children, or dependents (as defined in Code Section 152); or (D) Payments necessary to prevent the eviction of the Member from the Member's principal residence or foreclosure on the mortgage of that residence. II. In general, Code Regulation 1.401(k)-1(d)(2)(iii) shall govern in determining whether the withdrawal is necessary to satisfy an immediate and heavy financial need. Under this Plan, a withdrawal shall generally be treated as 42 necessary to satisfy a financial need if the Member represents in writing as follows (which the Plan Administrator or its delegee may rely upon unless the Plan Administrator or its delegee have actual knowledge to the contrary): (A) The withdrawal is required to meet an immediate and heavy financial need, the amount of the withdrawal is necessary to meet this need, and the requested amount does not exceed the amount necessary (including taxes) to relieve the need. (B) The need cannot reasonably be satisfied by any of the following: (i) Through reimbursement or compensation by insurance or otherwise; (ii) By liquidation of the Member's assets or those of his spouse or minor children (which are reasonably available to the Member) without creating an additional and heavy financial need; (iii) By cessation of elective contributions or Employee contributions (Before-Tax or After-Tax Contributions) under the Plan; (iv) By other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer (including this Plan) or by any other employer, or by borrowing from commercial sources on reasonable commercial terms, in an amount sufficient to satisfy the need. For purposes of this subparagraph (B), a need cannot reasonably be relieved by one of the actions listed above if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a Plan loan if the loan would disqualify the Member from obtaining other necessary financing. (C) The Member understands that the withdrawal will result in Employer Matching Contributions being suspended for six months. (D) That the withdrawal is for one of the four purposes listed in paragraph I above and such 43 purpose or purposes shall be identified by the Member. (E) The Member understands that the application for such a withdrawal will be reviewed by the Plan Administrator or its delegee for compliance with the Plan's requirements for a distribution on account of financial hardship. The Plan Administrator (or its delegee) shall determine whether a request for a hardship withdrawal meets the requirements of this paragraph (2) in accordance with uniform and nondiscriminatory procedures. (d) SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of Section 9.1(b), the Plan Administrator shall not permit a withdrawal to a married Member who has a balance in Employee Account 9 of more than $3,500 (determined as of the date such Account was initially established under the Predecessor Plan) if such withdrawal is from such Employee Account 9. ARTICLE IX. DISTRIBUTIONS 9.1 ENTITLEMENT TO DISTRIBUTION UPON DEATH OF MEMBER. (a) DEATH OF MEMBER. In the event of a Member's death prior to the complete distribution of his Account balance, the Beneficiary of such Member shall be entitled to receive the entire balance remaining to the credit of such Member's Account as of the first Valuation Date coincident with or next following the Member's death, as provided in Sections 9.3 and 9.4. (b) DESIGNATION OF BENEFICIARY. (1) GENERAL RULE. Each Member may designate one or more persons as Beneficiary to receive his Account balance in the event of such Member's death. Each such designation shall be made on a form provided by the Plan Administrator, shall be effective only when filed in writing with the Plan Administrator, and shall revoke all prior designations, subject to the provisions of paragraph (2) below. Subject to paragraph (2) below, a trust may be named as a Beneficiary of a Member, but the trust itself will not be treated as a "designated beneficiary" under the Code or Code Regulations including Proposed Code Regulations. If the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are met, the beneficiaries of the trust will be treated as "designated beneficiaries" in accordance with and subject to the requirements of Proposed Code 44 Regulation 1.401(a)(9)-1D and E and other applicable regulations. If a trust is named as Beneficiary and the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are not met, the Member will be treated as not having a "designated beneficiary" under the Proposed Code Regulations and accordingly distribution will be made to the trust in accordance with the five-year rule in Code Section 401(a)(9)(B)(ii). (2) RULE FOR SURVIVING SPOUSES. A Member's surviving spouse shall be his sole Beneficiary unless, prior to the Member's death, one or more other persons have been named pursuant to a qualified alternate designation (as defined in paragraph (3) below) made and filed with the Plan Administrator prior to the Member's death or unless the Plan Administrator determines that the consent otherwise required under paragraph (3) could not have been obtained because the Member's spouse could not be located or because of such other circumstances as the Secretary of Treasury shall prescribe by Regulation. (3) QUALIFIED ALTERNATE DESIGNATION. A designation shall be a qualified alternate designation only if-- (A) the Member, in a signed written instrument, designates by name one or more persons to be Beneficiary in lieu of, or along with, his surviving spouse; (B) the Member's surviving spouse (if any), determined at the time of the Member's death, has consented in writing to the naming of such Beneficiary and has acknowledged the effect of such consent; and (C) such consent is witnessed by a notary public or the Plan Administrator. A qualified alternate designation may not be changed without spousal consent. Any spousal consent to a qualified alternate designation shall be irrevocable. (4) DEFAULT BENEFICIARY. If no person is otherwise designated under this subsection, or if a designation is revoked in whole or in part, or if no designated Beneficiary survives the Member, the Member's Beneficiary shall be his surviving spouse; or, if there is no surviving spouse, the surviving children of the Member in equal shares; 45 or, if there are no surviving children, then the surviving parent(s) of the Member; or, if there are no surviving parents, the Member's estate. For purposes of the foregoing, the term "surviving children" shall include the children of a Member's deceased child. Such children shall share equally in any distribution that would have gone to the Member's child had he been alive. If any payment is made under the Plan to any Beneficiary, in reasonable reliance on (A) a written statement by the Member that he was unmarried, (B) a spousal consent that on its face conformed to the requirements set forth above, or (C) evidence establishing to the Plan Administrator's satisfaction that a Member's spouse could not be located at the time of a Beneficiary designation, the Plan's liability for death benefits shall be satisfied, to the extent of such payment, and the Plan shall have no liability to any spouse to such extent. 9.2 DISTRIBUTION UPON TERMINATION OF SERVICE FOR REASONS OTHER THAN DEATH. Upon a Member's Termination of Service for reasons other than death, such Member shall be entitled to the Vested Balance of his Account as of the Valuation Date provided in Section 9.4. 9.3 FORM OF BENEFIT PAYMENTS. (a) PAYMENT TO MEMBER. Except as provided in Sections 9.4(b) and 9.6, the distribution of a benefit to a Member pursuant to Section 9.2 shall be made in either of the following ways, as the Member shall elect: (1) in a lump sum; or (2) in installments payable in substantially equal amounts or term certain annuities continuing over a period certain as elected by the Member, not exceeding the shorter of 15 years, the Member's life expectancy, or the life expectancy of the Member and his Beneficiary; provided that subject to the Code and Code Regulations the first distribution to a Member after Termination of Service may, at the Member's election, be a partial payment of his vested Account balance and any subsequent distribution shall conform to (1) or (2) above. (b) PAYMENT TO BENEFICIARY. Subject to the provisions below, a Beneficiary entitled to payment under this Article may elect to continue receiving the benefits under the method of payment in effect when the Member 46 died or be paid the remaining Account balance in a single lump sum distribution. If a Member dies before the time the distribution is considered to have commenced in accordance with the Code or Code Regulations or Proposed Code Regulations (i.e. before April 1 of the year after the year that the Member reaches age 70 1/2), the method of distribution shall satisfy the following requirements: (1) any remaining portion of the Member's interest that is not payable to a designated beneficiary (as defined under Code Regulations or Proposed Code Regulations) will be distributed within five years after the Participant's death; and (2) any portion of the Member's interest that is payable to a designated beneficiary (as defined in Code Regulations or Proposed Code Regulations) will be distributed either (i) within five years after the Member's death, or (ii) over the life of the Beneficiary or over a period certain not extending beyond the life expectancy of the Beneficiary, commencing not later than the end of the calendar year following the calendar year in which the Member died (or, if the designated Beneficiary is the Member's surviving spouse, commencing not later than the end of the calendar year following the calendar year in which the Member would have attained age 70 1/2). Subject to Sections 9.4(b) and 9.6 herein and further subject to the limitations of the Code and Code Regulations or Proposed Code Regulations, the distribution options described in Section 9.3(a) above will be offered to a designated beneficiary (as defined under Code or Proposed Code Regulations) whenever the Member dies. The distribution options in Section 9.3(a) will also be offered to satisfy subsection 9.3(b)(2)(ii) above, and for this purpose the term "Member" in Section 9.3(a) will refer to the designated beneficiary (except that if the designated beneficiary is not the Member's spouse, the words "or the life expectancy of the Member and his Beneficiary" at the end of 9.3(a)(2) shall not be applicable). Distribution options offered to a Beneficiary who is not an individual shall be those described in the first sentence of this Section 9.3(b) except that if the Member dies before April 1 of the year following his/her reaching age 70 1/2, the five-year rule of Code Section 401(a)(9)(B)(ii) shall apply. In the event a Beneficiary dies, any remaining balance payable to such Beneficiary shall be distributed to the 47 Beneficiary's estate (except where the Beneficiary is the Member's spouse and such spouse had submitted a beneficiary form designating an individual as a Beneficiary prior to the spouse's death). The distribution options available to a deceased Beneficiary's estate or to a designated individual Beneficiary of a deceased spouse-Beneficiary will be a continuation of the payments being made to the deceased Beneficiary at the time of his/her death or a lump sum payment (but any distribution shall in any event be completed by the end of the normal life expectancy of the deceased Beneficiary (measured at the time of the Employee's death) or within five years after the Member's death if the five-year rule applies), PROVIDED that, in cases where the deceased Beneficiary is the spouse of a deceased Member, and if such spouse had, prior to such spouse's death, submitted a beneficiary form to the Administrator designating an individual as his/her Beneficiary, then such individual Beneficiary may (in addition to the option of receiving a lump sum or the continuation of existing payments) elect to receive annual installments or a term certain annuity (commencing not later than December 31 of the year following the spouse-Beneficiary's death) over a period of up to 15 years, but in any event such period will not exceed the life expectancy of the individual Beneficiary (measured at the time of the spouse's death) named by the spouse and further will not exceed the life expectancy of the spouse (measured at the time of the Employee's death) if the spouse died after April 1 of the year following the Member's reaching age 70 1/2." (c) EARNINGS AND LOSSES. Amounts payable hereunder shall continue to accrue earnings and losses under Section 6.3 pending such payment. (d) COMPLIANCE WITH CERTAIN IRS REQUIREMENTS. Notwithstanding anything herein, distributions from the Plan will be made in accordance with the requirements of the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of Section 1.401(a)(9)-2 of the proposed Code Regulations. 9.4 TIME OF BENEFIT PAYMENTS. (a) GENERAL RULE. Except as otherwise provided in this Section 9.4 and Section 9.8, distribution of benefits under the Plan shall commence as soon as administratively feasible following the Member's Termination of Service and his request for his distribution from the Plan in accordance with the Rules of the Plan. 48 (b) SMALL AMOUNTS. If a Member incurs a Termination of Service and the Vested Balance of his Account as of the first Valuation Date coincident with or next following such Termination of Service is not greater than $3,500 (or exceeded such amount at the time of a prior distribution under Article VIII), distribution shall be made in a single lump sum in cash as soon as administratively feasible in accordance with the Rules of the Plan. (c) DISTRIBUTIONS UPON DEATH. A distribution to a Beneficiary pursuant to Section 9.1 shall be made as soon as practicable following the first Valuation Date coincident with or next following the Member's death. For purposes of Section 9.4(a) above, written consent of the Participant is required before the commencement of the distribution of any portion of an accrued benefit if the present value of the nonforfeitable total accrued benefit is greater than $3,500. The consent requirements are deemed satisfied if such value does not exceed $3,500 and the Plan may distribute such portion to the Participant as a single sum. Present value for this purpose shall be the Participant's Vested Balance of his or her Account as of the applicable Valuation Date. If the present value determined at the time of a distribution to the Participant exceeds $3,500, then the present value at any subsequent time shall be deemed to exceed $3,500. The foregoing consent requirements do not apply to situations where consent is not required by applicable law. (d) The notice required by Section 1.411(a)-11(c) of the Code Regulations will be provided no less than 30 days and no more than 90 days before the Annuity Starting Date. (e) If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Code Regulations is given, provided that: (1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution. 49 9.5 INCIDENTAL DEATH BENEFIT. Once distribution to the Member has commenced under Section 9.4, the minimum amount which must be distributed each calendar year shall be determined by dividing the balance in the Member's Account by the "applicable divisor." The "applicable divisor" shall be determined under Regulations issued under the incidental death benefit requirements of Code Section 401(a)(9). 9.6 DISTRIBUTION OF EMPLOYEE ACCOUNT 9. If a Member's Employee Account 9 exceeds $3,500 (determined as of the date such Account was initially established under the Predecessor Plan), distribution of such Employee Account 9 must conform with the following: (a) NORMAL FORM OF PAYMENT. (1) UNMARRIED MEMBER. The form of benefit payable to an unmarried Member shall be the single life annuity described in subsection (c)(1) unless the Member consents to payment in another form. (2) MARRIED. The form of benefit payable to each married Member shall be the qualified joint and survivor annuity as defined in Code Section 417, unless he consents to another form of payment in accordance with the rules described in this Section. A Participant who elects to receive a distribution on or after the obtainment of the Participant's Early Retirement Date (that is, the earliest date on which the Participant can elect to receive retirement benefits from Employee Account 9 under the Plan), will receive the distribution in the form of a qualified joint and survivor annuity unless the Participant and the Participant's spouse consent to payment in another form. The "qualified joint and survivor annuity" is a reduced monthly benefit commencing on the Member's benefit commencement date and payable throughout his lifetime, with 50 percent of that monthly amount continuing for life to his surviving spouse, beginning on the first day of the month following his date of death. The qualified joint and survivor annuity shall be the actuarial equivalent of the single life annuity described in subsection (c)(1). (A) EXPLANATION OF QUALIFIED JOINT AND SURVIVOR ANNUITY. The Plan Administrator shall provide to each Member a written explanation of the qualified joint and survivor annuity between 30 and 90 days before the Member's Annuity Starting Date. The written communication shall explain the terms and conditions of the annuity; the Member's right 50 to waive, and the effect of an election to waive the annuity; the right of the Member's spouse to refuse to consent to a waiver of the annuity; and the right to revoke, and the effect of a revocation of an election to waive the annuity; and the relative value of optional forms of payment available under the Plan. (B) WAIVER OF THE QUALIFIED JOINT AND SURVIVOR ANNUITY. The Member may elect to waive the qualified joint and survivor annuity, and may revoke any such election during the election period. Each election must be in writing and must satisfy all of the following conditions: (i) the Participant's spouse consents in writing to the election and the spouse's consent is witnessed by a plan representative or notary public; (ii) the Participant's waiver and the spouse's consent state the specific non-spouse beneficiary (including any class of beneficiaries or contingent beneficiaries) and the particular optional form of benefit, neither of which may be further modified (except back to a qualified joint and survivor annuity) without subsequent spousal consent (unless expressly permitted by the spouse); and (iii) the spouse's consent acknowledges the effect of the election; provided that spousal consent shall not be required if the Participant provides the Administrator with satisfactory evidence that such consent cannot be obtained because his spouse cannot be located or because of other circumstances described in Treasury Regulations. (C) ELECTION PERIOD. The election period for waiving the qualified joint and survivor annuity shall be the 90-day period ending on the Member's Annuity Starting Date. (D) ELECTION OF 75 PERCENT SURVIVOR ANNUITY. The Member may elect to receive a 75 percent joint and survivor annuity with his spouse as his joint annuitant, which shall be the actuarial equivalent of the qualified joint and survivor annuity, and he shall not be required to have his spouse's consent to make the election. (b) ELECTION OF OPTIONAL FORM OF PAYMENT. Subject to the restrictions described in subsection (a), the Member who is entitled to elect an optional form of payment 51 may elect, or revoke a previous election and make a new election, within the 90-day period ending on his Annuity Starting Date, to receive his benefits in one of the optional forms described in subsection (c). Each election shall be in writing on a form prescribed by the Plan Administrator. (c) DESCRIPTION OF OPTIONAL FORMS OF PAYMENT. The value of each optional form of payment shall be that which can be provided by the funds credited to the Member's Employee Account 9 as of the date benefits commence; and unless the Beneficiary is the Member's spouse, no option may be elected unless the periodic annuity payments payable to the Beneficiary do not exceed the "applicable percentage" (as defined in Regulations issued under Code Section 401(a)(9)) of the annuity payments payable to the Member. (1) SINGLE LIFE ANNUITY. The single life annuity is a monthly benefit commencing on the Member's Annuity Starting Date and payable throughout his lifetime, ending with the last payment due on the first day of the month in which his death occurs. (2) JOINT AND SURVIVOR ANNUITY. An unmarried Member, or a married Member who has properly waived the qualified joint and survivor annuity under subsection (a), may elect to receive an annuity in the form of a reduced monthly benefit commencing on his Annuity Starting Date and payable throughout his lifetime, with either 25 percent, 50 percent, or 75 percent of that monthly amount continuing for life to his surviving joint annuitant, beginning on the first day of the month following the Member's date of death. (3) TEN YEARS CERTAIN AND LIFE ANNUITY. An unmarried Member or a married Member who has properly waived the qualified joint and survivor annuity may elect to receive his annuity in the form of a reduced monthly benefit commencing on his Annuity Starting Date and payable throughout his lifetime, ending with the last payment due on the first day of the month in which his death occurs; provided that if the Member dies within the ten-year period following his Annuity Starting Date, payments shall continue to his Beneficiary for the remainder of the ten-year period. In the event the Beneficiary dies within the ten-year period and there is no contingent Beneficiary, the actuarial equivalent of any remaining monthly payments shall be paid in a lump sum to the Member's estate. 52 (4) OTHER FORMS OF PAYMENT. Subject to obtaining appropriate consents and waivers described in subsection (a) the Member may elect a lump sum payment or other form of payment permitted under Section 9.3. (d) EFFECT OF DEATH ON OPTIONAL FORMS OF PAYMENT. (1) DEATH BEFORE BENEFIT COMMENCEMENT DATE. In the event a Member has elected an optional form of payment and either the Member or his Beneficiary or joint annuitant dies before the Member's Annuity Starting Date, the election will not become effective. (2) DEATH AFTER ANNUITY STARTING DATE. If both the Member who has elected an optional form of payment and his Beneficiary or joint annuitant are living on his Annuity Starting Date, the subsequent death of either shall not cancel or otherwise affect the elected form of payment. (e) PRERETIREMENT DEATH BENEFITS. (1) MARRIED MEMBER. The surviving spouse of the vested Member who dies before his Annuity Starting Date shall receive a monthly benefit in the form of a survivor annuity. This annuity is intended to satisfy the requirements of Code Section 417 related to qualified preretirement survivor annuities. The Plan shall provide the death benefit without any charge to the Member for the cost of coverage. The Participant may not waive this death benefit coverage. (2) AMOUNT OF SPOUSE'S BENEFIT. The surviving Spouse shall receive a monthly benefit equal to the amount that can be provided by one-half the value of the Member's Employee Account 9. In lieu of this monthly benefit, the surviving spouse may elect any other form of payment permitted under Section 9.3(b). (3) COMMENCEMENT DATE OF SPOUSE'S BENEFIT. The preretirement death benefit shall be payable to the surviving spouse of the Member who dies before his Normal Retirement Date, on the first day of each month commencing in the month following the date that would have been his Normal Retirement Date if he had survived, provided, however, that the surviving spouse may direct that such payments commence at any earlier date. The surviving 53 spouse may direct the commencement of payments under the qualified pre-retirement survivor annuity within a reasonable time after the Member's death. A surviving spouse shall not be required to begin receiving benefits under a qualified pre-retirement survivor annuity prior to the time the Member would have obtained the later of age 62 or normal retirement age (as defined in Code Section 411(a)(8)), except where the present value of the nonforfeitable benefit does not exceed $3,500. The preretirement death benefit shall be payable to the surviving spouse of the Member who dies after his Normal Retirement Date, on the first day of each month commencing in the month following the Member's date of death. The last payment shall be due on the first day of the month in which the surviving spouse's death occurs. (4) UNMARRIED MEMBER. A Member who is not legally married as of the date of his death shall have the balance in his Employee Account 9 distributed to his designated Beneficiary in accordance with Section 9.1. (f) DELAYED RETIREMENT. (1) BENEFIT COMMENCEMENT DATE. Benefits payable from Employee Account 9 to a Member who remains employed after his Normal Retirement Date shall commence on the first day of the month following his actual retirement. (2) NOTICE TO PARTICIPANTS. The Plan Administrator shall provide to each Member who postpones retirement, during the month next following the month in which he attains age 65, a written notice containing (A) a statement that his benefit payments will be suspended until the date he actually retires, except that benefits will be paid during any month when he fails to accrue at least 40 Hours of Service; (B) a description of the reasons why his benefit payments are being suspended; i.e., because he has continued employment after his Normal Retirement Date for at least 40 Hours of Service per month; (C) a general description of the Plan provisions relating to the suspension of benefit payments and a photocopy of this Section; (D) a statement that applicable Department of Labor Regulations may be found in Section 2530.203-3 of Title 29 of the Code of Federal Regulations; and (E) a statement that the Member may seek review of his benefit suspension 54 by invoking the claims procedures described in Section 12.7. 9.7 [RESERVED] 9.8 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding the foregoing provisions of this Article IX, unless the Member otherwise elects in writing, distribution to a Member shall not take place later than the sixtieth day after the close of the Plan Year in which the latest of the following events occurs: (a) the Member attains age 65; (b) the Member attains the tenth anniversary of the date on which he commenced participation in the Plan; or (c) the Member's Termination of Service. In any event, the payment of benefits to a Member shall commence no later than April 1 following the calendar year in which the Member attains age 70-1/2. All distributions under this Plan shall be made in accordance with Code Section 401(a)(9) and the Regulations thereunder. 9.9 ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. DEFINITIONS: (a) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 55 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 9.10 PLAN TO PLAN TRANSFERS. (a) TRANSFERS TO PRECEDESSOR PLAN. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a Participant who is entitled to a lump sum distribution within the meaning of Code Section 402(e) from the Plan may elect instead to have the amount of such distribution transferred to the Predecessor Plan if the Participant is or becomes employed by a participating employer in the Predecessor Plan. If elected by the Participant and authorized by the Plan Administrator, such a plan-to-plan transfer must be made to the recipient plan by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. To the extent permitted by applicable law, the provisions of subsection (a) shall also be applicable to former employees of The Promus Companies Incorporated (i) who were participants in the Predecessor Plan and (ii) who terminated their employment with The Promus Companies Incorporated or its affiliates on or prior to the S&RP Spin-Off Date and (iii) whose unvested account balances under the Predecessor Plan were transferred to the S&RP on or after the S&RP Spin-Off Date and were subsequently transferred to the Plan on or after the Spin-Off Date and (iv) who are reemployed by The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or any of its subsidiaries after the S&RP Spin-Off Date and based upon such reemployment are Eligible Employees under the Predecessor Plan before incurring five 56 consecutive break years (as defined in the Predecessor Plan) since termination of their employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). (b) TRANSFERS TO PLAN A. Subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a former Participant in the Plan who ceases to be an Eligible Employee but remains an Employee of an Employer and is an eligible employee under the terms of Plan A who is actively participating in Plan A, shall have his Account under the Plan transferred to Plan A. If authorized by the Plan Administrator, such a plan-to-plan transfer must be made to Plan A by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. (c) TRANSFER TO QUALIFIED PLANS. Subject to the approval of the Plan Administrator in its sole discretion (exercised in a nondiscriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a former Participant in the Plan who ceases to be an Eligible Employee and an Employee of an Employer and is an eligible employee under the terms of another plan qualified under Code Section 401(a) of his new employer, may elect to have his Account under the Plan transferred to such qualified plan. If elected by the former Participant and authorized by the Plan Administrator, such a plan-to-plan transfer must be made to the qualified plan by the Trustee within the period established by the Plan Administrator on a uniform and non-discriminatory basis. ARTICLE X. LOANS TO MEMBERS 10.1 ADMINISTRATOR AUTHORIZED TO MAKE LOANS. (a) CURRENT EMPLOYEES. Upon application of a Member who is currently employed by the Company or an Affiliate, the Plan Administrator may direct the Trustee to make a cash loan to the Member from the Vested Balance of the Member's Account. Whether such loans are made, as well as their amounts and terms, shall be in the sole discretion of the Plan Administrator (exercised in a nondiscriminatory manner) subject to the provisions of this Article. Appropriate disclosure shall be made pursuant to the Truth in Lending Act to the extent applicable. A Member cannot have more than one loan outstanding at any one time, except the Plan Administrator, in his direction, may permit a Member to have two outstanding loans if one such loan is for the purpose of acquiring, constructing, reconstructing, or 57 substantially rehabilitating the principal residence of such Member or a person in his immediate family. (b) OTHER ELIGIBLE PERSONS. Loans shall also be available on a reasonably equivalent basis to a Member or Beneficiary who is a party in interest, as such term is defined in ERISA Section 3(14). (c) OWNER-EMPLOYEES AND SHAREHOLDER-EMPLOYEES. Notwithstanding any other provision of this Article, no loan shall be made to an owner-employee, a member of the family of an owner-employee, or a shareholder-employee, as such terms are defined in Code Section 4975(d), except as permitted under the applicable provisions of ERISA and the Code and Regulations promulgated thereunder. 10.2 AMOUNT OF LOANS. (a) MINIMUM AMOUNT. The minimum amount of any loan permitted under this Article shall be $500. (b) MAXIMUM AMOUNT. The amount of such loan (when added to the outstanding balance of all loans to the Member from his Account) shall not exceed the lesser of-- (1) $50,000, reduced by the excess (if any) of-- (A) the highest outstanding balance of loans from the Plan during the one-year period ending on the day before the loan was made, over (B) the outstanding balance of loans from the Plan on the date the loan is made; or (2) 50 percent of the Vested Balance of the Member's Account at the relevant time. (c) COLLATERAL. The Vested Balance of the Account equal to the amount of the loan shall be used as collateral to secure the loan. (d) ADMINISTRATIVE FEE. The Plan Administrator may impose administrative charges and processing fees for loans under the Plan in a nondiscriminatory and uniform manner. 10.3 INTEREST. Each loan made under the Plan shall bear a reasonable rate of interest fixed by the Plan Administrator which shall be set forth in the Rules of the Plan and shall be commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. For loans approved prior to March 18, 1996, the interest rate shall be the average of the rates charged 58 by The Hospitality Credit Union on loans secured by passbook savings accounts, adjusted as necessary to ensure that the rate charged on a Plan loan shall provide a return commensurate with the interest rates charged by persons in the business of lending money under similar circumstances. The interest rate shall remain unchanged for the life of the loan. The Plan Administrator shall periodically review the interest rate. 10.4 TERM. A loan shall be for the term (in whole year increments) requested by the Member but shall not exceed five years (except in the case of loans used to acquire the principal residence of the Member, which shall be for a reasonable term determined at the time the loan is made). Loans shall be made as of a Valuation Date chosen by the Plan Administrator. 10.5 REPAYMENT. (a) Loans shall be repaid in equal installments, one per pay period (but in no event less than quarterly), representing a combination of interest and principal, sufficient to amortize the loan during its term. (b) Payments by active Employees shall be made through payroll withholding or such other means acceptable to the Plan Administrator in his sole and absolute discretion. (c) Loans may be prepaid in full at any time pursuant to the procedures established by the Plan Administrator. (d) Beneficiaries and Members who are not currently employed, and who are parties-in-interest as defined in ERISA Section 3(14), must repay any loan either in one full amount or in accordance with the terms of a promissory note signed by such Beneficiary or Member. (e) Participants who are on a leave of absence authorized by the Employer either without pay or at a rate of pay (after income and employment tax withholding) that is less than the amount of the installment payments required under the terms of the loan may suspend the installment payments on their outstanding loans under the Plan for up to one year provided that such loans are repaid by the latest date permitted under Code Section 72(p)(2)(B). 10.6 ACCOUNTING FOR LOANS. Loan proceeds distributed to the Member shall be charged, on a PRO RATA basis, to each Investment Fund in which his Account is invested. Repayments of principal and interest shall be allocated on a PRO RATA basis according to his investment election as to future contributions at the time of such repayment. 59 10.7 DOCUMENTS. No loan under this Article shall be made until the Member has completed on the appropriate form, and submitted to the Plan Administrator, the following: (a) a loan application setting forth such information as the Plan Administrator deems appropriate; and (b) a promissory note designating the Trustee as payee; stating the amount, term, repayment schedule, interest rate, and other terms and conditions consistent with this Article; authorizing the Employer to make payroll withholdings equal to the installment amounts determined under Section 10.5(a); and granting a conditional security interest in the Member's Vested Balance in his Account to the Trustee as security for repayment of the loan. 10.8 DEFAULT. A loan shall be considered in default when all or any part of a scheduled payment shall be more than 60 days past due. The Plan Administrator may grant an additional grace period of 30 days in a uniform and nondiscriminatory manner. Loan payments may be suspended for up to one year during a Participant's authorized leave of absence as described in Section 10.5(e). Upon default of a loan, the total principal and interest remaining due shall be deducted from the Member's Account and treated as if it were a distribution made to the person receiving the loan. Notwithstanding the foregoing, upon default by an Eligible Employee under the age of 59 l/2, the portion of the outstanding loan balance related to the Employee's Before-Tax Contributions or earnings thereon shall remain an outstanding loan without accruing additional interest until such time as the Employee terminates employment or attains age 59 l/2. An Eligible Employee with a loan in default may not receive a distribution of the loan collateral until such time as the loan has been completely repaid. 10.9 SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of Section 9.1(b), the Plan Administrator shall not permit a loan to a married Member who has a balance in Employee Account 9 of more than $3,500 (determined as of the date such Account was initially established under the Predecessor Plan) if such loan is to be secured, all or in part, by such Employee Account 9. Written spousal consent to the use of a Participant's accrued benefit under Account 9 as security for a loan must be obtained within the 90-day period ending on the date on which the loan is to be secured. ARTICLE XI. AMENDMENT AND TERMINATION 11.1 AMENDMENT AND TERMINATION. The Company expects the Plan to be permanent, but the Company must necessarily and does hereby reserve the right to amend or modify in any respect, or to terminate, the Plan at any time, for any reason whatsoever, by the action of the Board of Directors. The Company may make any 60 modifications or amendments to the Plan, retroactively if necessary or appropriate, to qualify or maintain the Plan as a plan meeting the requirements of Code Section 401(a) or of ERISA, or the Regulations issued thereunder. No amendment of the Plan shall cause any part of the Fund to be used for or diverted to purposes other than the exclusive benefit of the Members, their surviving spouses, or their Beneficiaries covered by the Plan. No plan amendment may decrease the accrued benefit of any Member. Retroactive plan amendments may not decrease the accrued benefit of any Member determined as of the time the amendment was adopted. The Chief Executive Officer shall have the right to amend or modify the Plan; provided, however, that such amendments shall be administrative in nature, or mandated by any applicable law. The Plan may be amended or terminated under this Section without the vote of the stockholders of the Company, except to the extent that stockholder approval is required by Rule 16b-3, promulgated under Section 16 of Securities Exchange Act of 1934, as amended. 