Exhibit 10.1

THIS AGREEMENT IS NOT, AND SHALL NOT BE DEEMED, A SOLICITATION FOR CONSENTS TO
ANY PLAN PURSUANT TO SECTIONS 1125 AND 1126 OF THE BANKRUPTCY CODE OR A
SOLICITATION TO TENDER OR EXCHANGE OF ANY OF THE NOTES OR BONDS ISSUED PURSUANT
TO THE FIRST LIEN INDENTURES. EACH CONSENTING CREDITOR’S VOTE ON THE PLAN SHALL
NOT BE SOLICITED UNTIL THE CONSENTING CREDITORS HAVE RECEIVED THE DISCLOSURE
STATEMENT AND RELATED BALLOT(S), AS APPROVED BY THE BANKRUPTCY COURT

FOURTH AMENDED & RESTATED RESTRUCTURING SUPPORT AND FORBEARANCE AGREEMENT

This Fourth Amended & Restated Restructuring Support and Forbearance Agreement
dated as of July 31, 2015 amends, restates and replaces the Third Amended &
Restated Restructuring Support and Forbearance Agreement dated as of January 14,
2015 (as amended, supplemented, or otherwise modified from time to time, this
“Agreement”), among: (i) Caesars Entertainment Operating Company, Inc. (“CEOC”),
on behalf of itself and each of the debtors in the Chapter 11 Cases
(collectively, the “Company”), (ii) Caesars Entertainment Corporation (“CEC,”
and together with the Company, the “Caesars Parties”), (iii) LeverageSource III
(H Holdings), L.P. (“LS3”), (iv) LeverageSource V, L.P. (“LS5”), and (v) each of
the undersigned noteholders, each of which is the holder of, or the investment
advisor or the investment manager to a holder or holders of First Lien Bond
Claims (as defined below) (and in such capacity having the power to bind such
holder with respect to any First Lien Bond Claims identified on its signature
page hereto) (including any permitted assignees under this Agreement,
collectively, the “Consenting Creditors,” and together with the Caesars Parties,
LS3, and LS5, each referred to as a “Party” and collectively referred to as the
“Parties”). All capitalized terms not defined herein shall have the meanings
ascribed to them in the Restructuring Term Sheet (as defined below).

RECITALS:

WHEREAS, before the date hereof, the Parties and their representatives have
engaged in arm’s-length, good-faith negotiations regarding a potential
restructuring of the Company’s indebtedness and other obligations pursuant to
the terms and conditions of this Agreement and the terms and conditions set
forth on the term sheet annexed hereto as Exhibit B (the “Restructuring”) (which
term sheet, including any schedules, annexes, and exhibits attached thereto,
amends, restates, and replaces any prior restructuring term sheet, and is
expressly incorporated by reference herein and made a part of this Agreement as
if fully set forth herein (as such term sheet may be modified in accordance with
Section 14 hereof, the “Restructuring Term Sheet”));

WHEREAS, if effected, the Restructuring will resolve all claims between the
Consenting Creditors (including EMC (as defined below)) and the Caesars Parties,
including any litigation-related claims against the Company and CEC and those at
issue in the Caesars-Commenced Litigation (as defined below);

 

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WHEREAS, the Company will be implementing the Restructuring through a
prenegotiated joint chapter 11 plan of reorganization;

WHEREAS, the Parties have agreed that the Company may use Cash Collateral (as
defined below) during the Chapter 11 Cases (as defined below) on the terms and
subject to the conditions set forth in the Restructuring Term Sheet and as
otherwise satisfactory to the Parties; and

WHEREAS, the Parties have agreed to take certain actions in support of the
Restructuring on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which each of the Parties hereby acknowledges, each Party, intending to be
legally bound hereby, agrees as follows:

1. Definitions; Rules of Construction.

(a) Definitions. The following terms shall have the following definitions:

“Additional Bank Consideration” means any consideration provided in connection
with the Restructuring by or on behalf of any of the Caesars Parties or their
Affiliates after the date of this Agreement to any holder of First Lien Bank
Debt, in its capacity as such, that exceeds or is superior to that contemplated
under the Restructuring, including, without limitation, additional
consideration, the granting of any guaranty, and/or the allocation