11.2 VESTING ON TERMINATION OR PARTIAL TERMINATION. Upon a complete or partial termination of the Plan or complete discontinuance of contributions to the Plan (within the meaning of Treasury Regulation Section 1.411(d)-2), no further contributions shall be made under the Plan; all accrued benefits credited to the Account of each Member (or, in the case of a partial termination, each affected Member within the meaning of Treasury Regulation 1.411(d)-2) shall fully vest; and except as otherwise provided in this Section 11.2, the Accounts of any affected Members shall be distributed at the time and in the manner specified in Article IX. Amounts attributable to elective contributions (Basic Before-Tax Contributions and earnings thereon and Supplemental Before-Tax Contributions and earnings thereon) may not be distributed earlier than upon one of the following events: (1) The Employee's retirement, death, disability or separation from service. (2) The Employee's attainment of age 59 1/2 or the Employee's financial hardship as described in Section 8.1(c)(2) except that earnings credited to any Before-Tax Contributions after December 31, 1988 may not be withdrawn on account of an Employee's financial hardship. (3) The termination of the Plan without establishment or maintenance of another defined contribution plan (other than an Employee Stock Ownership Plan as defined in Code Section 4975(e) or 409 or a simplified employee pension as defined in Code Section 408(k)) subject to the provisions of 1.401(k)-1(d)(3) of the Code Regulations. 61 (4) The date of the sale or other disposition by an Employer that is a corporation of substantially all the assets (within the meaning of Section 409(d)(2)) used by such Employer in a trade or business of such Employer to an unrelated corporation. (5) The date of the sale or other disposition by an Employer that is a corporation of its interest in an Employer subsidiary (within the meaning of Code Section 409(d)(3) to an unrelated entity or individual. Notwithstanding any provision herein to the contrary, to the extent permitted by law, upon a complete termination of the Plan, each Member shall receive an immediate lump sum distribution of his Account maintained under the Plan for his benefit, except that the portion of his Account, if any, attributable to Employee Account 9 which the Member may receive as an annuity in the form described in Section 9.6(a)(1) and (2), if applicable. Upon a complete termination of the Plan, no Employee who is not a Participant on the termination date shall thereafter become a Participant. 11.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or consolidation of the Plan with, or any transfer of assets and liabilities of the Plan to, any other plan, provision shall be made so that each Member would, if the Plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then been terminated. 11.4 EFFECT OF CHANGE IN CONTROL. The following provisions shall govern in the event that an Employer or Division, or any part of the assets of an Employer, is acquired by, or merged into, a nonaffiliated company, or in the event a nonaffiliated company acquires substantially all the outstanding stock of an Employer: (a) The amounts credited to the Accounts of the Employees who are involved in such acquisition or merger shall become 100 percent vested whether or not this Plan is continued or assumed and whether or not the successor company has or establishes a comparable plan. An Employee of an Employer (other than the Company) or Division shall be deemed "involved" if his employment is terminated by reason of the acquisition or merger or transferred (from the controlled group consisting of the Company and its Affiliates) by reason of the acquisition or merger. Employees of the Company shall be deemed "involved" if their employment is terminated 62 by reason of the acquisition or merger or if they continue in the employment of the Company after control of the Company changes hands. (b) Subject to subsection (a), if the nonaffiliated successor company shall have agreed to establish, or shall have, a plan substantially comparable to this Plan (as determined by the Trustees), then the Plan assets allocable to the Employees involved in the acquisition or merger may be transferred to the plan so established by the successor company subject, however, to the receipt of a favorable determination letter from the Internal Revenue Service or opinion of counsel of the successor company satisfactory to the Trustees that such successor plan is a tax-exempt plan and trust under the applicable provisions of the Code. (c) Subject to subsection (a), if a nonaffiliated successor company acquires substantially all of the stock or assets of the Company by merger or acquisition or otherwise, then such successor company may assume this Plan as the sponsoring company. (d) If an Affiliate or other entity that owns 50 percent or more of the Company's outstanding common stock acquires the Company or substantially all of its assets or stock, then the affiliated company may assume the Plan and the Plan shall then continue in effect without interruption and without an acceleration in vesting. For a corporate transaction that does not constitute a merger or acquisition, the Human Resources Committee shall determine, in its sole and absolute discretion, whether a change in control has occurred and whether the provisions of this Section 11.4 shall apply with respect to affected Employees. ARTICLE XII. ADMINISTRATION OF THE PLAN 12.1 PLAN ADMINISTRATOR. (a) The general administration of the Plan shall be carried out by Promus Hotels, Inc. or its delegates, who shall act as the "administrator" within the meaning of Title 1 of ERISA. The Plan Administrator and the Trustees shall be the "named fiduciaries" within the meaning of Title I of ERISA. To the extent not prohibited by law or applicable rules or regulations, the Plan Administrator shall have the authority to delegate to one or more persons the duties and responsibilities of the Plan Administrator. (b) The Plan Administrator shall also have the authority and discretion to engage an Administrative Delegate who shall perform, without discretionary authority or control, administrative functions within the framework of policies, 63 interpretations, rules, practices, and procedures made by the Plan Administrator or other Plan fiduciary. Any action made or taken by the Administrative Delegate may be appealed by an affected Member to the Plan Administrator in accordance with the claims review procedures provided in Section 12.7. Any decisions which call for interpretations of Plan provisions not previously made by the Plan Administrator shall be made only by the Plan Administrator. Except to the extent the Administrative Delegate exercises discretionary authority or control over the assets of the Plan, the Administrative Delegate shall not be considered a fiduciary with respect to the services it provides. (c) Notwithstanding subsections (a) and (b), each Member shall be a named fiduciary for purposes of Section 403(a) of ERISA but solely with respect to the issuance of instructions to the Trustee-- (1) to tender or not to tender the Member's Company Stock Share pursuant to Section 14.1 of the Trust Agreement; and (2) to vote Company Stock pursuant to Section 6.4(d) of the Plan. 12.2 APPOINTMENT AND RESIGNATION OF TRUSTEES. The Board of Directors may remove any Trustee at any time. In the event of the removal, death, resignation, or inability to act of a Trustee, said Board of Directors may appoint a successor. A Trustee may resign at any time, effective upon delivering a written resignation to the Board of Directors or the Secretary or Assistant Secretary of the Company. 12.3 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except as to powers and duties and the determination of questions expressly reserved herein to the Trustees, the Plan Administrator shall have full charge of the administration of this Plan with all discretionary powers and authority to enable it properly to carry out its duties including (without limitation) the authority to determine all questions relating to (a) the interpretation of the Plan; (b) the eligibility of Participants; (c) the dates and other considerations regarding participation or termination of employment; (d) the benefit to which any Member or his surviving spouse or beneficiary may become entitled hereunder; (e) to construe the Plan and the Rules of the Plan; (f) to determine questions of eligibility and vesting of Participants; (g) to determine entitlement to allocations of contributions and forfeitures and to distributions of Participants, former Participants, Beneficiaries, and all other persons; (h) to make findings of fact as necessary to make any determinations and decisions in the exercise of such discretionary power and authority; (i) to conduct claims procedures as provided in Section 12.7; and (j) to delegate any power or duty to any firm or person engaged under Section 12.8 or to any other person or 64 persons. The Plan Administrator shall also have the right to authorize disbursements under the Plan, subject to any required withholdings. All interpretations under the Plan and all determinations of fact made in good faith by the Plan Administrator (or delegees thereof) and the Trustees shall be binding on the Members and all other interested persons. 12.4 ACTION BY MAJORITY OF THE PLAN ADMINISTRATOR. To the extent that the Plan Administrator has delegated its power and authority to a committee, all action by such committee hereunder shall be authorized either by a majority vote of all members of such committee present at a meeting (provided a quorum of all members is present), or by a writing signed by a majority of all members of such committee. 12.5 RULES AND REGULATIONS OF THE PLAN ADMINISTRATOR. The Plan Administrator may make such rules and regulations in connection with its administration of the Plan as are consistent with the terms and provisions hereof (the "Rules of the Plan"). 12.6 CONCLUSIVENESS OF REPORTS, ETC. The Trustees, the Plan Administrator and the Company and any other Employer and their officers and directors, shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any enrolled actuary selected by the Plan Administrator, upon all certificates and reports made by any accountant selected by the Plan Administrator, the Company, or any other Employer, and upon all opinions given by any legal counsel selected by the Plan Administrator (which may include in-house counsel of the Company). The Trustees, the Plan Administrator and the Company and any other Employers and their officers and directors, shall be fully protected with respect to any action taken or suffered by them in good faith in reliance upon any such actuary, or counsel, and all action so taken or suffered shall be conclusive upon all persons. 12.7 CLAIMS PROCEDURE. If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within 90 days after receipt of the claim (or within an additional 90 days if special circumstances require an extension of time, and written notice of the extension shall be furnished to the claimant). Notice of the denial shall set forth the following information: (a) the specific reason or reasons for the denial; (b) specific reference to pertinent Plan provisions on which denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; 65 (d) an explanation that a full and fair review by the Plan Administrator of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Plan Administrator, within 60 days after such notice has been received, a written request for such review; and (e) if such request is so filed, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in subsection (d) above. The decision of the Plan Administrator upon review shall be made promptly, and not later than 60 days after the Plan Administrator's receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If the claim is denied, wholly or in part, the claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the denial, shall include specific references to the pertinent Plan provisions on which the denial is based, and shall be written in a manner calculated to be understood by the claimant. The Plan Administrator's decision on the appeal may be reviewed by the Board of Directors which shall have the right to overrule the Plan Administrator. The Plan Administrator and the Board of Directors shall have full discretionary power and authority to construe the Plan and the Rules of the Plan, to determine questions of eligibility, vesting and entitlements and to make findings of fact as under Section 12.3 and, to the extent permitted by law, the decision of the Plan Administrator (if no review is properly requested) or the decision of the Board of Directors on review, as the case may be, shall be final and binding on all parties except to the extent found by a court of competent jurisdiction to constitute an abuse of discretion. 12.8 EMPLOYMENT OF AGENTS. The Plan Administrator may employ or designate agents, including without limitation custodians, accountants, consultants, or attorneys, to exercise and perform the powers and duties of the Plan Administrator as the Plan Administrator delegate to them, and to render such services to the Plan Administrator as the Plan Administrator may determine, and the Trustees may enter into agreements setting forth the terms and conditions of such services. The Plan Administrator may appoint an independent public accountant to audit the Plan. The compensation of these agents shall be an expense chargeable in accordance with Section 12.9. 12.9 COMPENSATION AND EXPENSES OF TRUSTEES. Unless otherwise determined by the Company, the Plan Administrator and the Trustees shall serve without compensation for services as such, 66 but all expenses of the Trustees shall be paid in accordance with the provisions of Section 16.4. Such expenses shall include any expenses incident to the functioning of the Plan, including without limitation attorneys' fees and the compensation of other agents, accounting and clerical charges, expenses, if any, of being bonded as required by ERISA, and any other costs of administering the Plan. 12.10 INDEMNITY FOR LIABILITY. To the maximum extent allowed by law and to the extent not otherwise indemnified, the Company shall indemnify each Trustee (and former Trustee) and Plan Administrator, and any other current or former Employee, officer, or director of the Company or the Employers, against any and all claims, losses, damages, expenses, including counsel fees, incurred by any such person on account of such person's action, or failure to act, in connection with the Plan, including, in the case of amounts paid in settlement, only such amounts as are paid with the Employer's approval. 12.11 EFFECT OF MISTAKE. In the event of a mistake or misstatement as to the eligibility, participation, investments, or service of any Member, or the amount of contributions made on behalf of, or payments made to, any Member or Beneficiary, the Plan Administrator (or a designated agent or agents thereof and the Plan Administrator) may determine whether or not a mistake has occurred and may make any adjustment to a Member's or Beneficiary's Account, or make any adjustment to payments made or being made to a Member or Beneficiary, which will, in the Plan Administrator's sole judgment (or in the sole judgments of a designated agent or agents of the Plan Administrator and the Plan Administrator), correct such mistake or misstatement. In addition, if the Administrator accepts a contribution or transfer pursuant to Section 4.9 of the Plan and later determines that it was improper to do so, in whole or in part, the Plan shall refund the necessary amount to the Participant. ARTICLE XIII. TRUST ARRANGEMENTS 13.1 APPOINTMENT OF TRUSTEE. The Trustees for the Plan shall be named in the Trust Agreement, and, upon acceptance thereof, each Trustee shall perform the duties and exercise the authority of a Trustee as set forth in the Plan and in said Trust Agreement. A Trustee shall be named, and may be removed, in accordance with the provisions of Article XII. 13.2 CHANGE IN TRUST AGREEMENTS. The Company may from time to time enter into such further agreements with the Trustees or other parties and make such amendments to Trust Agreements, as it may deem necessary or desirable to carry out the Plan and may take such other steps and execute such other instruments as may be deemed necessary or desirable to put the Plan into effect or to execute it. 67 13.3 TRUST FUND. All deposits under this Plan shall be paid to the Trustees and deposited in the Fund. All assets of the Fund, including investment income, shall be retained for the exclusive benefit of Members and beneficiaries and shall be used to pay benefits under the Plan or to pay administrative expenses of the Plan and of the Fund to the extent not permanently paid by the Company or an Employer in its sole discretion, and shall not revert to or inure to the benefit of the Company or an Employer, except as provided in Section 13.6. 13.4 APPOINTMENT OF AN INVESTMENT MANAGER. The Trustees shall have exclusive authority and discretion to manage and control the Fund; provided, however, that the Trustees may employ or appoint an Investment Manager(s) (within the meaning of ERISA Section 3(38)) to manage all or any part of the Fund or a custodian to hold such investments. The Trustees may also appoint an investment advisor. An Investment Manager or custodian shall acknowledge in writing its appointment and shall serve until removed by the Trustees or a proper resignation is received by the Trustees. An Investment Manager shall have sole responsibility for the investment of the portion of the Fund which such Investment Manager is appointed to manage. Neither the Trustees nor the Administrator shall have any responsibility for, or incur any liability for, the investment of such portion or for the loss to or diminution in value of the Fund resulting from any action directed, taken, or omitted by an Investment Manager or custodian. The Trustees shall require each Investment Manager and custodian to furnish such periodic and other reports to the Trustees as the Trustees deem to be in the best interests of the Trust. Neither the Trustees nor the Plan Administrator shall be under any duty to question, but shall be entitled to rely upon, any certificate, report, opinion, direction, or lack of direction provided by an Investment Manager or custodian and shall be fully protected in respect of any action taken or suffered by them in reliance thereon. Such Investment Manager or custodian may maintain cash balances in the Investment Fund(s) they are appointed to manage; provided that such cash balances shall be limited to the amount needed to meet the current cash requirements of the Plan, to make any cash distributions, to pay any expenses, or to exercise applicable rights under the Plan. 13.5 DIVERSIFICATION OF INVESTMENTS. Trust investments in the Investment Funds (other than the Company Stock Fund, if any) shall consist only of those in which a prudent man familiar with the objectives of the Plan and acting with the care, skill, prudence, and diligence under the circumstances then prevailing, would invest in the conduct of an enterprise of a like character and with the aims, diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. Members or Employers shall not have any right to direct particular investments within any Fund. 68 13.6 REVERSION OF EMPLOYER CONTRIBUTIONS. (a) Notwithstanding anything to the contrary contained in this Plan, if the Internal Revenue Service issues a determination letter stating that the Plan does not meet the requirements of Code Section 401 with respect to its initial qualification, then within one year of the issuance of such letter the Employer shall be entitled to receive a return of its contributions made hereunder and each Participant shall be entitled to receive a return of his Basic Before-Tax Contributions, Supplemental Before-Tax Contributions, Basic After-Tax Contributions, and Supplemental After-Tax Contributions. (b) That portion of a contribution made by a mistake of fact shall be returned to the Employer within one year after the payment of the contribution; provided, that, if the contribution to be returned is a Participant's Basic Before-Tax Contribution, Supplemental Before-Tax Contribution, Basic After-Tax Contribution, or Supplemental After-Tax Contribution, such contribution shall be returned to the Participant. (c) That portion of a contribution made by the Employer that is conditioned upon deductibility of the contribution under Code Section 404 and disallowed by the Internal Revenue Service as a deduction under Code Section 404 shall be returned to the Employer within one year after the Internal Revenue Service disallows the deduction; provided, that, if the contribution to be returned is a Participant's Basic Before-Tax Contribution or Supplemental Before-Tax Contribution, such contribution shall be returned to the Participant. (d) Earnings attributable to the contributions to be returned under this Section shall not be returned (except with respect to Section 13.6(a)) and any losses attributable to such contributions shall reduce the amount returned. ARTICLE XIV. TOP-HEAVY PLAN PROVISIONS 14.1 APPLICATION OF TOP-HEAVY PROVISIONS. (a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2) below, if as of the Applicable Determination Date the aggregate of the Account balances of Key Employees under the Plan exceeds 60 percent of the aggregate amount of the Account balances of all Employees (other than former Key Employees) under the Plan, the Plan will be top-heavy and the provisions of this Article shall become applicable. For the purposes of this Article-- 69 (1) Account balances shall include the aggregate amount of any distributions made with respect to the Employee during the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of said Applicable Determination Date; and (2) the Account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions, rollovers, and transfers shall be taken into account, shall be made in accordance with Code Section 416 and the Regulations thereunder which are incorporated herein by reference. (b) AGGREGATION GROUP DETERMINATION. (1) If as of the Applicable Determination Date the Plan is a member of a Required Aggregation Group which is top-heavy, the provisions of this Article shall become applicable. For purposes of this subsection (b), an Aggregation Group shall be top-heavy, as of the Applicable Determination Date, if the sum of-- (A) the aggregate of account balances of Key Employees under all defined contribution plans in such group, and (B) the present value of accrued benefits for Key Employees under all defined benefit plans in such group exceeds 60 percent of the same amounts determined for all employees (other than former Key Employees) under all plans included within the Aggregation Group. Account balances and accrued benefits shall be adjusted for any distribution made in the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of the Applicable Determination Date. The account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions (including distributions from terminated plans), rollovers, and transfers are taken into account, shall be made in 70 accordance with Code Section 416 and the Regulations thereunder. (2) If the Plan is top-heavy under subsection (a) above, but the Aggregation Group is not top-heavy, this Article shall not be applicable. (c) THE TRUSTEES. The Trustees shall have responsibility to make all calculations to determine whether the Plan is top-heavy. 14.2 DEFINITIONS. For purposes of this Article, the following definitions apply. (a) AGGREGATION GROUP means a required aggregation group or a permissive aggregation group as follows: (1) REQUIRED AGGREGATION GROUP. All plans maintained by the Company and the Affiliates in which a Key Employee participates shall be aggregated to determine whether or not the plans, as a group, are top-heavy. Each other plan of the Company and the Affiliates which enables this Plan to meet the requirements of Code Section 401(a) or Section 410 shall also be aggregated. (2) PERMISSIVE AGGREGATION GROUP. One or more plans maintained by the Company and the Affiliates, which are not required to be aggregated, may be aggregated with each other or with plans under paragraph (1) if such group would continue to meet the requirements of Code Sections 401(a)(4) and 410 with such plan(s) being taken into account. (b) APPLICABLE DETERMINATION DATE shall mean, with respect to the Plan, the Determination Date for the Plan Year of reference and, with respect to any other plan, the Determination Date for any plan year of such plan which falls within such calendar year as the Applicable Determination Date of the Plan. (c) DETERMINATION DATE shall mean, with respect to the initial plan year of a plan, the last day of such plan year and, with respect to any other plan year of a plan, the last day of the preceding plan year of such plan. (d) VALUATION DATE. For all top-heavy purposes, a Valuation Date shall be the annual date on which Plan assets must be valued for the purpose of determining the value of account balances or the date on which liabilities and assets of a defined benefit plan are valued. For the purpose of the top-heavy test, the Valuation Date for a defined benefit plan shall be the 71 same Valuation Date used for computing plan costs for minimum funding. The Valuation Date for a defined contribution plan shall be the most recent valuation for a defined contribution plan date within a 12-month period ending on the Determination Date. (e) KEY EMPLOYEE shall mean any Employee or former Employee who at any time during the Plan Year containing the Determination Date or the four preceding Plan Years, is or was (1) an officer of the Employer having annual compensation for such Plan Year which is in excess of 50 percent of the dollar limit in effect under Code Section 415(b)(1)(A) for the calendar year in which such Plan Year ends; (2) one of the ten Employees having annual compensation from the Employer for a Plan Year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and owning (or considering as owning within the meaning of Code Section 318) more than a one-half percent interest as well as one of the ten largest interests in the Employer; (3) a five percent owner of the Employer; or (4) a one percent owner of the Employer having annual compensation from the Employer for a Plan Year of more than $150,000. For purposes of determining five-percent and one-percent owners, neither the aggregation rules nor the rules of subsections (b), (c) and (m) of Code Section 414 apply. Beneficiaries of an Employee acquire the character of the Employee who performed service for the Employer. Inherited benefits will retain the character of the benefits of the Employee who performed services for the Employer. (f) COMPENSATION. Compensation to be used for determining a minimum benefit or minimum contribution for top-heavy purposes is the amount set forth in Box 10 of Form W-2 (or the successor method of reporting income under Code Sections 6041, 6051 and 6052). The same definition of compensation shall be used for all top-heavy purposes, except that for the purpose of determining whether an Employee is a Key Employee, with respect to Plan Years beginning on or after January 1, 1989, the compensation to be used is the aforesaid definition but including Employer contributions made pursuant to a salary reduction arrangement. 14.3 VESTING REQUIREMENTS. If the Plan is determined to be top-heavy with respect to a Plan Year under the provisions of Section 14.1, then a Member's interest in Employee Accounts 1, 6, and 8 shall vest in accordance with the following schedule: 72 Years of Vesting Service Vested Percentage ------------------------ ----------------- Less than 1 0% 1 10% 2 20% 3 40% 4 60% 5 80% 6 100% If in a subsequent Plan Year the Plan is no longer top-heavy, the vesting provisions that were in effect prior to the time the Plan became top-heavy shall be reinstated; provided, however, that any portion of a Member's Account which was vested prior to the time the Plan was no longer top-heavy shall remain vested, and provided further that a Member who has at least three Years of Vesting Service at the start of such Plan Year shall have the option of remaining under the vesting schedule in effect while the Plan was top-heavy. 14.4 MINIMUM CONTRIBUTION. For each Plan Year with respect to which the Plan is top-heavy, the minimum amount contributed by the Employer under the Plan and the Company and the Affiliates under all other qualified defined contribution plans maintained by the Company and the Affiliates for the benefit of each Participant who is not a Key Employee and who is otherwise eligible for such a contribution shall be the lesser of -- (a) 3 percent of the non-key Participant's compensation for only the Plan, or (b) the non-key Participant's compensation times a percentage equal to the largest percentage of the first $150,000 of such compensation of any Key Employee allocated under any of such plans with respect to any Key Employee for the Plan Year. This minimum contribution is determined without regard to any social security contribution and shall be in accordance with the requirements of Code Regulation 1.416-1. Solely with respect to Key Employees, contributions attributable to a salary reduction, matching contributions, or similar arrangement shall be taken into account. The minimum contribution provisions stated above shall not apply to any Participant who was not employed by the Company or an Affiliate on December 31 of the Plan Year. For a year in which the Plan is top-heavy, each non-Key Employee will receive a minimum contribution if the Participant has not separated from service at the end of the Plan Year, regardless of whether the non-Key Employee has less than 1,000 hours of service (or the equivalent) and regardless of whether such Employee declines to make a mandatory contribution to a plan that generally requires such a contribution. This section shall not apply to a Participant covered under a qualified defined benefit plan or a qualified defined contribution plan maintained by the Company or the Affiliates if the Participant's vested benefit 73 thereunder satisfies the requirements of Code Section 416(c). Amounts contributed under this Section shall be credited to a Member's Employee Account 6, and shall be subject to the vesting provisions of this Plan applicable to said Account. 14.5 LIMIT ON ANNUAL ADDITIONS; COMBINED PLAN LIMIT. If the Plan is determined to be top-heavy, Code Sections 415(e)(2)(B) and 415(e)(3)(B) shall be applied by substituting "1.0" for "1.25." This limitation shall not be applicable, however, if-- (a) the Plan would not be top-heavy if "90 percent" is substituted for "60 percent" in Sections 14.1(a) and 14.1(b)(1) above; and (b) for each Plan Year with respect to which the Plan is top-heavy, an Employer contribution is made for Participants who are not Key Employees equal to the sum of l percent of the non-key Participant's compensation for the Plan Year plus the amount of the contribution determined under Section 14.4 above. ARTICLE XV. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE 15.1 PARTICIPATION IN THE PLAN. Any Affiliate which desires to become an Employer hereunder may elect, with the written consent of the Chief Executive Officer, to become a party to the Plan and Trust Agreement by adopting the Plan for the benefit of its eligible Employees, effective as of the date specified in such adoption. The adoption resolution or decision may contain such specific changes and variations in Plan or Trust Agreement terms and provisions applicable to such adopting Employer and its Employees as may be acceptable to the Company and the Trustees. However, the sole, exclusive right of any other amendment of whatever kind or extent to the Plan or Trust Agreement is reserved by the Company. The adoption resolution or decision shall become, as to such adopting organization and its employees, a part of this Plan (as then amended or thereafter amended) and the related Trust Agreement. It shall not be necessary for the adopting organization to sign or execute the original or then amended Plan and Trust Agreement documents or to sign other documents to participate. The effective date of the Plan for any such adopting organization shall be that in the resolution or decision of adoption, and from and after such effective date, such adopting organization shall assume all the rights, obligations, and liabilities of an individual employer entity hereunder and under the Trust Agreement. The administrative powers and control of the Company, as provided in the Plan and Trust Agreement, including the sole right of amendment, and of appointment and removal of the Trustees, and their successors, shall not be diminished by reason of the participation of any such adopting organization in the Plan and Trust Agreement. 74 15.2 WITHDRAWAL FROM THE PLAN. An Employer or Division may withdraw from, or otherwise cease to participate in, the Plan by giving the Plan Administrator and the Trustees 30 days written notice of its intention to do so, in which event the Trustees shall, as promptly as is practicable, provide for the withdrawal or segregation of the share of the assets in the Fund attributable to the Participants of that Employer or Division and, if such Employer or Division so requests, the former Participants of such Employer or Division; provided, however, that the Plan Administrator, in its sole and absolute discretion, may waive the 30-day notice requirement and provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an employee of an Employer or Division which continues to participate in the Plan, such Participant may designate the portion of the assets in the Fund attributable to such Participant which shall be withdrawn or segregated in accordance with this Section 15.2. The amount of such pro rata share shall be the net value of the Fund attributable to the Participants and, if applicable, the former Participants of that Employer or Division, determined as of the latest Valuation Date. The Trustees shall select the assets of the Fund to be withdrawn or segregated in such amount. (a) If the withdrawal of such Employer or Division from this Plan has the effect of a termination of the plan so far as that Employer or Division is concerned, then the rights of that Employer's Participants, former Participants and Beneficiaries shall be governed by the provisions of Section 11.2 relating to partial terminations. (b) Subject to Section 11.4, if an Employer ceases to participate in the Plan and adopts a substantially similar plan for the benefit of its employees, the withdrawal from this Plan by that Employer shall not be regarded as a termination of the Plan so far as that Employer and its Employees are concerned; the rights of that Employer's Members and Beneficiaries shall be governed in accordance with the provisions of that substantially similar plan so adopted by that Employer for their benefit as if no withdrawal from this Plan had taken place. Provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an Employee of an Employer or Division which continues to participate in the Plan will have the right to designate in writing to the Plan Administrator, not later than twenty days after the withdrawal of the Employer or Division, the percentage of the Participant's vested Account that will be withdrawn or segregated in accordance with this Section 15.2, which designated percentage shall apply to all subaccounts, investment funds and other 75 financial amounts allocated to such Participant, and such Participant's Account will be valued for such purposes as of the Valuation Date coincident with or immediately preceding the effective date of the Employer's or Division's withdrawal from the Plan; if such written designation is not timely received, then such Participant's Account will not be withdrawn or segregated under this Section 15.2. The Plan Administrator may grant a reasonable extension of the time limit for making this designation with respect to Employees whose status as an employee of both a continuing Employer or Division and a withdrawing Employer or Division is not immediately known or ascertained, and the Valuation Date for such later designation will be the Valuation Date coincident with or immediately preceding the date the designation is submitted to the Plan Administrator. In the event of such designation, Accounts may be transferred to the new Plan as qualifying rollover distributions or plan to plan transfers subject to the applicable requirements of the Code and ERISA. ARTICLE XVI. MISCELLANEOUS 16.1 NO EMPLOYMENT RIGHTS CREATED. Neither the establishment nor the continuation of the Plan, nor anything contained within the Plan, shall be deemed to give any person the right to continued employment by the Company or the Affiliates, or to affect the right of the Company or the Affiliates to terminate the employment of any individual. 16.2 RIGHTS TO FUND ASSETS. No Employee or beneficiary shall have any right to, or interest in, any assets of the Fund upon termination of his employment or otherwise, except as specifically provided under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or beneficiary out of the assets of the Fund. All payments of benefits as provided for in this Plan shall be made solely out of assets of the Fund and neither the Company, the Affiliates, nor any fiduciary shall be liable therefor in any manner. 16.3 NONALIENATION OF BENEFITS. Except to the extent permissible under Code Sections 401(a)(13) and 414(p), benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder, shall be void. The Fund shall not in any manner be 76 liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. The preceding paragraph shall also apply to the creation, assignment, or recognition of a right to any interest or benefit payable with respect to a Member pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order (as defined in Code Section 414(p)). The Trustees (or a designated agent or agents thereof) shall establish reasonable plan procedures to determine the qualified status of domestic relations orders and to administer and pay distributions under such qualified orders. Amounts vested hereunder and payable pursuant to a qualified domestic relations order may be paid to the spouse or other alternate payee designated in such order regardless of the Member's age or such spouses's or alternate payee's age. Notwithstanding any provision of this Plan to the contrary and regardless of whether the Member is an Employee or former Employee and regardless of the Employee's or former Employee's age, such amounts may be paid immediately (as soon as practical after the Plan Administrator receives the qualified domestic relations order) in a single cash lump sum or in such other manner as may be paid to a terminated Member as provided in such an order which complies with the Plan's procedures for qualified domestic relations orders. 16.4 EXPENSES. All reasonable expenses of the Plan and Fund shall constitute a charge upon the Fund and shall be paid from Member's Accounts in proportion to the balance of such Accounts, except to the extent that the Company or an Employer elects to pay such expenses, provided that the Company or an Employer may advance such expenses on behalf of the Plan in which case the Company or Employer will be reimbursed for such payment by the Plan from fund assets. Such expenses shall include any expenses incident to the functioning of the Plan, including, without limitation, attorneys' fees and the compensation of actuaries and other agents, accounting and clerical charges, expenses, if any, of being bonded as required by ERISA, and any other costs of administering the Plan. 16.5 SEVERABILITY. In the event that any provision of this Plan is held invalid or illegal for any reason, such invalidity or illegality shall not affect the remaining parts of the Plan and the Plan shall be enforced and construed as if such provision had never been inserted herein. 16.6 GOVERNING STATE. The Plan shall be construed in accordance with the laws of the State of Tennessee except where such laws have been preempted by laws of the United States. 16.7 FACILITY OF PAYMENT. If the Plan Administrator shall find that any person to whom a benefit is payable from the Fund is unable to care for his affairs because of illness or accident, any payments due (unless a prior claim therefor shall have been 77 made by a duly appointed guardian, committee, or other legal representative) may be paid to the recipient's spouse, child, parent, brother or sister, or to any person deemed by the Trustees to have incurred expense for such person otherwise entitled to payment. Any such payment shall be a complete discharge of any liability under the Plan therefor. 16.8 MISSING PERSONS. If the Plan Administrator is unable to locate a proper payee within 18 months after a benefit becomes payable, the Plan Administrator may treat the benefit as a forfeiture and allocate it to the Accounts of other Participants under Section 4.6(a); however, if a claim for benefits is subsequently presented by a person entitled to a payment, the forfeited amount (determined as of the Valuation Date immediately before the forfeiture) shall be recredited from such funds or resources as the Plan Administrator deems appropriate (i.e., forfeitures, earnings, or additional Employer contributions) upon verification of the claim in a manner satisfactory to the Plan Administrator. 16.9 TELEPHONIC/ELECTRONIC DECISIONS. Notwithstanding anything in this Plan to the contrary, pay reduction agreements and cancellations or amendments thereto, investment elections, changes and transfers, loans, withdrawal decisions, and any other decision or election by a Member or other person under this Plan may be accomplished by electronic or telephonic means which are not prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Plan Administrator or its delegees. 16.10 TITLES. The titles of sections are included only for convenience and shall not be construed as part of this Plan or in any respect affecting or modifying its provisions. * * * * * IN WITNESS WHEREOF, PROMUS HOTEL CORPORATION has caused this instrument to be executed by its duly authorized officer, effective as of the date specified in Article I above. PROMUS HOTEL CORPORATION By: /s/ Raymond E. Schultz --------------------------------------------- President and Chief Executive Officer 78 ADDENDUM A 1. Notwithstanding any of the other provisions of this Plan, the Predecessor Plan or the S&RP, effective April 1, 1991, the assets of Investment Fund I under the Predecessor Plan invested as of March 31, 1991 in a guaranteed annuity contract issued by Executive Life Insurance Company (the "Executive Life Contract") were withdrawn from Investment Fund I and transferred to a separate segregated investment fund denominated Investment Fund IA of the Predecessor Plan. The amount transferred to Investment Fund IA of the Predecessor Plan was the amount ("March 1991 Book Value") reflected on the books and records of the Trustees of the Predecessor Plan as invested in the Executive Life Contract as of March 31, 1991. 2. A portion of each Member's Account invested in Investment Fund I under the Predecessor Plan as of March 31, 1991 was transferred to Investment Fund IA of the Predecessor Plan. The transferred portion was an amount equal to the value of such Member's Account invested in Investment Fund I of the Predecessor Plan as of March 31, 1991 multiplied by a fraction, the numerator of which is March 1991 Book Value, and the denominator of which is the value, as reflected on the books and records of the Trustees, of Investment Fund I of the Predecessor Plan as of March 31, 1991. The Executive Life Contract was subsequently assumed by Aurora National Life Assurance Company. 3. The Executive Life Fund shall be administered in accordance with the terms of this Addendum A. It is intended that the Predecessor Plan will transfer to the Executive Life Fund of this Plan an amount equal to the value of the accounts invested in Investment IA of the Predecessor Plan allocable to individuals who became Participants in the S&RP on the Spin-Off Date and who are Participants or Members in this Plan with an Account invested in part in the Executive Life Fund on the date of such transfer. It is further intended that the portion of the Executive Life Contract allocable to such amounts and the analogous amounts transferred to the S&RP will be split from the Executive Life Contract to create a separate contract between Aurora National Life Assurance Company and the Company (the "PHC Contract") (for periods prior to the execution of such PHC Contract, the term "PHC Contract" means the portion of the Executive Life Contract allocable to such amounts). A portion of such PHC Contract will be allocable to the Executive Life Fund under the Plan (the "Plan B Executive Life Contract") and a portion of such PHC Contract will be allocable to the Executive Life Fund under the Promus Hotel Corporation Savings and Retirement Plan - A (i.e., the S&RP) (the "Plan A Executive Life Contract"). Effective as of January 1, 1996, the amount equal to the value of the accounts invested in the Executive Life Fund under the S&RP which were allocable to individuals who became Participants in the Plan on January 1, 1996 were transferred to the Executive Life Fund of the Plan. 4. No Member shall be permitted to make or change investment elections with respect to, or elect to transfer, any portion of his Account invested in the Executive Life Fund. Accordingly, pursuant to the provisions of this Addendum A, any change or transfer directions received by the Plan Administrator with respect to Executive Life Fund shall not be honored. 5. No investments, contributions, reallocated forfeitures, or loan repayments shall be made to the Executive Life Fund. 6. The portion of a Member's Account invested in the Executive Life Fund shall not be taken into account in determining the amount he may borrow from the Plan, and no loan made to a Member may be made from or charged to the portion of the Member's Account invested in the Executive Life Fund. 7. No distributions or withdrawals shall be made from the Executive Life Fund until such time as the Trustees determine that such distributions or withdrawals are appropriate, except as provided in the following paragraph. 8. Notwithstanding the preceding paragraph, if a Member, Beneficiary or alternate payee under a qualified domestic relations order ("Distributee") is required under Section 9.8 of the Plan, Section 411(d)(6) of the Code or section 204(g)(2) of ERISA to receive a distribution or is entitled to a distribution on account of death or other termination of service ("Required Distribution") and if some or all of the Member's Account is invested in the Executive Life Fund, the Trustees shall, to the extent necessary to make the Required Distribution, distribute to the Distributee (A) in cash, an amount equal to the percentage ("Distribution Percentage") of the Distributee's Account remaining invested in the Executive Life Fund, after reductions for prior distributions or disbursements, valued based on the portion of the March 1991 Book Value allocable to the Plan B Executive Life Contract (the "Plan B March 1991 Book Value"), that is equal to the percentage of his Account being distributed in the Required Distribution, and (B) in kind, the Distributee's share ("Final Interest Component") of an undivided interest in the amount ("Excess Value"), if any, by which the Final Market Value (as defined below) of the Executive Life Fund exceeds the Plan B March 1991 Book Value. The value of Distributee's Final Interest Component with respect to any Required Distribution shall be determined at the time the Final Market Value is determined, and shall be adjusted to reflect an early distribution if the cash portion of the Required Distribution was distributed on or before June 30, 1992. The Final Interest Component shall be determined in a manner that is not inconsistent with the terms of settlement of the Executive Life Contract. The Final Interest Component shall be an amount equal to the Excess Value multiplied by a fraction, the numerator of which is the amount of the cash portion of the Required Distribution, and the denominator of which is the Plan B March 1991 Book Value; the value thus determined shall be prorated by multiplying it by a fraction, the numerator of which is the number of days (not in excess of 457) elapsed between March 31, 1991 and the date the Required Distribution is made, and the denominator of which is 457; PROVIDED that the manner of determining the Final Interest Component may be modified by the Plan Administrator to be consistent with the terms of settlement of the Executive Life Contract. 9. To the extent cash distributions are made with respect to a Distributee's interest in the Executive Life Fund and (after repaying Company Loans as provided below) there is not sufficient cash in the Executive Life Fund to make such distribution, the Trustees may borrow funds from the Company ("Company Loans"), on terms consistent with Prohibited Transaction Class Exemption 80-26. Company Loans shall not be treated as contributions to the Plan. Company Loans shall be repaid from time to time as follows: (A) If and to the extent a payment is made to the Plan in respect of the PHC Contract in any month on account of a distribution to a Member or his beneficiaries ("Distribution Payment") at a time when Company Loans are outstanding, the portion of such Distribution Payment allocable to the Plan A Executive Life Contract shall be applied to reduce (but not below zero) the outstanding balance of Company Loans before being applied to make Distribution Payments. (B) If and to the extent the PHC Contract is settled in one or more payments ("Contract Payments") to the Plan in termination of the PHC Contract, a portion of each Contract Payment allocable to the Plan A Executive Life Contract will be applied to repay the Company Loans. The amount of any such repayment shall be limited to a percentage (which, when aggregated with all such repayments to the Company, shall not exceed 100%) of the aggregate outstanding balance of the Company Loans. Such percentage shall be determined by dividing the portion of the Contract Payment allocable to the Plan B Executive Life Contract by the Plan B March 1991 Book Value. 10. In the event the Trustees determine that the total amount paid to the Plan in respect of the Executive Life Fund ("Final Market Value") is less than the Plan B March 1991 Book Value, the difference between (a) the Plan B March 1991 Book Value reduced by the aggregate outstanding balance of Company Loans, and (b) the Final Market Value shall be paid to the Plan by the Company. Such amount shall be treated as an amount paid in settlement of a claim under the Plan, and all outstanding Company Loans shall be cancelled upon such payment. 11. The purpose of this Addendum A is to provide special administrative procedures protective of the interests of Plan Members and their Beneficiaries in light of the court-supervised conservatorship of Executive Life Insurance Company. The Trustees may make such rules and regulations regarding transactions (including, but not limited to, investments, loans and distributions) involving Members' Accounts as they deem necessary or appropriate in light of the status or condition of Executive Life Fund. The Trustees shall have authority and discretion to administer the provisions of this Addendum A, and their determinations with respect thereto shall be final and binding upon all parties. The Chief Executive Officer may, with the advice of the Trustees, amend the Plan as appropriate in light of developments involving Executive Life Insurance Company and their effect on the Executive Life Fund. EXHIBIT 1 THE RESTATEMENT OF THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - B The provisions of the Restatement of The Promus Hotel Corporation Savings and Retirement Plan - B are generally effective as of January 1, 1996. However, the provisions set forth below are effective as follows: Sections Effective Date -------- -------------- 10.3 and 10.5(c) March 18, 1996 1 EX-10.5(B) 10 EXHIBIT 10(5)(B) EXHIBIT 10(5)(b) AMENDMENT TO PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B DATED MARCH 11, 1996 WHEREAS, Promus Hotel Corporation (the "Company"), a Delaware corporation, finds it necessary to amend the Promus Hotel Corporation Savings and Retirement Plan B (the "Plan") in order to clarify the meaning intended to be ascribed to certain provisions of the Plan pursuant to Section 11.1 of the Plan, the Plan is hereby amended, effective January 1, 1996 as follows. 1. Section 12.12 is amended to read as follows: 12.12 RESTORATIVE PAYMENTS. In the event of a breach of fiduciary duty or an administrative error that results in a loss to the Accounts of any Participants, the Plan may accept a restorative payment from any individual or entity responsible (either directly or through the actions its agent or designee) for such breach or error, or any insurer thereof, in an amount equal to the principal amount of such loss and any earnings thereon, as determined by the Plan Administrator or the Trustees, or any lesser amount which the Plan is able to recover from such individual, entity or insurer. Any such restorative payment shall not be subject to the allocation provisions of Article IV but instead shall be allocated to the Account of each Participant affected by such loss in an amount equal to the portion of such loss incurred by such Participant and any earnings thereon, as determined by the Plan Administrator or the Trustees; provided, however, that if the amount of any restorative payment made pursuant to this Section 12.12 is less than the amount of the total loss incurred by the Accounts of each of the affected Participants and the earnings thereon, if any, such restorative payment shall be allocated to the Account of each such Participant in an amount determined by multiplying such payment by the ratio which the loss suffered by such Participant bears to the loss of all of the affected Participants. In addition, the Plan Administrator or the Trustees, in their discretion, shall take any and all additional actions which it or they deem necessary or appropriate to remedy any breach or error which gives rise to a restorative payment under this Section 12.12. Any restorative payment made pursuant to this Section 12.12 shall not be a contribution to the Plan for purposes of Code Sections 401(a)(4), 404, 415 and 4972. Executed this 11th day of March, 1996. /s/ Raymond E. Schultz ------------------------------ Raymond E. Schultz Chief Executive Officer EX-10.5(C) 11 EXHIBIT 10(5)(C) EXHIBIT 10(5)(c) AMENDMENT TO THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN - B Whereas, Promus Hotel Corporation (the "Company"), a Delaware corporation, finds it desirable to amend the Promus Hotel Corporation Savings and Retirement Plan - B (the "Plan") in order to add additional provisions to the Plan regarding qualified nonelective contributions and qualified matching contributions. Pursuant to Section 11.1 of the Plan, the Plan is hereby amended, effective as of January 1, 1996, as follows: 1. Section 2.1 of Article II of the Plan is hereby amended by adding a new Subsection (j) to the end thereof to read as follows: (j) EMPLOYEE ACCOUNT 10 means the portion of a Member's Account which evidences the value of the Qualified Contributions, if any, made on his behalf by the Employer, and also any gains and losses of the Fund attributable thereto. 2. Article II of the Plan is hereby further amended by adding new subsections 2.36A, 2.36B and 2.36C thereof to read as follows: 2.36A QUALIFIED NONELECTIVE CONTRIBUTIONS means the qualified nonelective contributions within the meaning of Internal Revenue Code Section 401(m)(4)(C) and Code Regulation 1.401(k)-(1)(g)(13)(ii), if any, made by an Employer pursuant to Sections 4.7(a)(2)(i)(B) and 4.7(b) of the Plan. 2.36B QUALIFIED MATCHING CONTRIBUTIONS means the qualified matching contributions within the meaning of Code Regulation 1.401(k)- (1)(g)(13)(i)), if any, made by an Employer pursuant to Sections 4.7(a)(2)(i)(B) and 4.7(b) of the Plan. 2.36C QUALIFIED CONTRIBUTIONS means Qualified Nonelective Contributions and Qualified Matching Contributions. 3. Section 2.46 of Article II of the Plan is hereby amended to read in its entirety as follows: 2.48 VESTED BALANCE as of a given date means the Vested Percentage of the Member's Employee Accounts 1, 6, and 8 plus the aggregate balances of the Member's Employee Accounts 2, 3, 4, 5, 7, 9 and 10. 4. Article IV of the Plan is hereby amended by adding the following new Subsection 4.4A thereof to read as follows: 4.4A QUALIFIED CONTRIBUTIONS a. QUALIFIED CONTRIBUTIONS. To the extent permitted by Code Section 401(k) and 401(m) and the regulations thereunder, each Employer may make Qualified Nonelective Contributions and Qualified Matching Contributions on behalf of some or all of its non-Highly Compensated Employees, pursuant to Section 4.7 of the Plan. b. TIMING AND ALLOCATION OF QUALIFIED CONTRIBUTIONS. Qualified Nonelective Contributions and Qualified Matching Contributions, if any, shall be made as soon as practicable after the Plan Year to which they relate. Qualified Nonelective Contributions and Qualified Matching Contributions shall be allocated to Employee Account 10 as soon as administratively feasible following the payment of such contributions to the Fund. 5. The second and third paragraphs preceding Section 4.7(a)(2)(i) of the Plan are hereby amended in their entirety as follows: The deferral percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Before-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent permitted by applicable regulations, the Plan Administrator, in its discretion, may elect to take Qualified Nonelective Contributions and/or Qualified Matching Contributions into account in applying the deferral percentage test of this subsection (a)(2). To the extent necessary to conform to the limitation set forth in this subsection (a)(2), the Plan Administrator may reduce Before-Tax Contributions made on behalf of the Highly Compensated Employees. Such reduction shall be effected by reducing contributions made on behalf of Highly Compensated Employees (in the order of their actual deferral percentage) beginning with the Highly Compensated Employees who elected the highest percentage of such contributions. Any such reduction in the Before-Tax Contributions made on behalf of any Member shall be recharacterized as After-Tax Contributions or refunded to the Member as soon as administratively possible, as provided in the Rules of the Plan. If recharacterized, such excess contributions shall be recharacterized as soon as practicable. In no event, however, shall such excess contributions be left unrecharacterized later than two and one-half months following the Plan Year in which such contributions were made. 2 In addition to the foregoing, if the Plan Administrator determines during the course of a Plan Year or after the Plan Year that the discrimination test of Code Section 401(k)(3) otherwise might not be met for the Plan Year, the Plan Administrator may take the following actions: (A) reduce, at any time, the maximum percentage of Compensation at which Highly Compensated Employees may elect Before-Tax Contributions to such percentage as the Plan Administrator determines appropriate to ensure that such test shall be met for such Plan Year; or (B) to the extent permitted by the Code Section 401(a)(4), Code Regulation 1.401(k)-1(b)(5) (which are incorporated herein by this reference) and other applicable regulations, the Company may make a Qualified Nonelective Contribution and/or a Qualified Matching Contribution to the Accounts 10 of certain Participants and/or Eligible Employees (including Employees who are considered eligible for purposes of the testing described in this Section 4.7(a)(2)) which contribution shall be allocated to Participants and/or Eligible Employees in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant or Eligible Employee receiving the first allocation) with each Participant or Eligible Employee who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant or Eligible Employee with greater Compensation receives any allocation, until such contribution is fully allocated. For purposes of determining the lowest compensated Participants and Eligible Employees, the Plan Administrator, in its discretion, may (or to the extent required by law, shall) annualize Compensation for part-time employees. In order to conform to the limitation provided in this subsection (a)(2), in the discretion of the Plan Administrator, the correction methods described in this Section 4.7(a) may be combined. 6. The second paragraph of Section 4.7(b) of the Plan is hereby amended in its entirety as follows: The contribution percentage of each group of eligible Employees for any Plan Year shall be the average of the ratios (calculated separately for each eligible Employee in each group) of (i) the Matching Contributions and After-Tax Contributions made on behalf of each eligible Employee for such Plan Year to (ii) such eligible Employee's Compensation for such Plan Year or portion of the Plan Year in which the Employee was an Eligible Employee as defined in Section 3.3. To the extent necessary to conform to such limitation, the Plan Administrator may: 3 (i) reduce Matching Contributions and After-Tax Contributions made on behalf of the Highly Compensated Employees in a manner similar to the method described in subsection (a), or (ii) to the extent permitted by Code Section 401(a)(4), Code Regulation Section 1.401(m)-1(b)(5) (which are incorporated herein by this reference) and other applicable regulations, the Company may make a Qualified Nonelective Contribution and/or a Qualified Matching Contribution to the Accounts 10 of certain Participants and/or Eligible Employees (including employees who are considered eligible for purposes of the testing described in this Section 4.7(b)) which contribution shall be allocated to Participants and/or Eligible Employees in inverse order of Compensation received in the Plan Year in question (lowest compensated Participant or Eligible Employee receiving the first allocation) with each Participant or Eligible Employee who receives an allocation receiving the maximum allocation permitted by Code Section 415 before any Participant or Eligible Employee with greater Compensation receives any allocation, until such contribution is fully allocated. For purposes of determining the lowest compensated Participants and Eligible Employees, the Plan Administrator, in its discretion, may (or to the extent required by law, shall) annualize Compensation for part-time employees. Any reduction in the Matching Contributions pursuant to item (i) above or After-Tax Contributions pursuant to item (i) above made on behalf of any Member (including income and losses allocable thereto) shall be paid to the Member if vested, or treated as a forfeiture (if forfeitable). If refunded, Matching Contributions (and the income allocable to Matching Contributions) that are not vested (determined without regard to any increase in vesting that may occur after the date of the forfeiture) may also be forfeited to correct excess aggregate contributions. To the extent permitted by applicable Regulations, the Plan Administrator may elect to take Before-Tax Contributions and Qualified Nonelective Contributions into account in applying the contribution percentage test of this subsection (b). 7. Section 4.7(b)(ix) of the Plan is hereby amended in its entirety to read as follows: (ix) Before-Tax Contributions and/or Qualified Nonelective Contributions may be treated as matching contributions only if the conditions described in Code Section 401(a)(4) and Code Regulation 1.401(m)-1(b)(5) are satisfied. 4 In order to conform to the limitation provided in this subsection (b), the correction methods described in this subsection (b) may be combined. 8. Section 4.8(a)(i) is hereby amended in its entirety to read as follows: (i) all Company and Affiliate contributions made for the Participant under "any defined contribution plan" for the year (including Qualified Contributions); 9. Section 4.7(d) of the Plan is hereby amended in its entirety as follows: (d) ADDITIONAL LIMITATION. The limits of this subsection shall comply with the provisions of Code Regulation 1.401(m)-2 for "multiple use of the alternative limitation" and for this purpose the provisions of Section 1.401(m)-2(d) of the Code Regulations are incorporated herein by reference. Correction of the multiple use of the alternative limitation shall occur by first reducing the actual contribution percentages for only those Highly Compensated Employees who are eligible in both the arrangement subject to Code Section 401(k) and the plan subject to Code Section 401(m). If this is insufficient to make the correction, then the actual deferral percentage shall be reduced for these Employees in a manner that complies with Code Regulations. Notwithstanding any other provision in this subsection (d), instead of making such reductions described in this subsection (d), an Employer may eliminate the "multiple use of the alternative limitation" by making Qualified Nonelective Contributions in accordance with Code Regulations 1.401(k)-1(b)(5) and (f)(1) and Code Regulations 1.401(m)-1(b)(5) and (e)(1). 10. Section 7.1 of Article VII of the Plan is hereby amended in its entirety to read as follows: 7.1 VESTING IN BEFORE-TAX CONTRIBUTIONS, ROLLOVER CONTRIBUTIONS AND QUALIFIED CONTRIBUTIONS. A Member shall have a fully-vested interest at all times in his Employee Accounts 2, 3, 4, 5, 7, 9 and 10. 11. Section 8.1 of Article VIII of the Plan is hereby amended in its entirety to read as follows: 8.1 ORDER OF WITHDRAWAL. Subject to Section 8.2, a Member may withdraw funds from his Account (valued as of the Valuation Date immediately preceding the date of the withdrawal payment) in the following order: (a) Supplemental After-Tax Contributions and earnings from Employee Account 5; 5 (b) Basic After-Tax Contributions and earnings from Employee Account 4; (c) Rollover Contributions from Employee Account 7; (d) Qualified Contributions from Employee Account 10; (e) the vested portion of Basic Matching Contributions from Employee Account 1; (f) the vested portion of Discretionary Matching Contributions from Employee Account 6; (g) the vested portion derived from the Harrah's Plans in Employee Account 8; (h) all or any part of the amounts transferred from the Holiday Inns, Inc. Employee's Retirement Plan in Employee Account 9; (i) Supplemental Before-Tax Contributions from Employee Account 3 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 3); and (j) Basic Before-Tax Contributions from Employee Account 2 (and earnings credited to the analogous account under the Predecessor Plan as of December 31, 1988 and transferred to such Account 2). (k) Earnings credited to Before-Tax Contributions after December 31, 1988. Such a withdrawal shall be processed as soon as administratively feasible following receipt of notice of such withdrawal by the Member in accordance with the Rules of the Plan; PROVIDED, HOWEVER, a Member must give at least 30 days advance written notice to the Plan Administrator (or such other advance written notice the Plan Administrator may allow in a uniform and nondiscriminatory manner) to withdraw funds from Employee Account 9. 12. Section 8.2(b) of Article VIII of the Plan is hereby amended in its entirety to read as follows: (b) ADDITIONAL RESTRICTIONS ON WITHDRAWAL OF MATCHING CONTRIBUTIONS. No amounts may be withdrawn under Sections 8.1(e) and (f) unless the Member making the withdrawal has been participating in the Plan for at 6 least 60 months or unless the amounts being withdrawn have been in the Fund for at least 24 months. 13. Section 8.2(c)(1) of Article VIII of the Plan is hereby amended in its entirety to read as follows: (c) ADDITIONAL RESTRICTIONS ON WITHDRAWALS FROM EMPLOYEE ACCOUNTS 2, 3, 8, 9 AND 10. (1) A withdrawal under Sections 8.1(d), (g), (h), (i), (j) and (k) shall be permitted only upon a Member's Retirement Date or other Termination of Service, attainment of age 59 1/2, or financial hardship (except a withdrawal under 8.1(k) shall not be permitted upon a financial hardship). See also the provisions of Section 11.2 for distributions allowed upon plan termination and the restrictions thereon and also the provisions herein dealing with qualified domestic relations orders. 14. Section 11.2(2) of Article XI of the Plan is hereby amended in its entirety to read as follows: (2) The Employee's attainment of age 59 1/2 or the Employee's financial hardship as described in Section 8.2(c)(2) except that earnings credited to any Before-Tax Contributions after December 31, 1988 may not be withdrawn on account of an Employee's financial hardship. Executed on this 10th day of September, 1996. /s/ Raymond E. Schultz --------------------------------------------- Raymond E. Schultz Chief Executive Officer 7 EX-10.6 12 EXHIBIT 10.6 EXHIBIT 10(6) THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN TABLE OF CONTENTS PAGE ---- Article I. The Plan........................................................ 1 1.1 Establishment of Plan............................................ 1 1.2 Applicability of the Plan........................................ 1 1.3 Purpose of Plan.................................................. 1 Article II. Definitions.................................................... 1 2.1 Account.......................................................... 2 2.2 Administrative Delegate.......................................... 2 2.3 Affiliate........................................................ 2 2.4 Annuity Starting Date............................................ 2 2.5 Beneficiary...................................................... 2 2.6 Board of Directors............................................... 2 2.7 Break Year....................................................... 2 2.8 Chief Executive Officer.......................................... 2 2.9 Code............................................................. 2 2.10 Company.......................................................... 3 2.11 Compensation..................................................... 3 2.12 Division......................................................... 3 2.13 Eligible Employee................................................ 4 2.14 Employee......................................................... 4 2.15 Employer......................................................... 4 2.16 Enrollment Form.................................................. 4 2.17 Entry Date....................................................... 4 2.18 ERISA............................................................ 4 2.19 ESOP Contributions............................................... 4 2.20 Exempt Loan...................................................... 4 2.21 Exempt Loan Suspense Account..................................... 4 2.22 Fund............................................................. 4 2.23 Highly Compensated Employee...................................... 4 2.24 Holiday Plan..................................................... 6 2.25 Hour of Service.................................................. 6 2.26 Human Resources Committee........................................ 10 2.27 Investment Fund.................................................. 10 2.28 Member........................................................... 10 2.29 Participant...................................................... 10 2.30 Plan............................................................. 11 2.31 Plan Administrator............................................... 11 2.32 Plan Year........................................................ 11 2.33 Predecessor Effective Date....................................... 11 2.34 Predecessor Plan................................................. 11 2.35 Retirement Date.................................................. 11 2.36 Spin-Off Date.................................................... 11 2.37 S&RP............................................................. 11 2.38 S&RP Spin-off Date............................................... 11 2.39 Stock............................................................ 11 2.40 Termination of Service........................................... 11 i PAGE ---- 2.41 Total and Permanent Disability................................... 11 2.42 Trust Agreement.................................................. 12 2.43 Trustees......................................................... 12 2.44 Valuation Date................................................... 12 2.45 Vested Balance................................................... 12 2.46 Vested Percentage................................................ 12 2.47 Year of Eligibility Service...................................... 12 Article III. Eligibility and Participation................................. 12 3.1 Eligibility...................................................... 12 3.2 Participation.................................................... 13 3.3 Eligible Employees............................................... 13 3.4 Rehired Employees................................................ 13 3.5 Loss of Status as Eligible Employee.............................. 14 3.6 Leased Employees................................................. 14 Article IV. Contributions and Allocations.................................. 14 4.1 ESOP Contributions............................................... 14 4.2 Allocation of Forfeitures........................................ 17 4.3 Limitations on Contributions..................................... 17 4.4 Limitations on Annual Additions.................................. 17 Article V. Special ESOP Provisions......................................... 19 5.1 Designation as ESOP; Exempt Loan Transactions.................... 19 5.2 Restrictions on Stock in Account................................. 22 Article VI. Members' Accounts.............................................. 22 6.1 Plan Expenses.................................................... 22 6.2 Valuation, Allocation of Investment Earnings and Losses........................................................... 23 6.3 Stock Funds...................................................... 24 Article VII. Vesting....................................................... 30 7.1 Vesting.......................................................... 30 Article VIII. [Reserved]................................................... 30 Article IX. Distributions.................................................. 30 9.1 Entitlement to Distribution Upon Death of Member................. 30 9.2 Distribution Upon Termination of Service for Reasons Other Than Death......................................... 32 9.3 Form of Benefit Payments......................................... 32 9.4 Time of Benefit Payments......................................... 35 9.5 Incidental Death Benefit......................................... 36 9.6 Distribution of Account.......................................... 36 9.7 Limitations on Distributions..................................... 38 9.8 Eligible Rollover Distributions.................................. 38 ii PAGE ---- 9.9 Plan to Plan Transfer............................................ 39 Article X. [Reserved]...................................................... 39 Article XI. Amendment and Termination...................................... 39 11.1 Amendment and Termination........................................ 39 11.2 Termination or Partial Termination............................... 40 11.3 Merger, Consolidation, or Transfer............................... 40 11.4 Effect of Change in Control...................................... 41 Article XII. Administration of the Plan.................................... 42 12.1 Plan Administrator............................................... 42 12.2 Appointment and Resignation of Trustees.......................... 42 12.3 Powers and Duties of the Plan Administrator...................... 43 12.4 Action by Majority of the Plan Administrator..................... 43 12.5 Rules and Regulations of the Plan Administrator.................. 43 12.6 Conclusiveness of Reports, Etc................................... 43 12.7 Claims Procedure................................................. 44 12.8 Employment of Agents............................................. 45 12.9 Compensation and Expenses of Trustees............................ 45 12.10 Indemnity for Liability.......................................... 45 12.11 Effect of Mistake................................................ 45 Article XIII. Trust Arrangements........................................... 46 13.1 Appointment of Trustee........................................... 46 13.2 Change in Trust Agreements....................................... 46 13.3 Trust Fund....................................................... 46 13.4 Appointment of an Investment Manager............................. 46 13.5 Reversion of Employer Contributions.............................. 47 Article XIV. Top-Heavy Plan Provisions..................................... 47 14.1 Application of Top-Heavy Provisions.............................. 47 14.2 Definitions...................................................... 49 14.3 Minimum Contribution............................................. 50 14.4 Limit on Annual Additions; Combined Plan Limit................... 51 Article XV. Participation in and Withdrawal................................ 51 15.1 Participation in the Plan........................................ 51 15.2 Withdrawal from the Plan......................................... 52 Article XVI. Miscellaneous................................................. 53 16.1 No Employment Rights Created..................................... 53 16.2 Rights to Fund Assets............................................ 53 16.3 Nonalienation of Benefits........................................ 54 16.4 Expenses......................................................... 54 iii PAGE ---- 16.5 Severability..................................................... 55 16.6 Governing State.................................................. 55 16.7 Facility of Payment.............................................. 55 16.8 Missing Persons.................................................. 55 16.9 Telephonic/Electronic Decisions.................................. 55 16.10 Titles........................................................... 55 iv THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN ARTICLE I. THE PLAN 1.1 ESTABLISHMENT OF PLAN. The Promus Hotel Corporation (the "Company") established the Promus Hotel Corporation Savings and Retirement Plan (the "S&RP") for its eligible Employees, effective as of June 30, 1995 (the "S&RP Spin-off Date"). The S&RP is a spin-off of The Promus Companies Incorporated Savings and Retirement Plan (now, the "Harrah's Entertainment, Inc. Savings and Retirement Plan") (the "Predecessor Plan")), which spin-off was pursuant to the distribution of a dividend of common stock in the Company to the shareholders of The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). The S&RP was amended effective June 30, 1995 and on November 15, 1995. As of December 31, 1995, the S&RP consisted of two plans, a profit-sharing plan and a stock bonus plan ("ESOP"). Effective as of December 31, 1995, the ESOP was spun-off from the S&RP. In order to document said spin-off of the ESOP and to make certain other administrative changes to the ESOP, the Promus Hotel Corporation Employee Stock Ownership Plan (the "Plan") has been adopted by a resolution of the Board of Directors of the Company on November 15, 1995, effective as of January 1, 1996. 1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are applicable only to Employees in the employ of the Company or an Affiliate on or after January 1, 1996, except as otherwise specifically provided herein. 1.3 PURPOSE OF PLAN. The purpose of the Plan is to allow eligible Employees to accumulate capital for their retirement. The Plan is a stock bonus plan which is intended to be an "employee stock ownership plan," within the meaning of ERISA Section 407(d)(6)(A) and Code Section 4975(e)(7). The Plan is designed to invest primarily in qualifying employer securities and is intended to comply with the provisions of Code Sections 401(a), 402(a), 404(a)(3) and other applicable provisions of the Code, similar provisions of state law and ERISA, as amended. ARTICLE II. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below unless otherwise expressly provided. Any masculine terminology shall be deemed to refer either to a male or a female, and the definition of any term in the singular shall also include the plural, whichever is appropriate in the context. 2.1 ACCOUNT means the separate account maintained under the Plan for each Member, which represents his total proportionate interest in the Fund as of any Valuation Date and which consists of a Member's Account transferred from the Predecessor Plan and/or the S&RP which evidences the value of the ESOP Contributions made on his behalf by an Employer under Section 4.5 of the Predecessor Plan and/or the S&RP and ESOP Contributions made on his behalf by an Employer under Section 4.1 of the Plan, and the value of "Employee Account 11" as defined in, and transferred from, the Holiday Plan, including any gains and losses of the Fund attributable thereto. 2.2 ADMINISTRATIVE DELEGATE means one or more persons or institutions to whom the Plan Administrator has delegated certain administrative functions pursuant to a written agreement. 2.3 AFFILIATE. Affiliate means a member of the same controlled group of corporations (as defined in Code Section 414(b)) as the Employer, a trade or business that is under common control (as defined in Code Section 414(c)) with the Employer; an organization which, along with the Employer, is a member of an affiliated service group (as defined in Code Section 414(m)); or any other entity while it is required to be aggregated with the Employer under Code Section 414(o) and related Regulations. Notwithstanding anything in this Section to the contrary, for purposes of Section 4.4 (regarding annual limitations on additions to a Participant's Account), a determination as to whether an entity is an Affiliate shall be made in accordance with Code Section 415. 2.4 ANNUITY STARTING DATE means the first day of the first period for which a benefit is paid as an annuity or in any other form. 2.5 BENEFICIARY means the person or persons designated under Section 9.1 to receive benefits under the Plan. 2.6 BOARD OF DIRECTORS means the board of directors of the Company, the Human Resources Committee, or any other committee of the Board of Directors designated by the Chief Executive Officer, with authority to act in matters related to the Plan. 2.7 BREAK YEAR means a Plan Year in which the Employee is credited with no more than 500 Hours of Service. 2.8 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Company. 2.9 CODE means the Internal Revenue Code of 1986, as amended from time to time. A reference to a provision of the Code shall, if such provision is amended, refer to the successor to such provision to the extent required by law. 2 2.10 COMPANY means Promus Hotel Corporation or any successor thereto that agrees to assume and continue this Plan. 2.11 COMPENSATION. (a) Except as otherwise specified in subsections (b) and (c), Compensation means base pay paid to the Employee by the Employer (determined prior to such Employee's election to reduce wages under Code Section 125 or 401(k)); including shift premiums, commissions, and tips reported to the Employer for additional withholding of Federal income tax (not to exceed actual tips received); and excluding overtime, bonuses, and other forms of additional remuneration. (b) For purposes of determining whether an individual is a Highly Compensated Employee, "Compensation" means an Employee's compensation, as defined in Code Section 414(q)(7) and the applicable Treasury Regulations. (c) For purposes of satisfying the limits on contributions described in Section 4.3, Compensation means an Employee's compensation as defined in Code Section 414(s), and, at the Plan Administrator's election, may be increased by amounts excluded from wages by reason of an Employee's election to reduce wages under Code Sections 125 and 401(k). (d) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the annual compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of an Employee for purposes of this limitation, Code Section 414(q)(6) shall apply, except in applying such Section, the term "family" shall include only the Employee's spouse and any lineal descendants of the Employee who have not attained age 19 before the close of the Plan Year. 2.12 DIVISION means an Employer, Affiliate, group, or other identifiable unit of the Company. 3 2.13 ELIGIBLE EMPLOYEE means an Employee described in Section 3.3. 2.14 EMPLOYEE means any individual employed by the Company or an Affiliate. No individual shall be considered an Employee under the Plan by reason of service to the Company or an Affiliate solely as a director or during a period of service pursuant to an agreement designating such service as that of a consultant. 2.15 EMPLOYER means the Company and any Affiliate which is participating hereunder or which elects or determines, with the consent of the Chief Executive Officer, to participate hereunder. An Affiliate that employs a nonresident alien who is participating in this Plan under Section 3.3(a) shall be deemed an Employer only with respect to such nonresident alien. 2.16 ENROLLMENT FORM means the form described in Section 3.2. 2.17 ENTRY DATE means January 1, 1996, or any January 1 or July 1 thereafter. 2.18 ERISA means the Employee Retirement Income Security Act of 1974, as in effect at the time with respect to which such term is used. 2.19 ESOP CONTRIBUTIONS mean the contributions made by the Employer under Section 4.1, and shall include both Discretionary Per Capita ESOP Contributions and Discretionary Pay-Related ESOP Contributions. 2.20 EXEMPT LOAN means a loan to the Plan or Fund which is not prohibited by Code Section 4975(c) because it is used to finance the acquisition of Stock or refinance a previous Exempt Loan, and which otherwise meets the requirements of Code Section 4975(d)(3) and the Regulations promulgated thereunder. 2.21 EXEMPT LOAN SUSPENSE ACCOUNT means the account containing the proceeds of an Exempt Loan and the Stock acquired with such proceeds, to the extent that such proceeds and such Stock have not been allocated to the Accounts of Members under Section 4.1. 2.22 FUND means the trust fund established under Article XIII to hold the assets of the Plan. It shall be composed of one or more separate Investment Funds, as permitted by the Plan Administrator, including a Fund which is invested solely or primarily in Stock (the "ESOP Investment Fund"). The Plan Administrator and the Trustees shall have the discretion to establish, amend, and terminate such Investment Funds as they shall deem appropriate. 2.23 HIGHLY COMPENSATED EMPLOYEE means an Employee who performs service during the determination year and is described in one or more of the following groups: 4 (a) An Employee who is a 5% owner, as defined in Code Section 416(i)(1)(A)(iii), at any time during the determination year or the look-back year. (b) An Employee who receives compensation in excess of $75,000, (indexed in accordance with Code Section 415(d)) during the look-back year. (c) An Employee who receives compensation in excess of $50,000 (indexed in accordance with Code Section 415(d)) during the look-back year and is a member of the top-paid group for the look-back year. (d) An Employee who is an officer, within the meaning of Code Section 416(i), during the look-back year and who receives compensation in the look-back year greater than 50% of the dollar limitation in effect under Code Section 415(b)(1)(A) for the calendar year in which the look-back year begins. (e) An Employee who is both described in paragraph (b), (c) or (d) above when these paragraphs are modified to substitute the determination year for the look-back year and one of the 100 employees who receive the most compensation from the Employer during the determination year. For purposes of the definition of Highly Compensated Employee: (1) The determination year is the Plan Year for which the determination of who is highly compensated is being made. (2) The look-back year is the 12 month period immediately preceding the determination year, or if the Employer elects, the calendar year ending with or within the determination year. (3) The top-paid group consists of the top 20% of Employees ranked on the basis of compensation received during the year. For purposes of determining the number of Employees in the top-paid group, Employees described in Code Section 414(q)(8) and Q & A 9(b) of Section 1.414(q)-1T of the Code Regulations are excluded. (4) The number of officers is limited to 50 (or, if lesser, the greater of 3 Employees or 10% of Employees) excluding those Employees who may be excluded in determining the top-paid group. (5) When no officer has compensation in excess of 50% of the Code Section 415(b)(1)(A) limit, the 5 highest paid officer is treated as highly compensated. (6) Compensation means compensation within the meaning of Code Section 415(c)(3), including elective or salary reduction contributions to a cafeteria plan, cash or deferred arrangement or tax-sheltered annuity. (7) Employers aggregated under Code Section 414(b), (c), (m), or (o) are treated as a single Employer. For purposes of the requirements of Code Section 414(q), a Highly Compensated Employee who is either a 5% owner or one of the ten most Highly Compensated Employees is subject to the family aggregation rules of Code Section 414(q)(6). For purposes of the family aggregation rules, the term "family" means, with respect to any Employee, such Employee's spouse and lineal ascendants and descendants and the spouses of such lineal ascendants and descendants. 2.24 HOLIDAY PLAN means the Holiday Corporation Savings and Retirement Plan, as in effect immediately before the Predecessor Effective Date. 2.25 HOUR OF SERVICE. (a) GENERAL RULE. "Hour of Service" means each hour for which the Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate-- (1) for the performance of duties, (2) on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, or (3) for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate; provided, however, that no hour shall be credited as an Hour of Service under more than one of the preceding paragraphs. For Employees who are paid on other than an hourly basis, Hours of Service shall be credited for each payroll period of the Employee for which the Employee receives or is entitled to receive compensation according to the following chart: 6 Payroll Period Hours of Service Credited -------------- ------------------------- (1) Daily 10 (2) Weekly 45 (3) Bi-Weekly 90 (4) Semi-Monthly 95 (5) Monthly 190 (b) APPLICABLE COMPUTATION PERIOD. (1) Hours of Service described in subsection (a)(1) shall be credited to the computation period (as defined below) in which the duties are performed. (2) Hours of Service described in subsection (a)(2) shall be credited to the computation period in which the Employee is compensated for such Hours of Service. (3) Hours of Service described in subsection (a)(3) shall be credited to the computation period to which the award or agreement for back pay pertains, rather than the computation period in which the award, agreement, or payment is made. (4) The term "computation period" means the appropriate 12-month period determined under Section 2.47 for purposes of determining Years of Eligibility Service. (c) HOURS NOT COUNTED. This subsection limits the Hours of Service credited for periods during which no duties are performed and applies whether or not Hours of Service otherwise would have been counted for such periods under subsection (a)(2). (1) UNPAID TIME. An hour for which an Employee is not paid, either directly or indirectly, shall not be credited except in the case of an approved leave of absence or military leave (as defined below). (2) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT COMPENSATION. An hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which the Employee performed no duties shall not be credited if such payment is made or due under a plan maintained solely for the purpose of complying with an applicable workers' compensation, disability insurance, or unemployment compensation law. (3) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited for a payment which solely reimburses 7 the Employee for medical or medically-related expenses incurred by the Employee. (4) 501 HOUR LIMITATION. Except in the case of an approved leave of absence or military leave and except as required by the Family and Medical Leave Act of 1993, not more than 501 Hours of Service shall be credited under subsection (a)(2) on account of any single period during which the Employee performs no duties (whether or not such period occurs in a single computation period). (d) MILITARY LEAVE. An Employee shall be credited with an Hour of Service for each hour of the normally scheduled workweek for each week during any period in which he is absent from work, without pay, with the Company and its Affiliates for voluntary or involuntary military service with the armed forces of the United States of America, but not to exceed the period required under the laws pertaining to veteran's reemployment rights; provided, however, that if he fails to return to the employ of the Company or an Affiliate at the end of such absence during which he has reemployment rights under the applicable laws, he shall not receive credit for hours on such leave. (e) MATERNITY AND PATERNITY ABSENCE. Solely for purposes of determining whether a Break Year has occurred, an Employee shall be credited with an Hour of Service for each hour which would have been credited to such Employee but for such Employee's absence from employment for maternity or paternity reasons. In any case in which the Plan Administrator is unable to determine the hours which would have been credited to such Employee but for such absence, the Employee shall be credited with eight Hours of Service for each day of the normally scheduled workweek the Employee is absent from work for maternity or paternity reasons. An absence from work for maternity or paternity reasons shall mean an absence-- (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. 8 Except as required by the Family and Medical Leave Act of 1993, no more than 501 Hours of Service shall be credited under this subsection for any such absence. Hours of Service under this subsection shall be credited in the Plan Year in which the absence from employment commences if the crediting is necessary to prevent a Break Year (and only to prevent a Break Year) or, in all other cases, such Hours of Service shall be credited in the following Plan Year (and only for the purpose of preventing a Break Year in such Plan Year). (f) SPECIAL RULE FOR FORMER EMPLOYEES OF THE PROMUS COMPANIES INCORPORATED. (1) Notwithstanding any other provision of this Section 2.25, for purposes of Section 2.47, with respect to an Employee who was an employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan), including for purposes of this Section 2.25(f) Harrah's Entertainment, Inc. or any of its subsidiaries, at any time prior to the S&RP Spin-Off Date and who becomes an Employee of the Company or an Affiliate under either of the circumstances described below, "Hour of Service" shall include, to the extent reasonably determinable by the Plan Administrator, each "Hour of Service" credited to such Employee under the Predecessor Plan through the date determined in accordance with the following: (A) any such employee who was employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) on the day immediately preceding the S&RP Spin-Off Date and who becomes employed by the Company or any Affiliate on or after the S&RP Spin-Off Date but prior to January 1, 1996, or who becomes concurrently employed by The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) and the Company or an Affiliate as of the S&RP Spin-Off Date, shall be credited with such "Hours of Service" through the date of commencement of such Employee's employment or concurrent employment with the Company or Affiliate; or (B) any such employee who becomes employed by the Company or any Affiliate after December 31, 1995 but within five years after the S&RP Spin-Off Date shall be credited with such "Hours of Service" through the S&RP Spin-Off Date only. 9 (2) Notwithstanding any other provision of this Section 2.25, for purposes of Section 2.47, with respect to an Employee who (i) is a former employee of The Promus Companies Incorporated or one of its affiliates (as defined in the Predecessor Plan) participating in the Predecessor Plan, (ii) was, on the S&RP Spin-Off Date, employed by The Promus Companies Incorporated in a position in its Administrative Systems Department or Computer Operations Department in a capacity supporting the Human Resources and Financial Computer Systems for the hotel business of The Promus Companies Incorporated, (iii) terminates employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as defined in the Predecessor Plan) within thirty months following the S&RP Spin-Off Date and (iv) within thirty days following such termination is employed by the Company or one of its Affiliates in a capacity substantially similar to the capacity in which such employee was employed by The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or one of its affiliates (as defined in the Predecessor Plan), "Hour of Service" shall include, in addition to each "Hour of Service" credited to such employee during the period preceding and including the S&RP Spin-Off Date, each "Hour of Service" credited to such Employee under the Predecessor Plan during the period following the S&RP Spin-Off Date until the date of such termination of employment, to the extent that such service is reasonably determinable by the Plan Administrator. (g) CONSTRUCTION. This Section is intended to be consistent with the requirements of Section 2530.200b-2 of Department of Labor Regulations and shall be so construed. 2.26 HUMAN RESOURCES COMMITTEE means the committee of that name appointed by the Board of Directors, or any successor to such committee. 2.27 INVESTMENT FUND means one of the investment funds of the Fund which is authorized by the Plan Administrator and the Trustees at the time of reference. 2.28 MEMBER means a Participant, or a former Participant who still has a balance in his Account. 2.29 PARTICIPANT means any Employee of an Employer who has met and continues to meet the active participation requirements of the Plan as set forth in Article III. 10 2.30 PLAN means the Promus Hotel Corporation Employee Stock Ownership Plan, as set forth herein. 2.31 PLAN ADMINISTRATOR means Promus Hotels, Inc. acting through one or more of its officers or their respective delegates. 2.32 PLAN YEAR means the calendar year. 2.33 PREDECESSOR EFFECTIVE DATE means February 6, 1990. 2.34 PREDECESSOR PLAN means the Promus Companies Incorporated Amended and Restated Savings and Retirement Plan (now, the Harrah's Entertainment, Inc. Savings and Retirement Plan), as in effect immediately before the S&RP Spin-Off Date, unless otherwise required by the context to include The Harrah's Entertainment, Inc. Savings and Retirement Plan, as in effect after the Spin-Off Date. 2.35 RETIREMENT DATE under the Plan includes the following: (a) NORMAL RETIREMENT DATE means the Employee's sixty-fifth birthday. (b) EARLY RETIREMENT DATE means the date on or after the Employee's fifty-fifth birthday, but before his sixty-fifth birthday, on which he retires. 2.36 SPIN-OFF DATE means December 31, 1995. 2.37 S&RP means the Promus Hotel Corporation Savings and Retirement Plan as it existed on the Spin-Off Date and, following the Spin-Off Date, the Promus Hotel Corporation Savings and Retirement Plan - A and the Promus Hotel Corporation Savings and Retirement Plan - B, as applicable. 2.38 S&RP SPIN-OFF DATE means June 30, 1995 when the S&RP was spun off of the Predecessor Plan. 2.39 STOCK means the common stock of the Company or an Affiliate, as the Plan Administrator shall determine. 2.40 TERMINATION OF SERVICE means the last date on which the individual is an Employee of the Company or an Affiliate. 2.41 TOTAL AND PERMANENT DISABILITY means any physical or mental injury or disease which causes an Employee to be permanently incapable of continuing employment with his or her Employer or securing any gainful employment. Such disability shall be established by certification to the Plan Administrator. Such certification shall be by: (a) a physician selected by the Employee and approved by the Plan Administrator; 11 (b) three physicians, one selected by the Employee, one selected by the Plan Administrator, and one selected by the physicians selected by the Employee and Plan Administrator; (c) an award to receive Social Security disability benefits; or (d) approval of waiver of premiums under the Employer's group life insurance plan. 2.42 TRUST AGREEMENT means the agreement under which Plan assets are held and invested pursuant to Article XIII. 2.43 TRUSTEES means the person or persons acting as trustee under the Trust Agreement. 2.44 VALUATION DATE means any day that the New York Stock Exchange is open for business or any other date designated by the Plan Administrator and the Trustees. 2.45 VESTED BALANCE as of a given date means the aggregate balance of the Member's Account. 2.46 VESTED PERCENTAGE means 100% of the balance of the Member's Employee Account. 2.47 YEAR OF ELIGIBILITY SERVICE. An Employee shall receive credit for a Year of Eligibility Service for each 12-month period during which the Employee completes 1,000 or more Hours of Service, beginning on (1) the earlier of the Employee's first day of compensated work for the Company or an Affiliate or, to the extent applicable pursuant to Section 2.25(f), The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.) or an affiliate thereof (as defined in the Predecessor Plan) or (2) any January 1 thereafter. ARTICLE III. ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY. Each Eligible Employee who was eligible to participate in the S&RP on the Spin-Off Date shall be eligible to become a Participant in this Plan on January 1, 1996, provided that he is then an Eligible Employee. Each other Employee who becomes an Eligible Employee after January 1, 1996 shall be eligible to become a Participant on the latest of: (a) the Entry Date coincident with or next following the date on which he becomes an Eligible Employee; or (b) the Entry Date coincident with or next following his completion of one Year of Eligibility Service. 12 3.2 PARTICIPATION. (a) Each Employee shall automatically become a Participant on the Entry Date coincident with or next following the date on which he satisfies the requirements of Section 3.1. (b) The Enrollment Form in effect for each Employee under the S&RP on the Spin-Off Date shall apply under the Plan for purposes of his Beneficiary designation pursuant to Section 9.1; provided, however, that such Employee may change his Beneficiary designation by submitting a Beneficiary Designation Form at a time and in a manner specified by the Plan Administrator. (c) Any other Employee who becomes a Participant in accordance with Section 3.2(a) shall submit a Beneficiary designation pursuant to Section 9.1. 3.3 ELIGIBLE EMPLOYEES. (a) GENERAL RULE. Subject to the provisions of subsection (b), the term "Eligible Employee" shall mean an Employee of an Employer and shall include a nonresident alien who receives no United States source income from an Employer who has been designated by an Employer as eligible to participate in this Plan. (b) EXCLUDED EMPLOYEES. There shall be excluded from the class of "Eligible Employees" any Employees included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, unless such agreement specifically provides for participation in the Plan. In addition, there shall be excluded from the class of "Eligible Employees" any Employees who (1) are nonresident aliens and receive no United States source income from an Employer unless specifically designated as "Eligible Employees" by the Employer, or (2) reside in Puerto Rico or are otherwise subject to the income tax code of Puerto Rico unless such Employee is designated as an Eligible Employee by the Employer. 3.4 REHIRED EMPLOYEES. Each reemployed Employee who was an Eligible Employee and who has completed a Year of Eligibility Service prior to his Termination of Service but was not then a Participant shall be eligible to become a Participant on the Entry Date coincident with or next following his satisfying the requirements of Section 3.3. A former Eligible Employee who was a Participant and is re-employed as an Eligible Employee will be eligible to participate in the Plan immediately upon his or her reemployment commencement date. Each other former Employee who is subsequently rehired by the Company or an Affiliate as an 13 Eligible Employee shall, upon reemployment become a Participant in accordance with Sections 3.1 and 3.2. 3.5 LOSS OF STATUS AS ELIGIBLE EMPLOYEE. For any period during which a Member either-- (a) remains in the employ of the Company or Affiliate, but ceases to be an Eligible Employee within the meaning of Section 3.3; or (b) is no longer an Employee but has an Account balance under the Plan, no contributions of any kind shall be made on his behalf to his Account, but such individual shall remain a Member for all other purposes until the earlier of his death or the complete distribution (and/or forfeiture) of his Account. 3.6 LEASED EMPLOYEES. A person who is treated as an Employee of an Employer or an Affiliate pursuant to Code Section 414(n) or (o) and the regulations thereunder shall be considered a "leased employee" and shall not be considered an Employee for purposes of the Plan. If such a person participates in the Plan as a result of subsequent employment with an Employer or Affiliate, he shall receive Years of Eligibility Service for his employment as a leased employee. Notwithstanding the preceding provisions of this Section, a leased employee shall be treated as an Employee for purposes of applying the requirements described in Code Section 414(n)(3) and in determining the number and identity of Highly Compensated Employees. ARTICLE IV. CONTRIBUTIONS AND ALLOCATIONS 4.1 ESOP CONTRIBUTIONS. (a) EMPLOYER CONTRIBUTIONS. (1) DISCRETIONARY PER CAPITA ESOP CONTRIBUTIONS. For each Plan Year, each Employer may make Discretionary Per Capita ESOP Contributions in the form of Stock, cash, or bonds, to the Fund in an amount determined by the Human Resources Committee in its sole and absolute discretion. (2) DISCRETIONARY PAY-RELATED ESOP CONTRIBUTIONS. For each Plan Year, each Employer may make Discretionary Pay-Related ESOP Contributions in the form of Stock, cash, or bonds, to the Fund in an amount determined by the Human Resources Committee in its sole and absolute discretion. 14 (b) APPLICATION OF CASH CONTRIBUTIONS. Except to the extent of current cash needs of the Plan, or to the extent used to repay an outstanding Exempt Loan, cash contributions under this Section 4.1 shall be invested in Stock as soon as practicable after they are paid to the Fund in an amount sufficient so that each Account will continue to be invested primarily in Stock. (c) ALLOCATION OF ESOP CONTRIBUTIONS. (1) ESOP Contributions shall first be used to make payments on any outstanding Exempt Loans pursuant to the terms of such loans. Stock released as a result of payments made on an outstanding Exempt Loan shall be allocated to Members' Accounts in accordance with paragraph (2). ESOP Contributions that are not used to repay an Exempt Loan shall be allocated to the Account of each Participant who, as of the last day of the Plan Year-- (A) was credited with 1,000 Hours of Service in the Plan Year, and (B) either (i) was actively employed by an Employer on such day, or (ii) was absent from employment due to an authorized leave of absence. ESOP Contributions made pursuant to subsection (a)(l) shall be allocated to each eligible Participant on a per capita basis. ESOP Contributions made pursuant to subsection (a)(2) shall be allocated to each eligible Participant on a percentage of Compensation basis, with each eligible Participant receiving an allocation equal to a uniform percentage of his Plan Year Compensation. (2) Stock acquired with the proceeds of an Exempt Loan shall be added to and maintained in the Exempt Loan Suspense Account and shall thereafter be released from such account and allocated to the Accounts of Participants as follows: (A) For each Plan Year until the Exempt Loan is fully repaid, the number of shares of Stock released from the Exempt Loan Suspense Account shall equal the number of unreleased shares immediately before such release for the current Plan Year multiplied by the "Release Fraction." As used herein, the Release Fraction shall be a fraction the numerator of which is the amount of principal and interest paid on the Exempt Loan for such 15 current Plan Year and the denominator of which is the sum of the numerator plus the principal and interest to be paid on such Exempt Loan for all future years during the duration of the term of such Exempt Loan (determined without reference to any possible extensions or renewals thereof). Notwithstanding the foregoing, if such Exempt Loan is repaid with the proceeds of a subsequent Exempt Loan (the "Substitute Loan"), such repayment shall not operate to release all such Stock in the Exempt Loan Suspense Account, but, rather, such release shall be effected pursuant to the foregoing provisions of this subparagraph on the basis of payments of principal and interest on such Substitute Loan. (B) If required by any pledge or similar agreement, in lieu of applying the foregoing provisions with respect to an Exempt Loan or Substitute Loan, shares shall be released from the Exempt Loan Suspense Account as the principal amount of such loan is repaid (and without regard to interest payments), provided the following three conditions are satisfied: (i) The Exempt Loan must provide for annual payments of principal and interest at a cumulative rate that is not less rapid in time than level annual payments of such amounts for ten years. (ii) The interest portion of any payment is disregarded only to the extent it would be treated as interest under standard loan amortization tables. (iii) If the Exempt Loan is renewed, extended, or refinanced, the sum of the expired duration of the Exempt Loan and the renewal, extension, or new Exempt Loan period must not exceed ten years. (C) Shares of Stock released from the Exempt Loan Suspense Account for a Plan Year in accordance with this paragraph (2) shall be held in the Fund on an unallocated basis until allocated on the last day of the Plan Year. Such allocation shall be to the Account of each Participant who is eligible for an allocation under paragraph (1). Stock released pursuant to Discretionary Per Capita 16 ESOP Contributions shall be allocated on a per capita basis. As of the end of each Plan Year, the ESOP shall consistently allocate to the Participants' accounts non-monetary units representing Participants' interests in assets withdrawn from the suspense account. Stock released pursuant to Discretionary Pay-Related ESOP Contributions shall be allocated on a percentage of Compensation basis, with each eligible Participant receiving an allocation equal to a uniform percentage of his Plan Year Compensation. (D) It is intended that the provisions of this paragraph (2) shall be applied and construed in a manner consistent with the requirements and provisions of Treasury Regulation Section 54.4975-7(b)(8), and any successor Regulation thereto. (d) TIMING OF ESOP CONTRIBUTIONS. ESOP contributions shall be paid to the Trustee not later than the date prescribed by law for the Employer to obtain a federal income tax deduction for the Plan Year for which such contributions are made. 4.2 ALLOCATION OF FORFEITURES. Persons who are credited with 1,000 Hours of Service during the Plan Year and are either (1) actively employed by an Employer on the last day of the Plan Year, or (2) are absent from employment due to an authorized leave of absence, shall share in amounts forfeited under Section 16.8 on a percentage of Compensation basis, with each eligible Participant receiving an allocation equal to a uniform percentage of his Plan Year Compensation. 4.3 LIMITATIONS ON CONTRIBUTIONS. The aggregate amount of ESOP Contributions for a taxable year of the Employer allocated to the Accounts of Participants who are Highly Compensated Employees shall not exceed one-third of the aggregate ESOP Contributions made under Section 4.1 and which are deductible under Code Section 404(a)(9) with respect to the taxable year on behalf of all Participants. 4.4 LIMITATIONS ON ANNUAL ADDITIONS. The provisions of this Section 4.4 shall apply to Plan Years (which shall be the "limitation years" under this Plan for purposes of Code Section 415). (a) ANNUAL ADDITION. "Annual Addition" means, for any Participant for any Plan Year, an annual addition as defined in Code Sections 415(c)(2) and 415(c)(6), generally including the sum of: 17 (1) all Company and Affiliate contributions made for the Participant under "any defined contribution plan" for the year; (2) the Participant's after-tax contributions for the year to "any defined contribution plan;" (3) any forfeitures or employer contributions allocated to him for the year under "any defined contribution plan," except as otherwise specified in Code Section 415(c)(6) for an employee stock ownership plan that satisfies certain nondiscrimination requirements; and (4) contributions to an individual, post-retirement medical account for the Participant, to the extent required by Code Section 415(1) or 419A(d)(2). "Any defined contribution plan" means all qualified defined contribution plans of the Employers and Affiliates that are considered as one plan under Code Sections 414 and 415. (b) LIMITATION. Notwithstanding the foregoing provisions of this Article IV, for any Plan Year the Annual Addition of a Participant shall not exceed the lesser of-- (1) $30,000 (or other amount for a particular Plan Year as may be determined under Code Sections 415(c)(1) and 415(d) and related Regulations); or (2) 25 percent of the Participant's wages and all other payments of compensation (for such Plan Year) as reported on Form W-2 (currently entitled "wages, tips, other compensation") (or the successor method of reporting income under Code Sections 6041, 6051 and 6052) and as described in Treas. Reg. Section 1.415- 2(d)(11)(i). (c) ADDITIONAL LIMITATION. If in any Plan Year a Participant is both a participant in any defined contribution plan and a participant in any qualified defined benefit plan of the Employer or an Affiliate, the sum of the defined benefit fraction (as defined in Code Section 415(e)(2)) and the defined contribution fraction (as defined in Code Section 415(e)(3)) shall not exceed 1.0. In calculating the defined contribution fraction, the Plan Administrator may, in his discretion, make the election provided under Code Section 415(e)(6). Before any contributions are reduced under this Plan, the benefit under a defined benefit plan shall be reduced to the extent necessary 18 to ensure that the sum of the defined benefit fraction and defined contribution fraction does not exceed 1.0. (d) REDUCTION IN ANNUAL ADDITIONS. (1) If in any Plan Year a Member's Annual Addition exceeds the limitation determined above, such excess shall not be allocated to his accounts in any defined contribution plan. In accordance with the provisions of Code Section 415 and the Regulations thereunder, the Plan Administrator will distribute elective deferrals (within the meaning of Code Section 402(g)(3)) or return voluntary Employee contributions to the extent that the distribution or return will reduce the excess amounts in the Member's Account. Amounts equal to any gains attributable to the returned elective deferrals and voluntary Employee contributions will also be returned to the Member if necessary to insure that a Member's Annual Addition does not exceed the limitation determined above. If gains attributable to the returned elective deferrals or returned voluntary Employee contributions are not returned to the Member, such earnings will be considered as an Employee contribution for the limitation Plan Year for which the returned contribution was made. (2) If the foregoing distributions do not completely reduce the excess amounts in the Member's account, then the remaining excess amounts in the Member's Account will be placed in a suspense account and used to reduce Employer contributions for the next Plan Year and succeeding Plan Years as necessary (referred to as the "Next Plan Year"). Such remaining excess amounts will be held unallocated in the suspense account for the limitation Plan Year and will be allocated and reallocated in the next Plan Year to the Accounts of all Participants in accordance with applicable Code Regulations. Such suspense account shall share in the gains and losses of the Fund on the same basis as other Accounts. Excess amounts that are allocated to Participants will be used to reduce Employer contributions for the Plan Year in which such allocation occurs. For purposes of this Section 4.4(d)(2), excess amounts will not be distributed to Participants or former Participants. ARTICLE V. SPECIAL ESOP PROVISIONS 5.1 DESIGNATION AS ESOP; EXEMPT LOAN TRANSACTIONS. (a) The Plan is hereby designated as an employee stock ownership plan and the primary purpose of such Plan is to invest in Employer securities. (b) The Company may direct the Trustee to incur a loan on behalf of the Fund, provided that such loan qualifies as an Exempt Loan. 19 (i) IN GENERAL. An Exempt Loan shall be used primarily for the benefit of Participants and Beneficiaries and shall be structured to withstand the special scrutiny specified in Treasury Regulation 54.4975-7(b)(2)(ii) and similar standards that apply under ERISA. All the surrounding facts and circumstances, including those described in paragraphs (ii) and (iii) of this Section 5.1(b), will be considered in determining whether the Exempt Loan satisfies this requirement. However, no loan will satisfy this requirement unless it satisfies the requirements of paragraphs (c), (d), and (e) of this Section 5.1. (ii) NET AFFECT ON PLAN ASSETS. At the time that an Exempt Loan is made, the interest rate for the loan and the price of securities to be acquired with the loan proceeds shall not be such that the Plan assets might be drained off. (iii) ARM'S-LENGTH STANDARD. The terms of an Exempt Loan, whether or not between independent parties, shall, at the time the loan is made, be at least as favorable to the ESOP as the terms of a comparable loan resulting from arm's-length negotiations between independent parties. (c) USE OF LOAN PROCEEDS. The proceeds of an Exempt Loan shall be used within a reasonable time after the receipt by the borrowing ESOP only for any or all of the following purposes: (i) to acquire qualifying employer securities; (ii) to repay such Exempt Loan; or (iii) to repay a prior Exempt Loan in a transaction creating a Substitute Loan, as described in Code Section 4.1(c)(2)(A). A new loan, the proceeds of which are so used, shall satisfy the provisions of Code Regulation 54.4975-7(d). Except as provided in paragraph (b)(9) and (10) of Code Regulation 54.4975-7 or otherwise required by applicable law, no security 20 acquired with the proceeds of an Exempt Loan may be subject to a put, call or other option, or buy-sell or similar arrangement while held by and when distributed from the Plan, whether or not the Plan is then an ESOP. (d) LIABILITY AND COLLATERAL OF ESOP FOR LOAN. An Exempt Loan shall be without recourse against the ESOP. Furthermore, the only assets of the ESOP that shall be given as collateral on an Exempt Loan are qualifying employer securities of two classes: those acquired with the proceeds of the Exempt Loan and those that were used as collateral on a prior Exempt Loan be paid with the proceeds of the current Exempt Loan. No person entitled to payment under the Exempt Loan shall have any right to assets of the ESOP other than: (i) Collateral given for the loan, (ii) Contributions (other than contributions of employer securities) that are made under the ESOP to meet its obligations under the loan, and (iii) Earnings attributable to such collateral and the investment of such contributions. The payments made with respect to an Exempt Loan by the ESOP during a Plan Year shall not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less such payments in prior years. Such contributions and earnings shall be accounted for separately in the books of account of the ESOP until the Exempt Loan is repaid. (e) DEFAULT. In the event of default upon an Exempt Loan, the value of Plan assets transferred in satisfaction of the loan shall not exceed the amount of default. If the lender is a disqualified person, an Exempt Loan shall provide for a transfer of plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan. For purposes of this subparagraph (e) the making of a guarantee does not make a person a lender. (f) REASONABLE RATE OF INTEREST. The interest rate of an Exempt Loan shall not be in excess of a reasonable rate of interest. All relevant factors will be considered in determining a reasonable rate of interest, including the amount and duration of the Exempt Loan, the security and guarantee (if any) involved, the credit standing of the ESOP and the guarantor (if any), and the interest rate prevailing for comparable loans. When these factors are considered, a variable interest rate may be reasonable. In addition to the above requirements, an Exempt Loan shall comply with all other provisions of Code Regulation 54.4975-7. 21 Qualifying employer securities pledged as collateral shall be placed in an Exempt Loan Suspense Account and released and allocated pursuant to Section 4.1(c). Payments of principal and interest on any loan under this Section shall be made by the Trustee solely from: (i) ESOP Contributions available to meet obligations under the loan, (ii) earnings from the investment of such contributions, (iii) dividends and other earnings attributable to qualifying employer securities acquired with an Exempt Loan, (iv) the proceeds of a Substitute Loan, and (v) in the case of a default under an Exempt Loan or in the case where it is determined to be in the best interest of Participants and Beneficiaries, the proceeds of the sale of any qualifying employer securities pledged as collateral for an Exempt Loan. 5.2 RESTRICTIONS ON STOCK IN ACCOUNT. Except as provided in Section 9.6, or as otherwise required by applicable law, qualifying employer securities allocated to Employee's Accounts may not be subject to a put, call, or option, or buy-sell or similar arrangements, while held by and when distributed from the Plan. ARTICLE VI. MEMBERS' ACCOUNTS 6.1 PLAN EXPENSES. (a) INVESTMENT FEES, ETC. Expenses attributable to the management and investment of each of the Funds shall be charged against the respective Fund. (b) ADMINISTRATIVE EXPENSES, ETC. All fees paid to the Trustee for trustee services, all fees paid for recordkeeping services performed by the Trustee, the Plan Administrator and any third-party service provider, and any other costs or expenses described in Sections 12.9 and 16.4, shall constitute a charge upon the Fund and shall be paid from Members' Accounts in proportion to the balance of such Accounts except to the extent that the Company or an Employer elects to pay such fees, costs or expenses; provided that the Company or an Employer may advance fees, costs or expenses on behalf of the Plan in which case the Company or Employer will be reimbursed for such payment by the Plan from Fund assets. 22 6.2 VALUATION, ALLOCATION OF INVESTMENT EARNINGS AND LOSSES. (a) GENERAL RULE. Except as provided in subsections (b) and (c), Accounts and Funds shall be valued at their fair market values as of each Valuation Date. Except as provided in subsections (b) and (c) earnings, gains, and losses (realized or unrealized) for each Fund shall be allocated to the portion ("subaccount") of a Member's Account maintained with respect to that Fund, in the same ratio that the value of his subaccount (determined as of the Valuation Date) bears to the sum of the values of all Members' subaccounts maintained with respect to the Fund. For the purpose of determining this ratio, the value of a subaccount shall be the value of the subaccount as of the last preceding Valuation Date. After the allocation of earnings, gains, and losses, each Member's Account shall be adjusted for contributions, reallocated forfeitures, loan repayments, interfund transfers, distributions, withdrawals, and expenses made or incurred since the last preceding Valuation Date. (b) UNALLOCATED EARNINGS. Except as provided in subsection (c), earnings, gains, and losses which have not been allocated to Members' Accounts during the Plan Year under subsection (a), shall be allocated as of the last day of the Plan Year to all Members who have a balance in their Account as of such date. Each such Member shall receive a percentage of the total amount allocated under this subsection (b) equal to-- (1) the balance in the Member's Account as of the last Valuation Date of the Plan Year, divided by (2) the total balance of the Accounts of all eligible Members as of the last Valuation Date of the Plan Year. Amounts allocated under this subsection (b) shall be credited to the various Accounts and invested in the various Investment Funds in accordance with uniform and nondiscriminatory procedures established by the Plan Administrator. (c) UNIT VALUES, The Plan Administrator or the Trustees (or their designated agent or agents) or the Administrative Delegate may, for administrative purposes, establish unit values for one or more Investment Fund (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such 23 terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Investment Fund (or any portion thereof), the value of a Member's interest in that Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Member. 6.3 STOCK FUNDS. (a) VALUATION. (i) Subject to the special valuation rules set forth in subsections (ii) and (iii), Stock in the Investment Funds shall be initially valued at the purchase price paid by the Trust and thereafter shall be valued at its most recent closing price on the New York Stock Exchange as of the Valuation Date. In the discretion of the Plan Administrator, the Plan Administrator (or its designated agent or agents) may establish a pooled Investment Fund consisting of Company Stock and cash in order to facilitate payments to Participants. The Plan Administrator or the Trustees (or their designated agent or agents) may, for administrative purposes, establish unit values for one or more Investment Fund, (or any portion thereof) and maintain the Accounts setting forth each Member's interest in such Investment Fund (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as such Plan Administrator shall deem to be fair, equitable and administratively practicable. Such terms and procedures may be detailed in a separate document approved by the Plan Administrator and such terms and procedures shall be deemed to be incorporated in the Rules of the Plan. In the event that unit accounting is thus established for any Investment Fund (or any portion thereof), the value of a Member's interest in that Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Member. (ii) If Stock ceases to be publicly traded or if it is being valued in connection with a transaction between the Plan and a "party in interest" (as defined in ERISA Section 3(14)) or a "disqualified person" (as defined in Section 4975(e)(2) of the Code) or in connection with an extraordinary transaction or event, its value 24 shall be determined by the Trustees in good faith based on all relevant factors. (iii) In the case of Stock acquired with an Exempt Loan the following special valuation rules shall apply: a. For purposes of valuing such Stock in any transaction between the Plan and any "disqualified person" as that term is defined in Code Section 4975(e)(2), fair market value shall be determined in good faith by the Administrator in accordance with Section 3(18) of ERISA. b. For purposes of a Participant's exercise of his put option rights (if applicable) under Section 9.6, such Stock shall be valued as of the end of the most recent Plan Year. (iv) Notwithstanding the foregoing provisions, in all cases the valuation provisions of this Section, including the selection of a Valuation Date for any purpose under this Plan, shall be interpreted and applied in a manner consistent with the applicable requirements under Code Sections 409 and 4975(e)(7), the Treasury Regulations issued thereunder, Treasury Regulation Section 54.4975-11(d)(5) and the fiduciary requirements of ERISA, and any related or successor statutes or regulations, that must be satisfied in order to qualify for the prohibited transaction exemption under Code Section 4975(d)(3) or any other relevant prohibited transaction exemption. In this connection, all valuations of Stock contributed to or acquired by the Plan which at the time of such valuation is not readily tradable on an established securities market within the meaning of Code Section 401(a)(28) shall be made by an independent appraiser (within the meaning of Code Section 170(a)(1)), whose name shall be reported to the Internal Revenue Service. (v) The Plan Administrator in its sole discretion may establish a pooled Investment Fund consisting of Stock and cash in order to facilitate payments to Participants. (b) ALLOCATION. (1) CHANGES IN VALUE. Any changes in value in Stock in any ESOP Investment Fund shall not be allocated in the manner described in Section 6.2, but shall be allocated directly to each Member's Account as of the Valuation Date. 25 (2) CASH DIVIDENDS. (A) ALLOCATED SHARES. Cash dividends paid on Stock allocated to Accounts of Members in any ESOP Investment Fund shall, to the extent not used to repay an Exempt Loan, be allocated directly to said Accounts as of the Valuation Date coinciding with or next following the date on which the dividend is paid. (B) UNALLOCATED SHARES. Cash dividends on Stock in any ESOP Investment Fund that has not been allocated to a Member's Account (because of the operation of Section 4.1(c)) shall, to the extent not used to repay an Exempt Loan, be allocated to such Member's Account in the same ratio that the value of his Account bears to the sum value of each Member's Account as of the Valuation Date coinciding with or next following the date on which the dividend is paid. (C) DIVIDEND PASS THROUGH. Notwithstanding anything in this subsection (b) to the contrary, the Company may, in its discretion, direct that dividends allocated to each Member's Account be passed through, in whole or in part, to Members or their Beneficiaries as an "applicable dividend" under Code Section 404(k), which shall meet the following requirements to be an "applicable dividend": (i) is paid in cash to the Participants in the Plan or their beneficiaries. (ii) is paid to the Plan and is distributed in cash to Participants in the Plan or their beneficiaries not later than 90 days after the close of the Plan Year in which paid, or (iii) is used to make payments on an Exempt Loan the proceeds of which were used to acquire employer securities (whether or not allocated to Participants) with respect to which the dividend is paid. In the case of a dividend used to make payments on an Exempt Loan the proceeds of which were used to acquire employer securities that are allocated to a Member's Account, such dividend shall not be treated as an "applicable dividend" under Code 26 Section 404(k) unless employer securities with a fair market value of not less than the amount of such dividend shall be allocated to such Member for the year which such dividend would have otherwise been allocated to such Member. (3) STOCK DIVIDENDS. Stock Dividends received on shares in of Stock in the ESOP Investment Fund shall be allocated as soon as administratively feasible following the date such dividends are paid, to each Member's Account and the Exempt Loan Suspense Account, if any, in an amount which will bear substantially the same proportion to the total number of shares received as the number of shares of Stock in each Account (or Exempt Loan Suspense Account) as of the Valuation Date next preceding the date of such allocation bears to the total number of shares of Stock allocated to all Accounts as of such Valuation Date. (c) RIGHTS, WARRANTS, OR OPTIONS. Stock rights (including warrants and options) issued with respect to Company Stock shall be exercised by the Trustee on behalf of Members. (d) VOTING RIGHTS. Except as otherwise required in ERISA, the Code, and applicable Treasury Regulations, all voting rights of shares of Stock allocated to a Member's Account or held in the Exempt Loan Suspense Account shall be exercised by the Trustee only as directed by the Members or other Beneficiaries in accordance with the following provisions of this paragraph (1): (A) If the Company has a registration-type class of securities (as defined in Section 409(e)(4) of the Code or any successor statute thereto) then, with respect to all corporate matters submitted to the Company's shareholders, all shares of Stock allocated to a Member's Account shall be voted in accordance with the directions of such Members as given to the Trustee. Each Member shall be entitled to direct the voting only of the shares of Stock (including fractional interests in shares of Stock) allocated and credited to his Account. If the Company does not have a registration-type class of securities (as defined in Section 409(e)(4) of the Code or any successor statute thereto), then, only with respect to corporate matters relating to a corporate merger or consolidation, recapitalization, 27 reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such other similar transaction that the applicable Treasury Regulations may require, all shares of Stock allocated to a Member's Account or held in the Exempt Loan Suspense Account shall be voted in accordance with the directions of such Members as given to the Trustee. Each Member shall be entitled to direct the voting only of the shares of Stock (including fractional interests in shares) allocated to his Account. If this subparagraph (A) applies to shares of Stock allocated to the account of a deceased Member, such Member's Beneficiary shall be entitled to direct the voting with respect to such shares as if such Beneficiary were the Member. (B) If Members are entitled under subparagraph (A) to direct the vote with respect to allocated shares of Stock, then, at least thirty days before each annual or special shareholders' meeting of the Company, (or, if such schedule cannot be met, as early as practicable before such meeting), the Trustee shall furnish to each Member a copy of the proxy solicitation material sent generally to shareholders, together with a form requesting confidential instructions on how the shares of Stock allocated to such Member's Employee Account 10 (including fractional shares of Stock to 1/1000th of a share) are to be voted. Upon timely receipt of such instructions, the Trustee (after combining votes of fractional shares of Stock to give effect to the greatest extent possible to Members' instructions) shall vote the shares of Stock as instructed. The instructions received by the Trustee from Members shall be held by the Trustee in strict confidence and shall not be divulged or released to any person including officers or Employees of the Company, or of any other company. The Trustee and the Company shall not make recommendations to Members on whether to vote or how to vote, other than recommendations contained in proxy and other materials that are generally distributed to all shareholders of the Company with respect to such vote. If voting instructions for shares of Stock allocated to any Member are not timely received for a particular shareholders' 28 meeting, such instructions shall be deemed to have not been received by the Trustee. (C) If voting instructions are not required to be followed under subparagraph (A), the Trustee shall vote shares of Stock-- (i) credited to the Exempt Loan Suspense Account; or (ii) allocated to Members' Account in its sole discretion, after the Trustee determines such action to be in the best interests of the Members and their Beneficiaries. (D) If voting instructions are required to be followed under subparagraph (A), the Trustee shall vote shares of Stock credited to the Exempt Loan Suspense Account in the same proportion as Stock with respect to which voting instructions are received is voted. (e) DIVERSIFICATION. Any Participant who has attained age 55 and completed 10 years of participation in the Plan and the portion of the Predecessor Plan or S&RP that is or was designated as an employee stock ownership plan (each as "Qualified Participant") shall have the right to diversify the investment of his Account in a manner that satisfies Code Section 401(a)(28). A Qualified Participant may elect, within 90 days after the close of each Plan Year in the qualified election period (as defined below), to (1) receive a cash distribution of the amount subject to the diversification election which shall be distributed to the qualified Participant (or made available for distribution) within 90 days after the last day of the period during which the election can be made, or (2) transfer the amount subject to the diversification election to the S&RP and invest such amount in any one or more of the Investment Funds (not including the ESOP Investment Fund) offered by the S&RP (which Funds are not inconsistent with IRS Regulations) and any such investment option selected by the qualified Participant shall be implemented no later than 90 days after the last day of the period during which the election can be made. For purposes of this Section 6.2(e), the term "qualified election period" means the 6-plan-year period beginning with the first plan year in which the individual first became a qualified participant. The portion of a qualified Participant's Account subject to the diversification election in all years in the qualified election period, other than the final 29 year of such period, is equal to: (1) 25 percent of the total number of shares of employer securities acquired by or contributed to the Plan, or the portion of the Predecessor Plan and/or S&RP that constitutes an employee stock ownership plan after December 31, 1986, that have ever been allocated to a qualified Participant's account on or before the most recent plan allocation date; LESS (2) the number of shares of employer securities previously distributed, transferred, or diversified pursuant to a diversification election made after December 31, 1986 (subject to the provision that a de minimis amount that satisfies the requirements described in Q & A-7 or IRS Notice 88-56 shall not be subject to the diversification requirement of Code Section 401(a)(2)). The resulting number of shares shall be rounded to the nearest whole integer. With respect to a qualified Participant's final diversification election, "50 percent" is substituted for "25 percent" in determining the amount subject to the diversification election. ARTICLE VII. VESTING 7.1 VESTING. A Member shall have a fully-vested interest at all times in his Account. ARTICLE VIII. [RESERVED] ARTICLE IX. DISTRIBUTIONS 9.1 ENTITLEMENT TO DISTRIBUTION UPON DEATH OF MEMBER. (a) DEATH OF MEMBER. In the event of a Member's death prior to the complete distribution of his Account balance, the Beneficiary of such Member shall be entitled to receive the entire balance remaining to the credit of such Member's Account as of the first Valuation Date coincident with or next following the Member's death, as provided in Sections 9.3 and 9.4. (b) DESIGNATION OF BENEFICIARY. (1) GENERAL RULE. Each Member may designate one or more persons as Beneficiary to receive his Account balance in the event of such Member's death. Each such designation shall be made on a form provided by the Plan Administrator, shall be effective only when filed in writing with the Plan Administrator, and shall revoke all prior designations, subject to the provisions of paragraph (2) below. Subject to paragraph (2) below, a trust may be named as a Beneficiary of a Member, but the trust itself will not be treated as a "designated beneficiary" under the Code or Code Regulations including Proposed 30 Code Regulations. If the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are met, the beneficiaries of the trust will be treated as "designated beneficiaries" in accordance with and subject to the requirements of Proposed Code Regulation 1.401(a)(9)-1D and E and other applicable regulations. If a trust is named as Beneficiary and the requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are not met, the Member will be treated as not having a "designated beneficiary" under the Proposed Code Regulations and accordingly distribution will be made to the trust in accordance with the five-year rule in Code Section 401(a)(9)(B)(ii). (2) RULE FOR SURVIVING SPOUSES. A Member's surviving spouse shall be his sole Beneficiary unless, prior to the Member's death, one or more other persons have been named pursuant to a qualified alternate designation (as defined in paragraph (3) below) made and filed with the Plan Administrator prior to the Member's death or unless the Plan Administrator determines that the consent otherwise required under paragraph (3) could not have been obtained because the Member's spouse could not be located or because of such other circumstances as the Secretary of Treasury shall prescribe by Regulation. (3) QUALIFIED ALTERNATE DESIGNATION. A designation shall be a qualified alternate designation only if-- (A) the Member, in a signed written instrument, designates by name one or more persons to be Beneficiary in lieu of, or along with, his surviving spouse; (B) the Member's surviving spouse (if any), determined at the time of the Member's death, has consented in writing to the naming of such Beneficiary and has acknowledged the effect of such consent; and (C) such consent is witnessed by a notary public or the Plan Administrator. A qualified alternate designation may not be changed without spousal consent. Any spousal consent to a qualified alternate designation shall be irrevocable. 31 (4) DEFAULT BENEFICIARY. If no person is otherwise designated under this subsection, or if a designation is revoked in whole or in part, or if no designated Beneficiary survives the Member, the Member's Beneficiary shall be his surviving spouse; or, if there is no surviving spouse, the surviving children of the Member in equal shares; or, if there are no surviving children, then the surviving parent(s) of the Member; or, if there are no surviving parents, the Member's estate. For purposes of the foregoing, the term "surviving children" shall include the children of a Member's deceased child. Such children shall share equally in any distribution that would have gone to the Member's child had he been alive. If any payment is made under the Plan to any Beneficiary, in reasonable reliance on (A) a written statement by the Member that he was unmarried, (B) a spousal consent that on its face conformed to the requirements set forth above, or (C) evidence establishing to the Plan Administrator's satisfaction that a Member's spouse could not be located at the time of a Beneficiary designation, the Plan's liability for death benefits shall be satisfied, to the extent of such payment, and the Plan shall have no liability to any spouse to such extent. 9.2 DISTRIBUTION UPON TERMINATION OF SERVICE FOR REASONS OTHER THAN DEATH. Upon a Member's Termination of Service for reasons other than death, such Member shall be entitled to the Vested Balance of his Account as of the Valuation Date provided in Section 9.4. 9.3 FORM OF BENEFIT PAYMENTS. (a) PAYMENT TO MEMBER. Except as provided in Sections 9.4(b), the distribution of a benefit to a Member pursuant to Section 9.2 shall be made in either of the following ways, as the Member shall elect: (1) in a lump sum; or (2) in installments payable in substantially equal amounts or term certain annuities continuing over a period certain as elected by the Member, not exceeding the shorter of 15 years, the Member's life expectancy, or the life expectancy of the Member and his Beneficiary; provided that subject to the Code and Code Regulations the first distribution to a Member after Termination of Service may, at the Member's election, be a partial payment of his vested Account 32 balance and any subsequent distribution shall conform to (1) or (2) above. (b) PAYMENT TO BENEFICIARY. Subject to the provisions below, a Beneficiary entitled to payment under this Article may elect to continue receiving the benefits under the method of payment in effect when the Member died or be paid the remaining Account balance in a single lump sum distribution. If a Member dies before the time the distribution is considered to have commenced in accordance with the Code or Code Regulations or Proposed Code Regulations (i.e. before April 1 of the year after the year that the Member reaches age 70 1/2), the method of distribution shall satisfy the following requirements: (1) any remaining portion of the Member's interest that is not payable to a designated beneficiary (as defined under Code Regulations or Proposed Code Regulations) will be distributed within five years after the Participant's death; and (2) any portion of the Member's interest that is payable to a designated beneficiary (as defined in Code Regulations or Proposed Code Regulations) will be distributed either (i) within five years after the Member's death, or (ii) over the life of the Beneficiary or over a period certain not extending beyond the life expectancy of the Beneficiary, commencing not later than the end of the calendar year following the calendar year in which the Member died (or, if the designated Beneficiary is the Member's surviving spouse, commencing not later than the end of the calendar year following the calendar year in which the Member would have attained age 70 1/2). Subject to Section 9.4(b) herein and further subject to the limitations of the Code and Code Regulations or Proposed Code Regulations, the distribution options described in Section 9.3(a) above will be offered to a designated beneficiary (as defined under Code or Proposed Code Regulations) whenever the Member dies. The distribution options in Section 9.3(a) will also be offered to satisfy subsection 9.3(b)(2)(ii) above, and for this purpose the term "Member" in Section 9.3(a) will refer to the designated beneficiary (except that if the designated beneficiary is not the Member's spouse, the words "or the life expectancy of the Member and his Beneficiary" at the end of 9.3(a)(2) shall not be applicable). Distribution options offered to a Beneficiary who is not an individual shall be those described in the first sentence of this Section 9.3(b) 33 except that if the Member dies before April 1 of the year following his/her reaching age 70 1/2, the five-year rule of Code Section 401(a)(9)(B)(ii) shall apply. In the event a Beneficiary dies, any remaining balance payable to such Beneficiary shall be distributed to the Beneficiary's estate (except where the Beneficiary is the Member's spouse and such spouse had submitted a beneficiary form designating an individual as a Beneficiary prior to the spouse's death). The distribution options available to a deceased Beneficiary's estate or to a designated individual Beneficiary of a deceased spouse-Beneficiary will be a continuation of the payments being made to the deceased Beneficiary at the time of his/her death or a lump sum payment (but any distribution shall in any event be completed by the end of the normal life expectancy of the deceased Beneficiary (measured at the time of the Employee's death) or within five years after the Member's death if the five-year rule applies), PROVIDED that, in cases where the deceased Beneficiary is the spouse of a deceased Member, and if such spouse had, prior to such spouse's death, submitted a beneficiary form to the Administrator designating an individual as his/her Beneficiary, then such individual Beneficiary may (in addition to the option of receiving a lump sum or the continuation of existing payments) elect to receive annual installments or a term certain annuity (commencing not later than December 31 of the year following the spouse- Beneficiary's death) over a period of up to 15 years, but in any event such period will not exceed the life expectancy of the individual Beneficiary (measured at the time of the spouse's death) named by the spouse and further will not exceed the life expectancy of the spouse (measured at the time of the Employee's death) if the spouse died after April 1 of the year following the Member's reaching age 70 1/2." (c) EARNINGS AND LOSSES. Amounts payable hereunder shall continue to accrue earnings and losses under Section 6.2 pending such payment. (d) COMPLIANCE WITH CERTAIN IRS REQUIREMENTS. Notwithstanding anything herein, distributions from the Plan will be made in accordance with the requirements of the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of Section 1.401(a)(9)-2 of the proposed Code Regulations. 34 9.4 TIME OF BENEFIT PAYMENTS. (a) GENERAL RULE. Except as otherwise provided in this Section 9.4 and Section 9.7, distribution of benefits under the Plan shall commence as soon as administratively feasible following the Member's Termination of Service and his request for his distribution from the Plan in accordance with the Rules of the Plan. (b) SMALL AMOUNTS. If a Member incurs a Termination of Service and the Vested Balance of his Account as of the first Valuation Date coincident with or next following such Termination of Service is not greater than $3,500, distribution shall be made in a single lump sum in cash as soon as administratively feasible in accordance with the Rules of the Plan. (c) DISTRIBUTIONS UPON DEATH. A distribution to a Beneficiary pursuant to Section 9.1 shall be made as soon as practicable following the first Valuation Date coincident with or next following the Member's death. For purposes of Section 9.4(a) above, written consent of the Participant is required before the commencement of the distribution of any portion of an accrued benefit if the present value of the nonforfeitable total accrued benefit is greater than $3,500. The consent requirements are deemed satisfied if such value does not exceed $3,500 and the Plan may distribute such portion to the Participant as a single sum. Present value for this purpose shall be the Participant's Vested Balance of his or her Account as of the applicable Valuation Date. If the present value determined at the time of a distribution to the Participant exceeds $3,500, then the present value at any subsequent time shall be deemed to exceed $3,500. The foregoing consent requirements do not apply to situations where consent is not required by applicable law. (d) The notice required by Section 1.411(a)-11(c) of the Code Regulations will be provided no less than 30 days and no more than 90 days before the Annuity Starting Date. (e) If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)- 11(c) of the Code Regulations is given, provided that: 35 (1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution. 9.5 INCIDENTAL DEATH BENEFIT. Once distribution to the Member has commenced under Section 9.4, the minimum amount which must be distributed each calendar year shall be determined by dividing the balance in the Member's Account by the "applicable divisor." The "applicable divisor" shall be determined under Regulations issued under the incidental death benefit requirements of Code Section 401(a)(9). 9.6 DISTRIBUTION OF ACCOUNT. Notwithstanding anything in this Article IX to the contrary, distribution of a Member's balance in his Account shall be subject to the following: (a) FORM OF DISTRIBUTION. Unless the Member elects to receive his distribution in Stock, distribution of his Account shall be in cash, and shall be distributed at the time and in the manner specified elsewhere in this Article IX. If a Member elects to receive his distribution of his Account in Stock, distribution shall be in whole shares of Stock either credited to such Account or purchased with cash or other non-Stock assets allocated to such Account, plus a supplemental cash payment equal to the sum of any fractional share of Stock credited to such Account and the Member's allocable share of any non-Stock assets to the extent that such assets are not sufficient to purchase additional Stock for distribution. A Stock distribution shall be paid as a lump sum and shall be subject to the Article IX provisions relating to lump sum distributions. A Member who chooses to diversify his Account in accordance with subsection 6.3(e) by investing in any one or more of the Investment Funds offered by the S&RP may not elect to receive such portion of his Account in Stock. (b) REQUIRED COMMENCEMENT DATE. Distribution of a Member's balance in his Account must begin by the time prescribed by Code Section 409(o). Accordingly, if the Member elects, the distribution of his Account will commence not later than one year after the close of the Plan Year (i) in which the Member has a Termination of Service by reason of attaining age 65, disability, or death, or (ii) which is the fifth Plan Year following the Plan Year in which the Member otherwise has a 36 Termination of Service, except that this clause shall not apply if the Member is reemployed by the Company or an Affiliate before such year. If the present value of the vested balance of the Employee's Account is less than $3,500 as of the Valuation Date coincident with or next following the Member's Termination of Service (except if the present value of the vested balance of such Account at the time of a previous distribution exceeded $3,500), or if the Member has a Termination of Service and has attained age 65, distribution of the balance of his Account shall be made as soon as practicable following said Termination of Service and the Member's consent or election shall not be required for such distribution. For purposes of this subsection (b), the balance of a Member's Account shall not include any Stock acquired with the proceeds of an Exempt Loan until the close of the Plan Year in which such loan is repaid in full. (c) PUT OPTIONS AND RIGHTS OF FIRST REFUSAL. If Stock is distributed from the Plan at a time when it is not readily tradable on an established public market, then the provisions of this Section shall apply in the case of a Member or any other distributee of the Stock who may be legally subject to the following rules. (1) The distributee shall have the right to require that the Employee repurchase such Stock under reasonable payment terms and at a price per share determined in accordance with Section 6.3(a). This put option shall continue during a period of at least 60 days following the date of distribution of the Stock and, if not exercised within such period of 60 days, during the first 60 days in the following Plan Year. This right shall be granted in accordance with Code Section 409(h) and all applicable Regulations. (2) Stock acquired with the proceeds of an Exempt Loan shall be subject to a right of first refusal whereby the Company shall be entitled to purchase such Stock at a selling price and under other terms not less favorable to the seller than (i) the purchase price and other terms offered by a buyer other than the Company pursuant to a good faith offer to purchase the Stock, or (ii) if more favorable to the seller than clause (i), the value of the Stock determined in accordance with Section 6.3(a). The right of first refusal must lapse no later than 14 days after the holder of the Stock gives written notice to the Employer that an offer by a third party to purchase the Stock has been received. 37 9.7 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding the foregoing provisions of this Article IX, unless the Member otherwise elects in writing, distribution to a Member shall not take place later than the sixtieth day after the close of the Plan Year in which the latest of the following events occurs: (a) the Member attains age 65; (b) the Member attains the tenth anniversary of the date on which he commenced participation in the Plan; or (c) the Member's Termination of Service. In any event, the payment of benefits to a Member shall commence no later than April 1 following the calendar year in which the Member attains age 70-1/2. All distributions under this Plan shall be made in accordance with Code Section 401(a)(9) and the Regulations thereunder. 9.8 ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. DEFINITIONS: (a) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible 38 retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 9.9 PLAN TO PLAN TRANSFER. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article IX, subject to the approval of the Plan Administrator in its sole discretion (exercised in a non-discriminatory manner) and at the time and in the manner prescribed by the Plan Administrator, a Participant who is entitled to a lump sum distribution within the meaning of Code Section 402(e) from the Plan may elect instead to have the amount of such distribution transferred to the Predecessor Plan or the S&RP if the Participant is or becomes employed by a participating employer in the Predecessor Plan or the S&RP. If elected by the Participant and authorized by the Plan Administrator, such a plan-to-plan transfer must be made to the recipient plan by the Trustee within the period established by the Plan Administrator on a uniform and nondiscrimatory basis. To the extent permitted by applicable law, the provisions of this Section 9.9 shall also be applicable to former employees of the Promus Companies Incorporated (i) who were participants in the Predecessor Plan and S&RP and (ii) who terminated their employment with The Promus Companies Incorporated or its affiliates on or prior to the S&RP Spin-off Date and (iii) whose unvested account balances under the Predecessor Plan were transferred to the S&RP on or after the S&RP Spin-Off Date and were subsequently transferred to the Plan on or after the Spin-Off Date and (iv) who are reemployed by Harrah's Entertainment, Inc. or any of its subsidiaries after the S&RP Spin-off Date and based upon such reemployment are Eligible Employees under the Predecessor Plan before incurring five consecutive break years (as defined in the Predecessor Plan) since termination of their employment with The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.). ARTICLE X. [RESERVED] ARTICLE XI. AMENDMENT AND TERMINATION 11.1 AMENDMENT AND TERMINATION. The Company expects the Plan to be permanent, but the Company must necessarily and does hereby reserve the right to amend or modify in any respect, or to terminate, the Plan at any time, for any reason whatsoever, by 39 the action of the Board of Directors. The Company may make any modifications or amendments to the Plan, retroactively if necessary or appropriate, to qualify or maintain the Plan as a plan meeting the requirements of Code Section 401(a) or of ERISA, or the Regulations issued thereunder. No amendment of the Plan shall cause any part of the Fund to be used for or diverted to purposes other than the exclusive benefit of the Members, their surviving spouses, or their Beneficiaries covered by the Plan. No plan amendment may decrease the accrued benefit of any Member. Retroactive plan amendments may not decrease the accrued benefit of any Member determined as of the time the amendment was adopted. The Chief Executive Officer shall have the right to amend or modify the Plan; provided, however, that such amendments shall be administrative in nature, or mandated by any applicable law. The Plan may be amended or terminated under this Section without the vote of the stockholders of the Company, except to the extent that stockholder approval is required by Rule 16b-3, promulgated under Section 16 of Securities Exchange Act of 1934, as amended. 11.2 TERMINATION OR PARTIAL TERMINATION. Upon a complete or partial termination of the Plan or complete discontinuance of contributions to the Plan (within the meaning of Treasury Regulation Section 1.411(d)-2), no further contributions shall be made under the Plan and, upon a complete termination of the Plan, no Employee who is not a Participant on the termination date shall thereafter become a Participant. Except as otherwise provided in this Section 11.2, upon a partial or complete termination of the Plan, the Accounts of any affected Members shall be distributed at the time and in the manner specified in Article IX. Notwithstanding any provision herein to the contrary, to the extent permitted by law, upon a complete termination of the Plan, each Member shall be entitled to a lump sum distribution of his Account, in cash or Stock; if a Member does not elect that his Accounts be distributed in an immediate lump sum distribution in cash or Stock, the value of the Member's Account shall be transferred to another plan qualified under Code Section 401(a) maintained by the Company in a trust-to-trust transfer and the value of such Account shall be distributable from such plan in the form of cash unless otherwise provided by such plan. 11.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or consolidation of the Plan with, or any transfer of assets and liabilities of the Plan to, any other plan, provision shall be made so that each Member would, if the Plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then been terminated. 40 11.4 EFFECT OF CHANGE IN CONTROL. The following provisions shall govern in the event that an Employer or Division, or any part of the assets of an Employer, is acquired by, or merged into, a nonaffiliated company, or in the event a nonaffiliated company acquires substantially all the outstanding stock of an Employer: (a) If the nonaffiliated successor company shall have agreed to establish, or shall have, a plan substantially comparable to this Plan (as determined by the Trustees), then the Plan assets allocable to the Employees involved in the acquisition or merger may be transferred to the plan so established by the successor company subject, however, to the receipt of a favorable determination letter from the Internal Revenue Service or opinion of counsel of the successor company satisfactory to the Trustees that such successor plan is a tax-exempt plan and trust under the applicable provisions of the Code. An Employee of an Employer (other than the Company) or Division shall be deemed "involved" if his employment is terminated by reason of the acquisition or merger or transferred (from the controlled group consisting of the Company and its Affiliates) by reason of the acquisition or merger. Employees of the Company shall be deemed "involved" if their employment is terminated by reason of the acquisition or merger or if they continue in the employment of the Company after control of the Company changes hands. (b) If a nonaffiliated successor company acquires substantially all of the stock or assets of the Company by merger or acquisition or otherwise, then such successor company may assume this Plan as the sponsoring company. (c) If an Affiliate or other entity that owns 50 percent or more of the Company's outstanding common stock acquires the Company or substantially all of its assets or stock, then the affiliated company may assume the Plan and the Plan shall then continue in effect without interruption. For a corporate transaction that does not constitute a merger or acquisition, the Human Resources Committee shall determine, in its sole and absolute discretion, whether a change in control has occurred and whether the provisions of this Section 11.4 shall apply with respect to affected Employees. 41 ARTICLE XII. ADMINISTRATION OF THE PLAN 12.1 PLAN ADMINISTRATOR. (a) The general administration of the Plan shall be carried out by Promus Hotels, Inc. or its delegates, who shall act as the "administrator" within the meaning of Title 1 of ERISA. The Plan Administrator and the Trustees shall be the "named fiduciaries" within the meaning of Title I of ERISA. To the extent not prohibited by law or applicable rules or regulations, the Plan Administrator shall have the authority to delegate to one or more persons the duties and responsibilities of the Plan Administrator. (b) The Plan Administrator shall also have the authority and discretion to engage an Administrative Delegate who shall perform, without discretionary authority or control, administrative functions within the framework of policies, interpretations, rules, practices, and procedures made by the Plan Administrator or other Plan fiduciary. Any action made or taken by the Administrative Delegate may be appealed by an affected Member to the Plan Administrator in accordance with the claims review procedures provided in Section 12.7. Any decisions which call for interpretations of Plan provisions not previously made by the Plan Administrator shall be made only by the Plan Administrator. Except to the extent the Administrative Delegate exercises discretionary authority or control over the assets of the Plan, the Administrative Delegate shall not be considered a fiduciary with respect to the services it provides. (c) Notwithstanding subsections (a) and (b), each Member shall be a named fiduciary for purposes of Section 403(a) of ERISA but solely with respect to the issuance of instructions to the Trustee-- (1) to tender or not to tender the Member's Company Stock Share pursuant to Section 14.1 of the Trust Agreement; and (2) to vote Stock pursuant to Section 6.3(d) of the Plan. 12.2 APPOINTMENT AND RESIGNATION OF TRUSTEES. The Board of Directors may remove any Trustee at any time. In the event of the removal, death, resignation, or inability to act of a Trustee, said Board of Directors may appoint a successor. A Trustee may resign at any time, effective upon delivering a written resignation to the Board of Directors or the Secretary or Assistant Secretary of the Company. 42 12.3 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except as to powers and duties and the determination of questions expressly reserved herein to the Trustees, the Plan Administrator shall have full charge of the administration of this Plan with all discretionary powers and authority to enable it properly to carry out its duties including (without limitation) the authority to determine all questions relating to (a) the interpretation of the Plan; (b) the eligibility of Participants; (c) the dates and other considerations regarding participation or termination of employment; (d) the benefit to which any Member or his surviving spouse or beneficiary may become entitled hereunder; (e) to construe the Plan and the Rules of the Plan; (f) to determine questions of eligibility and vesting of Participants; (g) to determine entitlement to allocations of contributions and forfeitures and to distributions of Participants, former Participants, Beneficiaries, and all other persons; (h) to make findings of fact as necessary to make any determinations and decisions in the exercise of such discretionary power and authority; (i) to conduct claims procedures as provided in Section 12.7; and (j) to delegate any power or duty to any firm or person engaged under Section 12.8 or to any other person or persons. The Plan Administrator shall also have the right to authorize disbursements under the Plan, subject to any required withholdings. All interpretations under the Plan and all determinations of fact made in good faith by the Plan Administrator (or delegees thereof) and the Trustees shall be binding on the Members and all other interested persons. 12.4 ACTION BY MAJORITY OF THE PLAN ADMINISTRATOR. To the extent that the Plan Administrator has delegated its power and authority to a committee, all action by such committee hereunder shall be authorized either by a majority vote of all members of such committee present at a meeting (provided a quorum of all members is present), or by a writing signed by a majority of all all members of such committee. 12.5 RULES AND REGULATIONS OF THE PLAN ADMINISTRATOR. The Plan Administrator may make such rules and regulations in connection with its administration of the Plan as are consistent with the terms and provisions hereof (the "Rules of the Plan"). 12.6 CONCLUSIVENESS OF REPORTS, ETC. The Trustees, the Plan Administrator and the Company and any other Employer and their officers and directors, shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any enrolled actuary selected by the Plan Administrator, upon all certificates and reports made by any accountant selected by the Plan Administrator, the Company, or any other Employer, and upon all opinions given by any legal counsel selected by the Plan Administrator (which may include in- house counsel of the Company). The Trustees, the Plan Administrator and the Company and any other Employers and their officers and directors, shall be fully protected with respect to any action taken or suffered by them in good faith in reliance upon any such actuary, or 43 counsel, and all action so taken or suffered shall be conclusive upon all persons. 12.7 CLAIMS PROCEDURE. If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within 90 days after receipt of the claim (or within an additional 90 days if special circumstances require an extension of time, and written notice of the extension shall be furnished to the claimant). Notice of the denial shall set forth the following information: (a) the specific reason or reasons for the denial; (b) specific reference to pertinent Plan provisions on which denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; (d) an explanation that a full and fair review by the Plan Administrator of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Plan Administrator, within 60 days after such notice has been received, a written request for such review; and (e) if such request is so filed, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in subsection (d) above. The decision of the Plan Administrator upon review shall be made promptly, and not later than 60 days after the Plan Administrator's receipt of the request for review, unless special circumstances require an extension of time for processing, in which case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If the claim is denied, wholly or in part, the claimant shall be given a copy of the decision promptly. The decision shall be in writing and shall include specific reasons for the denial, shall include specific references to the pertinent Plan provisions on which the denial is based, and shall be written in a manner calculated to be understood by the claimant. The Plan Administrator's decision on the appeal may be reviewed by the Board of Directors which shall have the right to overrule the Plan Administrator. The Plan Administrator and the Board of Directors shall have full discretionary power and authority to construe the Plan and the Rules of the Plan, to determine questions of eligibility, vesting and entitlements and to make findings of fact as under Section 12.3 and, to the extent permitted by law, the decision of the 44 Plan Administrator (if no review is properly requested) or the decision of the Board of Directors on review, as the case may be, shall be final and binding on all parties except to the extent found by a court of competent jurisdiction to constitute an abuse of discretion. 12.8 EMPLOYMENT OF AGENTS. The Plan Administrator may employ or designate agents, including without limitation custodians, accountants, consultants, or attorneys, to exercise and perform the powers and duties of the Plan Administrator as the Plan Administrator delegate to them, and to render such services to the Plan Administrator as the Plan Administrator may determine, and the Trustees may enter into agreements setting forth the terms and conditions of such services. The Plan Administrator may appoint an independent public accountant to audit the Plan. The compensation of these agents shall be an expense chargeable in accordance with Section 12.9. 12.9 COMPENSATION AND EXPENSES OF TRUSTEES. Unless otherwise determined by the Company, the Plan Administrator and the Trustees shall serve without compensation for services as such, but all expenses of the Trustees shall be paid in accordance with the provisions of Section 16.4. Such expenses shall include any expenses incident to the functioning of the Plan, including without limitation attorneys' fees and the compensation of other agents, accounting and clerical charges, expenses, if any, of being bonded as required by ERISA, and any other costs of administering the Plan. 12.10 INDEMNITY FOR LIABILITY. To the maximum extent allowed by law and to the extent not otherwise indemnified, the Company shall indemnify each Trustee (and former Trustee) and Plan Administrator, and any other current or former Employee, officer, or director of the Company or the Employers, against any and all claims, losses, damages, expenses, including counsel fees, incurred by any such person on account of such person's action, or failure to act, in connection with the Plan, including, in the case of amounts paid in settlement, only such amounts as are paid with the Employer's approval. 12.11 EFFECT OF MISTAKE. In the event of a mistake or misstatement as to the eligibility, participation, investments, or service of any Member, or the amount of contributions made on behalf of, or payments made to, any Member or Beneficiary, the Plan Administrator (or designated agent or agents thereof and the Plan Administrator) may determine whether or not a mistake has occurred and may make any adjustment to a Member's or Beneficiary's Account, or make any adjustment to payments made or being made to a Member or Beneficiary, which will, in the Plan Administrator's sole judgment (or in the sole judgments of a designated agent or agents of the Plan Administrator and the Plan Administrator), correct such mistake or misstatement. 45 ARTICLE XIII. TRUST ARRANGEMENTS 13.1 APPOINTMENT OF TRUSTEE. The Trustees for the Plan shall be named in the Trust Agreement, and, upon acceptance thereof, each Trustee shall perform the duties and exercise the authority of a Trustee as set forth in the Plan and in said Trust Agreement. A Trustee shall be named, and may be removed, in accordance with the provisions of Article XII. 13.2 CHANGE IN TRUST AGREEMENTS. The Company may from time to time enter into such further agreements with the Trustees or other parties and make such amendments to Trust Agreements, as it may deem necessary or desirable to carry out the Plan and may take such other steps and execute such other instruments as may be deemed necessary or desirable to put the Plan into effect or to execute it. 13.3 TRUST FUND. All deposits under this Plan shall be paid to the Trustees and deposited in the Fund. All assets of the Fund, including investment income, shall be retained for the exclusive benefit of Members and beneficiaries and shall be used to pay benefits under the Plan or to pay administrative expenses of the Plan and of the Fund to the extent not permanently paid by the Company or an Employer in its sole discretion, and shall not revert to or inure to the benefit of the Company or an Employer, except as provided in Section 13.6. 13.4 APPOINTMENT OF AN INVESTMENT MANAGER. The Trustees shall have exclusive authority and discretion to manage and control the Fund; provided, however, that the Trustees may employ or appoint an Investment Manager(s) (within the meaning of ERISA Section 3(38)) to manage all or any part of the Fund or a custodian to hold such investments. The Trustees may also appoint an investment advisor. An Investment Manager or custodian shall acknowledge in writing its appointment and shall serve until removed by the Trustees or a proper resignation is received by the Trustees. An Investment Manager shall have sole responsibility for the investment of the portion of the Fund which such Investment Manager is appointed to manage. Neither the Trustees nor the Administrator shall have any responsibility for, or incur any liability for, the investment of such portion or for the loss to or diminution in value of the Fund resulting from any action directed, taken, or omitted by an Investment Manager or custodian. The Trustees shall require each Investment Manager and custodian to furnish such periodic and other reports to the Trustees as the Trustees deem to be in the best interests of the Trust. Neither the Trustees nor the Plan Administrator shall be under any duty to question, but shall be entitled to rely upon, any certificate, report, opinion, direction, or lack of direction provided by an Investment Manager or custodian and shall be fully protected in respect of any action taken or suffered by them in reliance thereon. Such Investment Manager or custodian may maintain cash balances in the Investment Fund(s) they are appointed to manage; provided that such cash balances 46 shall be limited to the amount needed to meet the current cash requirements of the Plan, to make any cash distributions, to pay any expenses, or to exercise applicable rights under the Plan. 13.5 REVERSION OF EMPLOYER CONTRIBUTIONS. (a) Notwithstanding anything to the contrary contained in this Plan, if the Internal Revenue Service issues a determination letter stating that the Plan does not meet the requirements of Code Section 401 with respect to its initial qualification, then within one year of the issuance of such letter the Employer shall be entitled to receive a return of its contributions made hereunder. (b) That portion of a contribution made by a mistake of fact shall be returned to the Employer within one year after the payment of the contribution. (c) That portion of a contribution made by the Employer that is conditioned upon deductibility of the contribution under Code Section 404 and disallowed by the Internal Revenue Service as a deduction under Code Section 404 shall be returned to the Employer within one year after the Internal Revenue Service disallows the deduction. (d) Earnings attributable to the contributions to be returned under this Section shall not be returned (except with respect to Section 13.6(a)) and any losses attributable to such contributions shall reduce the amount returned. ARTICLE XIV. TOP-HEAVY PLAN PROVISIONS 14.1 APPLICATION OF TOP-HEAVY PROVISIONS. (a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2) below, if as of the Applicable Determination Date the aggregate of the Account balances of Key Employees under the Plan exceeds 60 percent of the aggregate amount of the Account balances of all Employees (other than former Key Employees) under the Plan, the Plan will be top-heavy and the provisions of this Article shall become applicable. For the purposes of this Article-- (1) Account balances shall include the aggregate amount of any distributions made with respect to the Employee during the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of said Applicable Determination Date; and 47 (2) the Account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions, rollovers, and transfers shall be taken into account, shall be made in accordance with Code Section 416 and the Regulations thereunder which are incorporated herein by reference. (b) AGGREGATION GROUP DETERMINATION. (1) If as of the Applicable Determination Date the Plan is a member of a Required Aggregation Group which is top-heavy, the provisions of this Article shall become applicable. For purposes of this subsection (b), an Aggregation Group shall be top-heavy, as of the Applicable Determination Date, if the sum of-- (A) the aggregate of account balances of Key Employees under all defined contribution plans in such group, and (B) the present value of accrued benefits for Key Employees under all defined benefit plans in such group exceeds 60 percent of the same amounts determined for all employees (other than former Key Employees) under all plans included within the Aggregation Group. Account balances and accrued benefits shall be adjusted for any distribution made in the five-year period ending on the Applicable Determination Date and any contribution due but unpaid as of the Applicable Determination Date. The account balance of any individual who has not performed services for the Company or the Affiliates at any time during the five-year period ending on the Applicable Determination Date shall not be taken into account. The determination of the foregoing ratio, including the extent to which distributions (including distributions from terminated plans), rollovers, and transfers are taken into account, shall be made in accordance with Code Section 416 and the Regulations thereunder. (2) If the Plan is top-heavy under subsection (a) above, but the Aggregation Group is not top-heavy, this Article shall not be applicable. 48 (c) THE TRUSTEES. The Trustees shall have responsibility to make all calculations to determine whether the Plan is top-heavy. 14.2 DEFINITIONS. For purposes of this Article, the following definitions apply. (a) AGGREGATION GROUP means a required aggregation group or a permissive aggregation group as follows: (1) REQUIRED AGGREGATION GROUP. All plans maintained by the Company and the Affiliates in which a Key Employee participates shall be aggregated to determine whether or not the plans, as a group, are top-heavy. Each other plan of the Company and the Affiliates which enables this Plan to meet the requirements of Code Section 401(a) or Section 410 shall also be aggregated. (2) PERMISSIVE AGGREGATION GROUP. One or more plans maintained by the Company and the Affiliates, which are not required to be aggregated, may be aggregated with each other or with plans under paragraph (1) if such group would continue to meet the requirements of Code Sections 401(a)(4) and 410 with such plan(s) being taken into account. (b) APPLICABLE DETERMINATION DATE shall mean, with respect to the Plan, the Determination Date for the Plan Year of reference and, with respect to any other plan, the Determination Date for any plan year of such plan which falls within such calendar year as the Applicable Determination Date of the Plan. (c) DETERMINATION DATE shall mean, with respect to the initial plan year of a plan, the last day of such plan year and, with respect to any other plan year of a plan, the last day of the preceding plan year of such plan. (d) VALUATION DATE. For all top-heavy purposes, a Valuation Date shall be the annual date on which Plan assets must be valued for the purpose of determining the value of account balances or the date on which liabilities and assets of a defined benefit plan are valued. For the purpose of the top-heavy test, the Valuation Date for a defined benefit plan shall be the same Valuation Date used for computing plan costs for minimum funding. The Valuation Date for a defined contribution plan shall be the most recent valuation for a defined contribution plan date within a 12-month period ending on the Determination Date. 49 (e) KEY EMPLOYEE shall mean any Employee or former Employee who at any time during the Plan Year containing the Determination Date or the four preceding Plan Years, is or was (1) an officer of the Employer having annual compensation for such Plan Year which is in excess of 50 percent of the dollar limit in effect under Code Section 415(b)(1)(A) for the calendar year in which such Plan Year ends; (2) one of the ten Employees having annual compensation from the Employer for a Plan Year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and owning (or considering as owning within the meaning of Code Section 318) more than a one-half percent interest as well as one of the ten largest interests in the Employer; (3) a five percent owner of the Employer; or (4) a one percent owner of the Employer having annual compensation from the Employer for a Plan Year of more than $150,000. For purposes of determining five-percent and one-percent owners, neither the aggregation rules nor the rules of subsections (b), (c) and (m) of Code Section 414 apply. Beneficiaries of an Employee acquire the character of the Employee who performed service for the Employer. Inherited benefits will retain the character of the benefits of the Employee who performed services for the Employer. (f) COMPENSATION. Compensation to be used for determining a minimum benefit or minimum contribution for top-heavy purposes is the amount set forth in Box 10 of Form W-2 (or the successor method of reporting income under Code Sections 6041, 6051 and 6052). The same definition of compensation shall be used for all top-heavy purposes, except that for the purpose of determining whether an Employee is a Key Employee, with respect to Plan Years beginning on or after January 1, 1989, the compensation to be used is the aforesaid definition but including Employer contributions made pursuant to a salary reduction arrangement. 14.3 MINIMUM CONTRIBUTION. For each Plan Year with respect to which the Plan is top-heavy, the minimum amount contributed by the Employer under the Plan and the Company and the Affiliates under all other qualified defined contribution plans maintained by the Company and the Affiliates for the benefit of each Participant who is not a Key Employee and who is otherwise eligible for such a contribution shall be the lesser of -- (a) 3 percent of the non-key Participant's compensation for only the Plan, or (b) the non-key Participant's compensation times a percentage equal to the largest percentage of the first $150,000 of such compensation of any Key Employee 50 allocated under any of such plans with respect to any Key Employee for the Plan Year. This minimum contribution is determined without regard to any social security contribution and shall be in accordance with the requirements of Code Regulation 1.416-1. Solely with respect to Key Employees, contributions attributable to a salary reduction, matching contributions, or similar arrangement shall be taken into account. The minimum contribution provisions stated above shall not apply to any Participant who was not employed by the Company or an Affiliate on December 31 of the Plan Year. For a year in which the Plan is top-heavy, each non-Key Employee will receive a minimum contribution if the Participant has not separated from service at the end of the Plan Year, regardless of whether the non-Key Employee has less than 1,000 hours of service (or the equivalent) and regardless of whether such Employee declines to make a mandatory contribution to a plan that generally requires such a contribution. This section shall not apply to a Participant covered under a qualified defined benefit plan or a qualified defined contribution plan maintained by the Company or the Affiliates if the Participant's vested benefit thereunder satisfies the requirements of Code Section 416(c). 14.4 LIMIT ON ANNUAL ADDITIONS; COMBINED PLAN LIMIT. If the Plan is determined to be top-heavy, Code Sections 415(e)(2)(B) and 415(e)(3)(B) shall be applied by substituting "1.0" for "1.25." This limitation shall not be applicable, however, if-- (a) the Plan would not be top-heavy if "90 percent" is substituted for "60 percent" in Sections 14.1(a) and 14.1(b)(1) above; and (b) for each Plan Year with respect to which the Plan is top-heavy, an Employer contribution is made for Participants who are not Key Employees equal to the sum of l percent of the non-key Participant's compensation for the Plan Year plus the amount of the contribution determined under Section 14.3 above. ARTICLE XV. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE 15.1 PARTICIPATION IN THE PLAN. Any Affiliate which desires to become an Employer hereunder may elect, with the written consent of the Chief Executive Officer, to become a party to the Plan and Trust Agreement by adopting the Plan for the benefit of its eligible Employees, effective as of the date specified in such adoption. The adoption resolution or decision may contain such specific changes and variations in Plan or Trust Agreement terms and provisions applicable to such adopting Employer and its Employees as may be acceptable to the Company and the Trustees. However, the sole, exclusive right of any other amendment of whatever kind or extent to the Plan or Trust Agreement is reserved by the Company. The adoption resolution or decision 51 shall become, as to such adopting organization and its employees, a part of this Plan (as then amended or thereafter amended) and the related Trust Agreement. It shall not be necessary for the adopting organization to sign or execute the original or then amended Plan and Trust Agreement documents or to sign other documents to participate. The effective date of the Plan for any such adopting organization shall be that in the resolution or decision of adoption, and from and after such effective date, such adopting organization shall assume all the rights, obligations, and liabilities of an individual employer entity hereunder and under the Trust Agreement. The administrative powers and control of the Company, as provided in the Plan and Trust Agreement, including the sole right of amendment, and of appointment and removal of the Trustees, and their successors, shall not be diminished by reason of the participation of any such adopting organization in the Plan and Trust Agreement. 15.2 WITHDRAWAL FROM THE PLAN. An Employer or Division may withdraw from, or otherwise cease to participate in, the Plan by giving the Plan Administrator and the Trustees 30 days written notice of its intention to do so, in which event the Trustees shall, as promptly as is practicable, provide for the withdrawal or segregation of the share of the assets in the Fund attributable to the Participants of that Employer or Division and, if such Employer or Division so requests, the former Participants of such Employer or Division; provided, however, that the Plan Administrator, in its sole and absolute discretion, may waive the 30-day notice requirement and provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an employee of an Employer or Division which continues to participate in the Plan, such Participant may designate the portion of the assets in the Fund attributable to such Participant which shall be withdrawn or segregated in accordance with this Section 15.2. The amount of such pro rata share shall be the net value of the Fund attributable to the Participants and, if applicable, the former Participants of that Employer or Division, determined as of the latest Valuation Date. The Trustees shall select the assets of the Fund to be withdrawn or segregated in such amount. (a) If the withdrawal of such Employer or Division from this Plan has the effect of a termination of the plan so far as that Employer or Division is concerned, then the rights of that Employer's Participants, former Participants and Beneficiaries shall be governed by the provisions of Section 11.2 relating to partial terminations. (b) Subject to Section 11.4, if an Employer ceases to participate in the Plan and adopts a substantially similar plan for the benefit of its employees, the withdrawal from this Plan by that Employer shall not be regarded as a termination of the Plan so far as that 52 Employer and its Employees are concerned; the rights of that Employer's Members and Beneficiaries shall be governed in accordance with the provisions of that substantially similar plan so adopted by that Employer for their benefit as if no withdrawal from this Plan had taken place. Provided further that any Participant who will be an employee of the withdrawing Employer or Division after such withdrawal and concurrently will also be an Employee of an Employer or Division which continues to participate in the Plan will have the right to designate in writing to the Plan Administrator, not later than twenty days after the withdrawal of the Employer or Division, the percentage of the Participant's vested Account that will be withdrawn or segregated in accordance with this Section 15.2, which designated percentage shall apply to all subaccounts, investment funds and other financial amounts allocated to such Participant, and such Participant's Account will be valued for such purposes as of the Valuation Date coincident with or immediately preceding the effective date of the Employer's or Division's withdrawal from the Plan; if such written designation is not timely received, then such Participant's Account will not be withdrawn or segregated under this Section 15.2. The Plan Administrator may grant a reasonable extension of the time limit for making this designation with respect to Employees whose status as an employee of both a continuing Employer or Division and a withdrawing Employer or Division is not immediately known or ascertained, and the Valuation Date for such later designation will be the Valuation Date coincident with or immediately preceding the date the designation is submitted to the Plan Administrator. In the event of such designation, Accounts may be transferred to the new Plan as qualifying rollover distributions or plan to plan transfers subject to the applicable requirements of the Code and ERISA. ARTICLE XVI. MISCELLANEOUS 16.1 NO EMPLOYMENT RIGHTS CREATED. Neither the establishment nor the continuation of the Plan, nor anything contained within the Plan, shall be deemed to give any person the right to continued employment by the Company or the Affiliates, or to affect the right of the Company or the Affiliates to terminate the employment of any individual. 16.2 RIGHTS TO FUND ASSETS. No Employee or beneficiary shall have any right to, or interest in, any assets of the Fund upon termination of his employment or otherwise, except as specifically provided under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or beneficiary out of the assets of the Fund. All payments of 53 benefits as provided for in this Plan shall be made solely out of assets of the Fund and neither the Company, the Affiliates, nor any fiduciary shall be liable therefor in any manner. 16.3 NONALIENATION OF BENEFITS. Except to the extent permissible under Code Sections 401(a)(13) and 414(p), benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder, shall be void. The Fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. The preceding paragraph shall also apply to the creation, assignment, or recognition of a right to any interest or benefit payable with respect to a Member pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order (as defined in Code Section 414(p)). The Trustees (or a designated agent or agents thereof) shall establish reasonable plan procedures to determine the qualified status of domestic relations orders and to administer and pay distributions under such qualified orders. Amounts payable pursuant to a qualified domestic relations order may be paid to the spouse or other alternate payee designated in such order regardless of the Member's age or such spouses's or alternate payee's age. Notwithstanding any provision of this Plan to the contrary and regardless of whether the Member is an Employee or former Employee and regardless of the Employee's or former Employee's age, such amounts may be paid immediately (as soon as practical after the Plan Administrator receives the qualified domestic relations order) in a single cash lump sum or in such other manner as may be paid to a terminated Member as provided in such an order which complies with the Plan's procedures for qualified domestic relations orders. 16.4 EXPENSES. All reasonable expenses of the Plan and Fund shall constitute a charge upon the Fund and shall be paid from Member's Accounts in proportion to the balance of such Accounts, except to the extent that the Company or an Employer elects to pay such expenses, provided that the Company or an Employer may advance such expenses on behalf of the Plan in which case the Company or Employer will be reimbursed for such payment by the Plan from fund assets. Such expenses shall include any expenses incident to the functioning of the Plan, including, without limitation, attorneys' fees and the compensation of actuaries and other agents, accounting and clerical charges, expenses, if any, 54 of being bonded as required by ERISA, and any other costs of administering the Plan. 16.5 SEVERABILITY. In the event that any provision of this Plan is held invalid or illegal for any reason, such invalidity or illegality shall not affect the remaining parts of the Plan and the Plan shall be enforced and construed as if such provision had never been inserted herein. 16.6 GOVERNING STATE. The Plan shall be construed in accordance with the laws of the State of Tennessee except where such laws have been preempted by laws of the United States. 16.7 FACILITY OF PAYMENT. If the Plan Administrator shall find that any person to whom a benefit is payable from the Fund is unable to care for his affairs because of illness or accident, any payments due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to the recipient's spouse, child, parent, brother or sister, or to any person deemed by the Trustees to have incurred expense for such person otherwise entitled to payment. Any such payment shall be a complete discharge of any liability under the Plan therefor. 16.8 MISSING PERSONS. If the Plan Administrator is unable to locate a proper payee within 18 months after a benefit becomes payable, the Plan Administrator may treat the benefit as a forfeiture and allocate it to the Accounts of other Participants under Section 4.2; however, if a claim for benefits is subsequently presented by a person entitled to a payment, the forfeited amount (determined as of the Valuation Date immediately before the forfeiture) shall be recredited from such funds or resources as the Plan Administrator deems appropriate (i.e., forfeitures, earnings, or additional Employer contributions) upon verification of the claim in a manner satisfactory to the Plan Administrator. 16.9 TELEPHONIC/ELECTRONIC DECISIONS. Notwithstanding anything in this Plan to the contrary, pay reduction agreements and cancellations or amendments thereto, investment elections, changes and transfers, withdrawal decisions, and any other decision or election by a Member or other person under this Plan may be accomplished by electronic or telephonic means which are not prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Plan Administrator or its delegees. 16.10 TITLES. The titles of sections are included only for convenience and shall not be construed as part of this Plan or in any respect affecting or modifying its provisions. * * * * * 55 IN WITNESS WHEREOF, PROMUS HOTEL CORPORATION has caused this instrument to be executed by its duly authorized officer, effective as of the date specified in Article I above. PROMUS HOTEL CORPORATION By: /s/ Raymond E. Schultz ---------------------------- President and Chief Executive Officer 56 EX-12.1 13 EXHIBIT 12(1)
EXHIBIT 12(1) - ------------------------------------------------------------------------------------------------ JUNE 1996 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ ------ RATIO OF EARNINGS TO FIXED CHARGES - ---------------------------------- Income (loss) from Continuing Operations 30,885 43,760 36,319 16,926 1,841 (4,488) (before extraordinary items) Add/(Less): Income Tax Provision 21,551 31,819 26,798 13,869 1,401 (2,383) Interest Expense 15,401 31,138 30,759 33,061 40,674 41,744 Interest Included in Rental Expense 873 1,848 1,310 1,284 1,388 1,098 Amortization of Cap. Interest 237 610 319 469 479 428 Dividends Received From Equity Invest. 370 877 790 441 270 0 (Income)/Loss from Equity Invest. (761) (1,452) (1,675) (1,540) (459) (636) ------ ------ ------ ------ ----- ------- Earnings as Defined 63,556 108,600 94,620 64,510 45,594 35,763 ------ ------ ------ ------ ----- ------- ------ ------ ------ ------ ----- ------- Fixed Charges: Interest Expenses 15,401 31,138 30,759 33,061 40,674 41,744 Capitalized Interest 725 1,428 4 0 82 1,456 Interest Included in Rent Expense 873 1,848 1,310 1,284 1,388 1,098 ------ ------ ------ ------ ----- ------- Total Fixed Charges 16,999 34,414 32,073 34,345 42,144 44,298 ------ ------ ------ ------ ----- ------- ------ ------ ------ ------ ----- ------- RATIO OF EARNINGS TO FIXED CHARGES 4.0 3.2 3.0 1.9 1.1 0.8 - ------------------------------------------------------------------------------------------------
EX-23.1 14 EXHIBIT 23.1 EXHIBIT 23(1) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement on Form S-3 of our reports dated February 6, 1996 included in or incorporated by reference in Promus Hotel Corporation's Form 10-K for the year ended December 31, 1995 and to all references to our Firm included in this Registration Statement. Arthur Andersen LLP October 10, 1996. EX-25.1 15 EXHIBIT 25(1) EXHIBIT 25(1) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) / / ------------------ SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) 63-0022787 (I.R.S. employer identification no.) ONE OFFICE PARK DRIVE, BIRMINGHAM, ALABAMA 35223 (Address of principal executive offices) (Zip Code) ------------------ PROMUS HOTEL CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 62-1596939 (State or other (IRS employer jurisdiction of incorporation identification no.) or organization) PROMUS HOTELS, INC. (Exact name of obligor as specified in its charter) DELAWARE 62-1602678 (State or other (IRS employer jurisdiction of incorporation identification no.) or organization) 755 Crossover Lane, Memphis, Tennessee 38117 (Address of principal executive offices) (Zip code) ------------------ DEBT SECURITIES (Title of the indenture securities) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1. GENERAL INFORMATION. Furnish the following information as to the trustee-- Name and address of each examining or supervising authority to which it is subject. COMPTROLLER OF THE CURRENCY SOUTHEASTERN DISTRICT OFFICE ATLANTA, GEORGIA FEDERAL RESERVE BANK OF ATLANTA ATLANTA, GEORGIA FEDERAL DEPOSIT INSURANCE CORPORATION WASHINGTON, D.C. Whether it is authorized to exercise corporate trust powers. YES. 2. AFFILIATION WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. NONE. (SEE NOTE ON PAGE 4.) 16. LIST OF EXHIBITS. (1) Articles of Association of the Trustee. (2) A copy of the certificate of authority of the Trustee to commence business. (3) A copy of the authorization of the Trustee to exercise corporate trust powers. (4) A copy of the existing By-laws of the Trustee. (6) The consent of the Trustee required by Section 321(b) of the Act. (7) A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. -2- NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, SouthTrust Bank of Alabama, National Association, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Birmingham and the State of Alabama, on the 10th day of October, 1996. SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION By: /s/ John Hoitt ---------------------- John Hiott Vice President -4- EXHIBIT 1 SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION Birmingham, Alabama ARTICLES OF ASSOCIATION AS AMENDED AND RESTATED January 13, 1995 I hereby certify this is a true and correct copy of the Articles of Association of SouthTrust Bank of Alabama, National Association as of this 8th day of October, 1996. /s/ Sandra B. Goddard --------------------------------- Sandra B. Goddard Senior Vice President/Cashier AMENDED AND RESTATED ARTICLES OF ASSOCIATION SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION FIRST. The title of this Association shall be "SouthTrust Bank of Alabama, National Association." SECOND. The main office of the Association shall be in Birmingham, County of Jefferson, State of Alabama. The general business of the Association shall be conducted at its main office and its branches. THIRD. The Board of Directors of this Association shall consist of not less than five nor more than twenty-five persons, the exact number of directors within such minimum and maximum limits to be fixed and determined from time to time by resolution of the Board of directors or by resolution of the shareholders at any annual or special meeting thereof. Unless otherwise provided by the laws of the United States any vacancy in the Board of Directors for any reason, including an increase in the number thereof, may be filled by action of the Board of Directors. Honorary or advisory members of the Board of Directors, without voting power or power of final decision in matters concerning the business and affairs of the Association, may be appointed by resolution of the Board of Directors. If requested by the Board of Directors, honorary or advisory directors shall attend meetings of the Board of Directors, but shall not have voting power. Honorary or advisory Directors shall not be counted for purposes of determining the number of Directors of the association or the presence of a quorum in connection with any Board action, and shall not be required to own qualifying shares. The Amended and Restated By-laws of the Association shall contain such other provisions regarding honorary or advisory members of the Board of Directors as are not inconsistent with these Amended and Restated Articles of Association. FOURTH. The annual meeting of shareholders of the Association shall be held in the City of Birmingham, State of Alabama, at the Association's principal offices on the third Tuesday of January of each year at such time as may be fixed by the Board of Directors of the Association and if a legal holiday, then on the next following banking day, or at such other date, time and place as may be fixed by the Board of Directors and stated in the notice of the meeting. At the annual meeting of shareholders, the shareholders shall elect a Board of Directors of the Association and transact such other business as properly may be brought before such meeting Nominations of persons for election to the Board of Directors of the Association may be made by the Board of Directors or by any holder of any outstanding capital stock of the Association entitled to vote in respect of the election of directors of the Association. Nominations, other than those made by or on behalf of the Board of Directors of the 1 Association, shall be made in writing and shall be delivered or mailed to the Chairman of the Board or the President of the Association and to the Comptroller of the Currency, Washington, D.C., not less than fourteen days nor more than fifty days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than twenty-one day's notice for the meeting is given to the shareholders, such nomination shall be mailed or delivered to the Chairman of the Board or the President of the Association and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the Bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in the discretion of the chairman of the meeting, be disregarded by the chairman of the meeting, and if so disregarded by the chairman of the meeting, the inspectors of election, or the persons performing a similar duty, may disregard all votes cast for such nominees. Unless otherwise specified in these Amended and restated Articles of Association or required by law, (1) all matters requiring shareholder action, including amendments to the Articles of Association, must be approved by shareholders owing a majority voting interest in the outstanding voting stock, and (2) each shareholder shall be entitled to one vote per share. FIFTH. The amount of authorized capital stock of this Association shall be $9,006,600.00 divided into 1,020,000 shares of common stock of the par value per share of eight dollars and eighty-three cents ($8.83) but said capital stock may be increased or decreased from time to time, in accordance with the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution adopted by the shareholders at the time the increase is authorized. The Board of Directors shall have the power to prescribe a reasonable period of time within which the preemptive rights to subscribe to the new shares of capital stock must be exercised. The Board of Directors of this Association may authorize the issue of capital stock or of debt obligations, whether or not subordinated, without the approval of its shareholders. SIXTH. The Board of Directors shall appoint one of its members President of this Association, who shall be Chairman of the Board, unless the board appoints another director to be Chairman. The Board of Directors shall have the power to appoint one or more Vice Presidents and to appoint a Cashier and such other officers and employees as may be required to transact the business of this Association. 2 The Board of Directors shall have the power to define the duties of the officers and employees of the Association; to fix the salaries to be paid to them; to dismiss them; to require bonds from them and to fix the penalty thereof; to regulate the manner in which any increase of the capital of the Association shall be made; to manage and administer the business and affairs of the Association; to make all By-laws that may be lawful for them to make; and generally to do and perform all acts that may be legal for a Board of Directors to do and perform. SEVENTH. The Board of Directors shall have the power to change the location of the main office to any other place within the limits of Birmingham, Alabama, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency; and shall have the power to establish or change the location of any branch or branches of the Association to any other location, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency. EIGHTH. The corporate existence of this Association shall continue until terminated in accordance with the law of the United States. NINTH. The Board of Directors of this Association, or any shareholder owning, in the aggregate, not less than 10 percent of the outstanding capital stock of this Association entitled to vote in respect of any matter to be considered at any special meeting of shareholders, may call a special meeting of shareholders at any time. Unless otherwise provided by law, a notice of the date, place, time and purpose of every special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least ten days and not more than sixty days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association, and a notice of the date, place and time of every annual meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least ten days prior to the date of such meeting to each shareholder of record at his address at least ten days and not more than sixty days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association. TENTH. Subject to the limitations stated in this Article Tenth, the Association shall indemnify its directors, honorary and advisory directors, officers and employees to the extent permitted by the General Corporation Law of Delaware, as such law shall be in force from time to time. In addition to the conditions under which indemnification is permitted under the General Corporation Law of Delaware, such indemnification shall not be made by the Association if in the judgement of the Association the director, honorary or advisory director, officer or employee has not cooperated with the Association in its dealing with any aspect of the claim, suit, action or proceeding in which the Association has an interest. If requested by the Association, the director, honorary or advisory director, officer or employee shall assist in investigations and in the conduct of suits, including attending hearings and trials and giving evidence in connection therewith. Such indemnification shall not include indemnification of directors, honorary or advisory directors, officers or employees of the Association against expenses, penalties, or other payments incurred in an administrative 3 proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual in the form of payments to the Association, except that the Association may advance expenses in connection with such a proceeding or action as set forth below. The Association may pay premiums for insurance covering the liability of its directors, honorary or advisory directors, officers or employees except where prohibited by the General Corporation Law of Delaware and except with regard to insurance coverage for a formal order assessing civil money penalties against an Association director, honorary or advisory director, officer, or employee arising out of an administrative proceeding or action instituted by an appropriate bank regulatory agency. The indemnification provisions of this Article Tenth are not intended to adversely affect any rights that the Association or any director, honorary or advisory director, officer of employee of the Association may have with respect to any insurance policy, including, without limitation, any insurance policy maintained by the Association. The Association shall advance expenses to its directors, honorary or advisory directors, officers or employees arising out of such an administrative proceeding or action instituted by an appropriate regulatory agency prior to a final order being entered only in accordance with the following: All advances must be subject to reimbursement if a final order is entered in the action assessing civil money penalties or requiring payments to the Association. Moreover, before any advances are made, the Board of Directors of the Association, in good faith, must determine in writing, that all of the following conditions are met: (1) the officer, director, honorary or advisory director, or employee has a substantial likelihood of prevailing on the merits; (2) in the event the officer, director, honorary or advisory director or employee does not prevail, he or she will have the financial capability to reimburse the Association; and (3) payment of expenses by the Association will not adversely affect the Associations safety and soundness. If at any time the Board of Directors of the Association believes, or should reasonably believe that either conditions (1), (2), or (3) are no longer met, the Association must cease paying such expenses or premiums. Further, the Board of Directors of the Association must enter into a written agreement with the director, honorary or advisory director, officer of employee specifying the 4 conditions under which he or she will be required to reimburse the Association. At a minimum, the agreement shall require reimbursement for expenses already paid, if and to the extent the Board of Directors finds that the director, honorary or advisory director, officer or employee willfully misrepresented factors relevant to the Board of Directors' determination of conditions (1) or (2), or if a final decision assessing penalties or requiring payments is returned. The Association shall ensure that it complies with all applicable laws and regulations affecting loans to directors officers and employees, including but not limited to 12 U.S.C (Section)(Section) 84, 375a and 375b and 12 C.F.R. (Section) 215, as such laws and regulations shall be in effect from time to time, in the event reimbursement is required. ELEVENTH. These Amended and Restated Articles of Association may be amended at any regular of special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this Association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. 5 EXHIBIT 2 [LOGO] - ------------------------------------------------------------------------------- COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS - ------------------------------------------------------------------------------- Washington, D.C. 20219 CERTIFICATE I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that: 1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq., as amended 12 U.S.C. 1, et seq., as amended, has possession, custody and control of all records pertaining to the chartering, regulation and supervision of all National Banking Associations. 2. "SouthTrust Bank of Alabama, National Association", Birmingham, Alabama, (Charter No. 14569), is a National Banking Association formed under the laws of the United States and is authorized thereunder to transact the business of banking on the date of this Certificate. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Department, in the City of Washington and District of Columbia, this 10th day of March, 1994. /s/ Eugene A. Ludwig ---------------------------------- Comptroller of the Currency EXHIBIT 3 [SEAL] STATE OF ALABAMA [SEAL] STATE BANK DEPARTMENT 101 SOUTH UNION STREET MONTGOMERY, ALABAMA 36120-0901 TELEPHONE (205) 242-3452 FAX (205) 240-3014 March 4, 1994 CERTIFICATION OF FIDUCIARY POWERS TO WHOM IT MAY CONCERN: I hereby certify, as Acting Superintendent of Banks of the State of Alabama, that SouthTrust Bank of Alabama, National Association is authorized by the laws of the State of Alabama, which is the state of its domicile, to act as a fiduciary in this state. Witness my hand this the 4th day of March 1994. /s/ Kenneth R. McCartha ------------------------------------- Kenneth R. McCartha Acting Superintendent of Banks EXHIBIT 4 SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION BIRMINGHAM, ALABAMA BY-LAWS AS AMENDED AND RESTATED JANUARY 13, 1995 I hereby certify this is a true and correct copy of the By-Laws of SouthTrust Bank of Alabama, National Association as of this 8th day of October, 1996. /s/ SANDRA B. GODDARD ------------------------ Sandra B. Goddard Senior Vice President/Cashier ARTICLE ONE SHAREHOLDERS Section 1. The annual meeting of shareholders of the Association shall be held in the City of Birmingham, State of Alabama, at the Association's principal offices on the third Tuesday of January of each year at such time as may be fixed by the Board of Directors of the Association , and if a legal holiday, then on the next following banking day, or at such other date, time and place as may be fixed by the Board of Directors and stated in the notice of the meeting. At the annual meeting of shareholders, the shareholders shall elect a Board of Directors of the Association and transact such other business as properly may be brought before such meeting. Written notice of the annual meeting of shareholders, stating the date, place and time thereof, shall be mailed, postage prepaid, at least ten days and not more than sixty days prior to the date thereof, to each shareholder entitled to vote in respect of the matters to be considered at such annual meeting of shareholders. Section 2. The Board of Directors of the Association, or any shareholder owning, in the aggregate, not less than 10 percent of the outstanding capital stock of the Association entitled to vote in respect of any matter to be considered at any special meeting of shareholders, may call a special meeting of shareholders at any time. Unless otherwise provided by law, written notice of any special meeting of shareholders, stating the date, place, time and purposes thereof, shall be mailed, postage prepaid, at least ten days and not more than sixty days prior to the date thereof, to each shareholder entitled to vote at such special meeting of shareholders. Section 3. The holders of the outstanding common stock of the Association shall be entitled to one vote for each share held by them with respect to all matters coming before any meeting of shareholders as to which a vote or consent of the shareholders is required, including the election of directors. Except as otherwise provided by law or by the Amended and Restated Articles of Association, a majority of the outstanding capital stock of the Association entitled to vote thereat shall constitute a quorum in all meetings of the shareholders, and a majority of the votes cast shall decide every issue or question presented to any meeting of the shareholders, except that the Board of Directors of the Association may increase the vote of the shareholders required with respect to any such matter or question. 1 Section 4. At any meeting of shareholders, a shareholder entitled to vote thereat may be represented by proxy duly appointed by such shareholder in writing. Any person or group of persons, including directors or attorneys for the Association, may be designated to act as proxy for any such shareholders, but officers or employees of the Association may not be designated to act as proxy. Section 5. The Board of Directors of the Association may fix a record date for determining shareholders of the Association entitled to notice of and to vote at any meeting of the shareholders of the Association, which date shall be a date not in excess of sixty days prior to the date of such meeting. Section 6. If a meeting of shareholders is adjourned to a different date, time or place, notice need not be given of the new date, time or place, provided that the new date, time or place is announced at the meeting before adjournment, unless an additional item of business is to be considered at such adjourned meeting or unless the Association becomes aware of an intervening event materially affecting any matter to be voted on at such adjourned meeting. If a new record date for the adjourned meeting is fixed, notice of the adjourned meeting, stating the date, time, place and purposes thereof, shall be given to each shareholder of record entitled to vote at such adjourned meeting. ARTICLE TWO DIRECTORS AND OTHER POSITIONS Section 1. (a) The business and the affairs of the Association shall be managed and administered by the Board of Directors of the Association, which shall consist of not less than five nor more than twenty-five persons, the exact number of which, within such limits, to be established from time to time by the Board of Directors or by the holders of the majority of the outstanding capital stock of the Association entitled to vote in respect of the election of directors of the Association. (b) Nominations of persons for election to the Board of Directors of the Association may be made by the Board of Directors or by any holder of any outstanding capital stock of the Association entitled to vote in respect of the election of directors of the Association. 2 Nominations, other than those made by or on behalf of the Board of Directors of the Association, shall be made in writing and shall be delivered or mailed to the Chairman of the Board or the President of the Association and to the Comptroller of the Currency, Washington, D.C., not less than fourteen days nor more than fifty days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than twenty-one days' notice of the meeting is given to the shareholders, such nomination shall be mailed or delivered to the Chairman of the Board or the President of the Association and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the Bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in the discretion of the chairman of the meeting, be disregarded by the chairman of the meeting, and if so disregarded by the chairman of the meeting, the inspectors of election, or the persons performing a similar duty, may disregard all votes cast for such nominees. (c) Directors need not be elected by written ballot, unless the chairman of the meeting otherwise determines. (d) Directors elected at any meeting of shareholders shall serve for the ensuing year and until their successors are elected and shall qualify, subject to other provisions hereof,and subject to the ability of the holders of a majority of the outstanding capital stock entitled to vote in respect of the election of directors to remove a director, with or without cause, at any time. No director shall act as a director until he shall have taken the oath of office required by law. Section 2. All vacancies on the Board of Directors occurring in the intervals between meetings of the shareholders may be filled by the Board of Directors. Section 3. The board of Directors shall meet immediately upon adjournment of the meeting of shareholders at which such directors have been elected, or at such other time as the Board of Directors may determine and following such initial meeting, the Board of Directors shall hold regular meetings on the third Tuesday in each month at 10:30 a.m. at the principal offices of the Association, unless said Tuesday is a legal holiday, in which case, the meeting shall be held on the next following banking day at the same place and hour. 3 Section 4. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or any three members of the Board of Directors. Each member of the Board of Directors shall be given a reasonable advance notice of any special meeting of the Board of Directors, stating the date, time and place of such special meeting, which notice may be given in writing or in person or by telegram, telephone or other reasonable means. Section 5. Each director of the Association who is not an officer or employee of the Association shall be entitled to an attendance fee for each meeting of the Board of Directors and a quarterly retainer fee, the amount of such fees to be established form time to time by the Human Resources Committee of the Board of Directors. Section 6. A majority of the entire Board of Directors is required to constitute a quorum of the Board of Directors authorized to transact business at any meeting of the Board of Directors. Except as otherwise provided by law, the Amended and Restated Articles of Association or the Amended and Restated By-laws, an act of the majority of the directors present at a meeting of the Board of Directors, at which a quorum is present, shall be the act of the Board of Directors. In the absence of a quorum is present, no business shall be transacted except that the members of the Board of Directors present may adjourn such meeting from time to time until a quorum is secured. Section 7. If a majority of the directors present at any meeting of the Board of Directors so determines, any action of the Board of Directors may be conducted by written ballot. Section 8. At the initial meeting of the Board of Directors after each annual meeting of shareholders, the Board of Directors shall elect the committees and officers contemplated by these Amended and Restated By-laws. Section 9. (a) Any director of the Association or any member of any Area Board who has reached his or her 68th birthday or who has retired from his or her principal business position or occupation will not be eligible for re-election as director or as a member of a Area Board; provided, however, that the foregoing provision relating to retirement from such person's 4 principal business position or occupation shall not apply to any director who has served as Chairman of the Board of the Association. Section 10. A director of the Associtation is eligible for election as a director emeritus if such person is ineligble for re-election as a director of the Association under Section 9 above or if such person has served as a director of the Association for at least five years and voluntarily declines to stand for re-election as a director. Immediately following each annual meeting of shareholders, or from time to time as the Board of Directors may determine, the Board of Directors, in its discretion, may elect one or more eligble persons to serve as a director emeritus for the ensuing year or until his or her successor is elected and shall qualify. Notwithstanding the foregoing, the Board of Directors of the Association may remove, with or without cause, a director emeritus from office at any time. If requested by the Board of Directors, a director ermeritus may attend meetings of the Board of Directors, but shall not have voting power or power of final decision on any matter concerning the business or affairs of the Association, and his or her presence at any meeting of the Board of Directors shall not be counted in the determination of a quorum. A director emeritus shall not have the same responsibilities and liabilities imposed by law and banking regulation upon members of the Board of Directors. A director emeritus shall receive such fees as the Board of Directors may from time to time determine. A director ermeritus shall not be required to own qualifying shares of Common Stock of SouthTrust Corporation. Section 11. Immediately following each annual meeting of shareholders, or from time to time as the Board of Directors may determine, the Board of Directors of the Association may elect persons to serve as advisory or honorary members of the Board of Directors and in this regard, may establish, in its discretion and by appropriate resolution, separate advisory or honorary boards in each city or other geographical area in which the Association transacts business (each advisory or honorary board being hereinafter referred to as the "Area Board"). Members of each Area Board shall be elected to serve for the ensuing year and until their successors are elected and shall qualify. Notwithstanding the foregoing, the Board of Directors of the Association may remove, with or without cause, any member of any Area Board at any time. The members of the Area Boards shall assist the Board of Directors and the officers of the Association in business development, with particular emphasis being placed upon business development in the city or other geographical area with respect to which such members have been designated, and shall have such other duties and functions as the Board of Directors, by appropriate resolution, shall determine; provided, however, that the members of the Area Boards shall not have power of final decision on any matter concerning the business or affairs of the Association. If requested by the Board of Directors, the members of the Area Boards shall attend meetings of the Board of Directors of the Association, but shall not have voting power, and the presence of any Area Board member at any meeting of the Board of Directors shall not be counted in the determination of a quorum. Members of the Area Boards shall not be deemed 5 to have the responsibilities and liabilities imposed upon directors of the Association by law and banking regulations. Members of the Area Boards may receive such fees as the Human Resources Committee of the Board of Directors may from time to time determine. The members of each Area Board shall not be required to own qualifying shares of Common Stock of SouthTrust Corporation. The provisions of the Amended and Restated Articles of Association and the Amended and Restated By-laws of the Association governing the conduct of meetings of the Board of Directors, including, without limitation, the time and place of any such meeting, the power to convene or call a meeting, the giving of notice of any meeting, and the quorum and voting requirements thereof, shall apply to each Area Board, and meetings and other business of each Area Board shall be convened and conducted in accordance with such provisions. The Chief Executive Officer of the city or other geographical area for which any Area Board is established shall serve as an ex officio member of any such Area Board. In addition, subject to the other notice provisions contained herein, the Chief Executive Officer of the city or other geographical sites for which any Area Board is established shall be entitled to convene or call meetings of any such Area Board and shall be entitled to attend and vote in respect of all matters coming before meetings of any such Area Board. ARTICLE THREE Officers Section 1. The officers of the Association shall be a Chairman of the Board of Directors, who shall serve as Chief Executive Officer, and a President, who shall serve as Chief Administrative Officer, both of whom shall be directors; one or more Vice Presidents, one of whom may be designated as Executive Vice Presidents, one or more of whom may be designated as Senior Vice Presidents; and one or more of whom may be designated as Group Vice Presidents; one or more Assistant Vice Presidents; a Cashier; a Secretary; a Comptroller; one or more Executive Vice Presidents and Trust Officers, Senior Vice Presidents and Trust Officers, Vice Presidents and Trust Officers and Assistant Vice Presidents and Assistant Trust Officers; and such other officers as may, from time to time, be appointed, or elected, by the Board of Directors to perform such duties as may be designated by the Board of Directors of the Association. The same person may be elected to more than one of such offices, provided that no person may be President and Cashier at the same time. If the office of the Chairman of the Board of Directors becomes vacant, the powers and duties herein vested in and imposed upon the holder of that office shall be vested in and discharged by the President, and the number of persons constituting the Executive Committee of the Board of Directors shall be correspondingly decreased while any such vacancy continues. 6 Section 2. The Chairman of the Board or, in his absence, the President shall preside at all meetings of the Board of Directors and, in case of absence or inability to act of the Chairman of the Board and of the President, the Board of Directors shall appoint one of their members to preside during such absence or inability. The Chairman of the Board, or in his absence, the President shall preside at all meetings of the Executive Committee of the Board of Directors, and, in case of absence or inability to act of the Chairman of the Board and the President, the Executive Committee shall elect one of its members to preside during such absence or inability. The Chairman of the Board shall exercise general supervision of the business and affairs of the Association, and, without limiting the foregoing, shall act as the Chief Executive Officer of the Association. In the absence of the Chairman of the Board, the powers and duties hereby vested in and imposed upon such person shall be exercised by the President. In the absence of both the Chairman of the Board and the President, those powers and duties shall be exercised by such officer of the Association as may have been designated for that purpose by the Chairman of the Board or the President, as the case may be. If none has been so designated by either thereof, the Board of Directors shall designate an officer of the Association to act in such capacity. Section 3. The President shall have general executive and administrative powers with respect to the business and affairs of the Association and shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice to the office of the President. The President also shall have and may exercise such further powers and duties as may from time to time be assigned or conferred upon him by the Board of Directors of the Association. Section 4. The Vice Presidents of the Association shall perform such duties and possess such powers as may be directed and delegated by the Board of Directors; the Executive Vice President(s) shall rank in priority over all other Vice Presidents; and the Senior Vice President(s) and Group Vice President(s) shall rank below any Executive Vice President but shall rank in priority and in presiding over all other Vice Presidents. Section 5. The Secretary shall attend all meetings of the Board of Directors and record all the proceedings of the meetings of the Board of Directors in a book to be kept for that purpose, which will be housed in the office of the Secretary. The Secretary shall give, or cause to be given, notice of all meetings of the Board of Directors, and shall perform such other duties as 7 may be prescribed by the Board of Directors. The Secretary shall have the custody of the corporate seal of the Association and he or she, or in the Secretary's absence the Cashier or an Assistant Secretary, or any other officer of the Association designated by the Board of Directors, shall have authority to affix the same to any instrument requiring it. When so affixed, it may be attested by his or her signature or by the signature of the Cashier. The Board of Directors may give general authority to any other officer to affix the seal of the Association and to attest the affixing by his signature. Section 6. The Cashier shall have the custody of such property and assets of the Association as may be entrusted to him or her by the Board of Directors. In the absence, removal or other disability of the Cashier, the Chairman of the Board or the President shall designate an officer for that purpose who shall perform his or her duties until action by the Board of Directors or Executive Committee. Section 7. The Chairman of the Board, the President, any Executive Vice President, any Senior Vice President, any Group Vice President or any Vice President shall have the power and authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Association, except where required or permitted by law to be otherwise signed by executed and except where the signing and the execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Association. Section 8. The Executive Vice President and Trust Officer, each Senior Vice President and Trust Officer and any other officer designated by the Board of Directors are hereby authorized to make, execute and acknowledge all bonds, certificates, deeds, mortgages, notes, releases, leases, agreements, contracts, bills of sale, assignments, transfers, powers of attorney or substitution, proxies to vote stock, or any other instrument in writing that may be necessary in the purchase, sale, mortgage, lease, assignment, transfer, management or handling, in any way, of any property of any description held or controlled by the Association in its corporate or in any fiduciary capacity; and shall have such other duties and powers as shall be designated by the Board of Directors. The Executive Vice President and Trust Officer shall exercise general supervision and management over the affairs of the Trust and Financial Services Division of the Association. The officers named above shall exercise the authority granted above in compliance with various policies and procedures as may be approved by the Board of Directors or the Trust Policy Committee from time to time. 8 Section 9. The other officers of the Association shall perform such duties as may be prescribed by the Board of Directors, the Chairman of the Board or the President. Section 10. Any office described in Sections 1 through 6 of the Article Three of the Amended and Restated By-laws may, by appropriate resolution adopted by the Board of Directors of the Association, be established in respect of any city or other geographical area in which the Association transacts business and the Board of Directors of the Association may elect persons to fill any such office created thereby in Section 1 through 6 of Article Three hereof. In such event, the duties and responsibilities assigned to each officer of the Association also shall constitute the duties and responsibilities of the person serving in a comparable office with respect to any such city or other geographical area, and such persons shall be deemed officers of the Association, except that, in the latter case, such duties and responsibilities shall be limited to the operations of the Association in the city or other geographical area with respect to which such person has been so designated, and provided that there shall be only one Cashier of the Association. Any person designated by the Board of Directors to serve as an officer with respect to any city or other geographical area shall be given such title as the Board of Directors may determine; provided, however, that such titles shall distinguish such persons from those persons holding comparable positions with the Association. Section 11. The officers of this Association shall receive such compensation as may be fixed by the Board of Directors or, if the Board of Directors directs, and following advice or consultation with such persons as the Board of Directors deems appropriate, the Human Resources Committee. Section 12. The Chairman of the Board may suspend any officer of the Association except the President until the next regular or called meeting of the Board of Directors, any officer of the Association may be removed by a majority of the Board of Directors at any regular or called meeting of the Board of Directors. Section 13. Bonds shall be required of the officers, tellers and other employees in such amounts as may be designated by the Board of Directors. 9 Section 14. The officers shall hold office from the time of their respective elections until the first meeting of the Board of Directors following the next annual meeting of the shareholders or until their successors shall be elected and qualify; provided, however, that the Board of Directors may remove, with or without cause, any officer of the Association at any time. ARTICLE FOUR CONVEYANCES, TRANSFERS AND CONTRACTS Section 1. The Chairman of the Board or the President is authorized, in his discretion, to do and perform any and all corporate and official acts in carrying on the business of the Association, either of its own or when acting in any fiduciary capacity whatsoever. Each is hereby empowered, in his discretion, to appoint all necessary agents or attorneys. The Chairman of the Board, the President, any Executive Vice President, any Senior Vice President, any Group Vice President or any Vice President is also authorized to make, execute and acknowledge all deeds, mortgages, releases, leases, agreements, contracts, bills of sale, assignments, transfers, powers of attorney or of substitution, proxies to vote stock, or any other instrument in writing that may be necessary in the purchase, sale, mortgage, lease, assignment, transfer, management, or handling in any way of any property of any description, held or controlled by the Association, either in its own right or in any fiduciary capacity, and the Secretary or Cashier is authorized to attest and affix the corporate seal to any and all instruments in writing requiring such attestation or which are executed under seal. The enumeration of particular powers in this By-law shall not restrict, or be taken to restrict, in any way the general powers and authority herein given to said officer. Section 2. The Chairman of the Board, the President, any Executive Vice President, Senior Vice President, Group Vice President, Vice President or Assistant Vice President, including those persons serving in such capacities who also carry the designation of Trust Officer, the Comptroller, the Cashier, or any employee so designated by the Chairman of the Board or the President, is authorized and empowered to receive and give receipts for money due and payable to the Association from any source whatever and to sign and endorse checks, drafts and warrants in its name or on its behalf. 10 Section 3. The Chairman of the Board, the President, any Executive Vice President, Senior Vice President, Group Vice President or Vice President, including those persons serving in such capacities who also carry the designation of Trust Officer, shall have full power and authority to sign and execute any and all trustees' certificates executed by the Association or any certificate of any character pertaining to any activity or condition in the Trust and Financial Services Division of the Association and also shall have full power and authority to sign any acceptance of any trust on behalf of the Association, provided, however, (i) that prior approval of the acceptance of any trust shall have been granted by such directors, officers or committees as shall then be authorized by the Trust Policy Committee to grant such approval and (ii) that the giving of such approval shall be made a matter of written record. ARTICLE FIVE COMMITTEES Section 1. EXECUTIVE COMMITTEE. The Board of Directors shall, at its initial meeting after its election in each year, elect from among their number a committee of three or more who, with the Chairman of the Board and the President of the Association, acting as ex officio members, shall constitute the Executive Committee of the Board of Directors. Each member of the Executive Committee shall serve for the ensuing year and until his or her successor is elected and shall qualify; provided, however, that any member of the Executive Committee may be removed, with or without cause, at any time by the Board of Directors. All vacancies in said Committee shall be filled by the Board of Directors. The Chairman of the Board of Directors and the President of the Association shall be ex-officio members of the Committee and shall have the power to vote with respect to all matters coming before the Executive Committee. The Executive Committee shall meet at such times as it may decide. It shall keep a separate book of minutes of its proceedings and actions, and make reports to the Board of Directors, from time to time, of its actions. All the powers of the Board of Directors when the Board is not in session may be exercised by the Executive Committee, except that the Executive Committee shall not declare dividends or distribute assets of the Association. Unless otherwise provided by resolutions duly adopted by the Board of Directors, a majority of the Executive Committee shall constitute a quorum for the transaction of business. 11 The Executive Committee shall review all loans when the total liability of the borrower exceeds an established amount, which amount is to be determined and set by the Board of Directors from time to time. All persons appointed or elected to office by the Executive Committee shall hold their respective offices only until the next annual meeting of the Board of Directors. Each member of the Executive Committee, except salaried officers of the Association, shall be entitled to an attendance fee for each meeting of the Committee, the amount of such fee to be established by the Board of Directors. Section 2. AUDIT AND EXAMINATION COMMITTEE. The Board of Directors shall, at its initial meeting after its election in each year, elect from among its number a committee of three or more who constitute the Audit and Examination Committee of the Board of Directors. No member of the Audit and Examination Committee shall be an officer or employee of the Association or shall be a member of the Trust Policy Committee. Each member of the Audit and Examination Committee shall serve until his or her successor is elected and shall qualify; provided, however, that any member of the Audit and Examination Committee may be removed, with or without cause, at any time by the Board of Directors of the Association. The Audit and Examination Committee shall make suitable examinations every six months of the affairs of the Association. The result of such examination shall be reported in writing to the Board of Directors at the next regular meeting thereafter, stating whether the Association is in a sound and solvent condition, whether adequate internal audit controls and procedures are being maintained, and recommending to the Board such changes in the manner of doing business, etc. as shall be deemed advisable. The Audit and Examination Committee, upon its own recommendation and with the approval of the Board of Directors, may employ a qualified firm of Certified Public Accountants to make an examination and audit of the Association. If such a procedure is followed, the one annual examination and audit of such firm of accountants and the presentation of its report to the Board of Directors will be deemed sufficient to comply with the requirements of this section of these Amended and Restated By-laws. At least once during each calendar year and as often as required by regulations, the Audit and Examination Committee shall make suitable audits of the Trust and Financial Services Division or cause suitable audits to be made by auditors responsible only to the Board of Directors and, at such time, shall ascertain whether the Trust and Financial Services Division has been administered in accordance with law, appropriate regulations and sound fiduciary principles. In lieu of such periodic audits, the Board of Directors may elect to adopt an adequate continuous audit system. A report of the audits and examinations, together with the action taken thereon, shall be noted in the minutes of the Board of Directors. 12 Each member of the Audit and Examination Committee, except salaried officers, shall be entitled to an attendance fee for each meeting of the Committee, the amount of such fee to be established by the Human Resources Committee of the Board of Directors. Section 3. TRUST POLICY COMMITTEE. The Board of Directors shall, at its initial meeting after its election in each year, elect from among its number a committee of four or more directors, who are not officers or employees of the Association, who shall constitute the Trust Policy Committee. Each member of the Trust Policy Committee shall serve for the ensuing year and until his or her successor is elected and shall qualify; provided, however, that any member of the Trust Policy Committee may be removed, with or without cause, at any time by the Board of Directors of the Association. The Trust Policy Committee shall be responsible for the formulation of policy with respect to all fiduciary functions exercised by the Trust and Financial Services Division and shall take all such actions as, in its judgment, may be necessary to insure the proper functioning of the Trust and Financial Services Division in matters pertaining to trust administration, investments, operations and new business development. The Trust Policy Committee shall from time to time receive information reflecting the implementation of its decisions and shall have authority to establish standing or ad hoc committees for the purpose of carrying out policies formulated by it. The Trust Policy Committee shall review the affairs of the Trust and Financial Services Division on an annual basis and, if appropriate, make recommendations with respect thereto. The Trust Policy Committee may authorize any one or more of its members, or officers assigned to the Trust and Financial Services Division, to grant prior approval of the acceptance of any or all appointments of the Association in a fiduciary capacity and to cause the granting of each such prior approval to be made a matter of written record. The Trust Policy Committee shall have such other and further duties as may from time to time be assigned to it by the Board of Directors. All investments of trust funds shall be made, retained or disposed of in accordance with policies, procedures or practices established or approved by the Trust Policy Committee, or with the express approval of the Trust Policy Committee, and the Trust Policy Committee shall keep minutes of all of its meetings showing the disposition of all matters considered and passed upon by it. At least once during each period of twelve months, the Trust Policy Committee shall review, or cause to be reviewed, all the assets held in or for each fiduciary account for which the Trust and Financial Services Division is charged with investment responsibility in order to determine the safety and current value of such accounts and the feasibility of retaining or disposing of them. The Trust Policy Committee shall fix the time for its regular meetings (to be held at least quarterly), provide for the call of special meetings and may adopt rules of procedure. Unless otherwise provided by a resolution duly adopted by the Board of Directors, the majority of the Trust Policy Committee shall constitute a quorum for the transaction of business. Each 13 member of the Trust Policy Committee shall be entitled to an attendance fee for each meeting of the Trust Policy Committee, the amount of such fee to be established by the Board of Directors. Section 4. HUMAN RESOURCES COMMITTEE. The Board of Directors shall, at its initial meeting after its election in each year, elect from among its number a committee of three or more members who shall constitute the Human Resources Committee. Each member of the Human Resources Committee shall serve for the ensuing year and until his or her successor is elected and shall qualify; provided, however, that any member of the Human Resources Committee may be removed, with or without cause, at any time by the Board of Directors of the Association. The Human Resources Committee shall monitor, on behalf of the Board of Directors, management's performance in providing the management and manpower requirements for the proper functioning and progress of the Association and shall counsel with management; the Human Resources Committee shall review plans for management succession, management training and management development programs; the Human Resources Committee shall review (and, if directed by the Board of Directors, establish) salary and wage administration procedures, including current ranges and surveys; approve any major deviation from established salary and wage levels; review compliance with applicable regulations; approve (and, if directed by the Board of Directors, establish) compensation of the principal executive officers, considering the recommendation of the Chairman of the Board, and in the case of the Chief Executive Officer's salary, considering the recommendation of the Chairman or President of SouthTrust Corporation; establish directors' fees; review and recommend proposed new Board members; review employee relation plans and activities; and establish a budget for contributions and review management's recommendations for individual contributions. Each member of the Human Resources Committee shall be entitled to an attendance fee for each meeting of the Human Services Committee, the amount of such fee to be established by the Board of Directors. Section 5. The Board of Directors also may appoint, from time to time, such other committees, including temporary committees, for such purposes and with such powers as the Board of Directors may determine, and may establish such attendance fees for the members of such other committees as the Board of Directors may determine. Section 6. The persons constituting the entire membership of any committee provided for or created pursuant to the Amended and Restated By-laws may be increased by the Board of Directors whenever it sees fit. In the case of any such increase in the membership of any such 14 committee, the Board of Directors may fix the term of service on any committee of any person elected to fill a vacancy created by any such increase. ARTICLE SIX LOANS Section 1. Loans may be made by or upon the authority of the Executive Committee or its designee as specified in the Loan Policy and Administration Manual. Section 2. The Board of Directors shall from time to time establish regulations or standards respecting the review and authority subject to which real estate loans may be made by the Association in any fiduciary capacity. Authority to make real estate loans in a fiduciary capacity may be delegated by the Board of Directors to the Trust Policy Committee; such loans may be made by an officer or a committee of officers who may be authorized and directed by the Trust Policy Committee, as the case may be, to perform those duties. In any such case, instructions relating to the powers, duties, authority and procedure for approving such loans, the maximum and minimum amounts of same, the terms and conditions of same, and the names of officers authorized to approve such loans and appraise or approve the appraisal of the real estate concerned, shall be set forth in detail in the minutes of the Trust Policy Committee. Section 3. On payment of the sums loaned for which collateral security has been taken, either by mortgage of real or personal property or by other pledge of collateral, whether said loans have been made from funds of the Association or from funds held in a fiduciary capacity, the Executive Committee shall from time to time designate bank officers that shall have the full power and authority to release or cancel the same on the margin of the record, if recorded, or in any other manner as the law in such cases may require or permit. 15 ARTICLE SEVEN BORROWINGS Section 1. With the approval of the Board of Directors of Executive Committee, the Chairman of the Board, the President, any Executive Vice President, Senior Vice President, Group Vice President, or Vice President, including those persons serving in such capacities who also carry the designation of the Trust Officer, shall have the authority to borrow money, including the authority to pledge and hypothecate any securities or any stocks or bonds, notes, or any property, real or personal, of the Association as collateral for such loan, and to endorse or guarantee in its name any notes or obligations payable or belonging to the Association and to execute and acknowledge, any document or instrument required for such purpose or purposes. Section 2. All time or interest bearing certificates of deposit may be signed by the Chairman of the Board, the President, any Executive Vice President, Senior Vice President, Group Vice President, Vice President, or any Assistant Vice President, the Cashier or any employee or employees of the Association designated by name or by job title or description from time to time by the Chairman of the Board or the President. The provisions of this Section 2 are supplemental to any other provision of these Amended and Restated By-laws. ARTICLE EIGHT SAVINGS DEPOSITS Section 1. Savings deposits shall be subject to such rules and regulations as may be adopted from time to time by the Board of Directors of this Association. 16 ARTICLE NINE CORPORATE SEAL Section 1. The Corporate Seal of the Association shall be circular in shape and around the outer circle shall have the words: SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION and on the inner circle may, but need not include the words: BIRMINGHAM, ALABAMA. ARTICLE TEN DIVIDENDS AND DISTRIBUTIONS Section 1. The Board of Directors may, at any regular or special meeting, declare such dividends, or make such distributions, as in its judgement are proper, out of the earnings and funds of the Association legally available therefor. ARTICLE ELEVEN STOCK CERTIFICATES Section 1. Certificates evidencing shares of capital stock of this Association shall be signed by the Chairman of the Board, the President or any Vice President or Assistant Vice President and the Cashier, or the Secretary and shall have the seal of the Association affixed thereto. Stock certificates shall conform to law in all respects. Section 2. Transfers of shares of capital stock of the Association can only be made in writing upon the production of a certificate or certificates evidencing such shares of capital stock with a transfer and assignment endorsed thereon by the person, or persons, in whose name the certificates were issued, the personal representatives thereof, or duly authorized attorneys-in-fact. 17 The former certificate, or certificates, shall be surrendered and canceled before the new certificate or certificates are issued or delivered. Section 3. The stock transfer books may be closed for such purposes and such time as may be specified in resolutions duly adopted by the Board of Directors. Section 4. In case of loss or destruction of any certificate evidencing shares of capital stock of the Association, the holder or owner thereof shall give notice thereof to the Cashier or Secretary of the Association, and if such holder or owner shall desire the issue of a new certificate in the place of the one lost or destroyed, he or she shall make affidavit of such loss or destruction and deliver the same to the Cashier or the Secretary of the Association and accompany the same with a bond, with security satisfactory to the Association, to indemnify and save harmless the Association against any loss, damage or expense in case the certificate so lost or destroyed should thereafter be presented to the Association. The proof of loss, and the condition and security of the said bond, shall be approved by the Executive Committee or Board of Directors before the issue of any new certificate. ARTICLE TWELVE AMENDMENT AND REPEAL OF THE AMENDED AND RESTATED BY-LAWS Section 1. The Amended and Restated By-laws may be altered, amended or repealed by the Board of Directors or the shareholders of the Association. 18 ARTICLE THIRTEEN EMERGENCY PREPAREDNESS PROGRAM Section 1. In the event of the destruction of properties, personnel and records of the Association, to the extent that continued operation of the Association is not reasonably possible, provisions in various resolutions hereafter adopted by the Board of Directors with reference to emergency operations shall become effective and continue to be in effect until conditions warrant the reestablishment of operations. 19 EXHIBIT 6 CONSENT OF TRUSTEE Pursuant to the Requirements of Section 321(b) of the Trust Indenture Act of 1939 in connection with the proposed issue of Senior Unsecured Debt by Promus Hotels, Inc., we hereby consent that reports of examination by Federal, State, Territorial, or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therfor. SouthTrust Bank of Alabama National Association By: /s/ John Hoitt ---------------------- Vice President & Manager Corporate Trust Dated: October 10, 1996 EXHIBIT 7 Comptroller of the Currency Administrator of National Banks REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the SouthTrust Bank of Alabama, National Association of Birmingham in the state of Alabama, at the close of business on June 30, 1996, published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161. Charter Number 14569 Comptroller of the Currency Southeastern District. Statement of Resources and Liabilities
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . . . . . . . . . . . . 306,714 Interest-bearing balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,088 Securities Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867,810 Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440,445 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,400 Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . . . 50,942 Loans and lease financing receivables: Loans and leases, net of unearned income . . . . . . . . . . . . . . . . . . . . . . 8,827,508 LESS: Allowance for loan and lease losses . . . . . . . . . . . . . . . . . . . . . 118,785 LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . . . . . . . . . 0 Loans and leases, net of unearned income, allowance and reserve. . . . . . . . . . . . . . . . . . . 8,708,723 Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . . . . . . . 207,874 Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,873 Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . 0 Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . 22,628 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,566 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,841 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,034,904 LIABILITIES Deposits: In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,823,943 Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,993 Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,919,950 In foreign offices, Edge and Agreement subsidiaries, and IBF's . . . . . . . . . . . . . . . . . . . 258,360 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440,446 Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,761 Demand notes issued to the U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,198 Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 Other borrowed money: With a remaining maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . . . . . . . 977,763 With a remaining maturity of more than one year. . . . . . . . . . . . . . . . . . . . . . . . . . . 427,000 Mortgage indebtedness and obligations under capitalized leases. . . . . . . . . . . . . . . . . . . . . . 0 Banks liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 22,628 Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,349 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,225,448 Limited-life preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 EQUITY CAPITAL Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,006 Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,284 Undivided profits and capital reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632,106 Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . (13,940) Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 Total equity capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809,456 Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . 12,034,904
I, Carol H. Tiarsmith, Senior Vice President and Controller of SouthTrust Bank of Alabama, National Association, do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. /s/ Carol H. Tiarsmith --------------------------------------- Carol H. Tiarsmith October 9, 1996 --------------------------------------- Date 2 -----END PRIVACY-ENHANCED MESSAGE-----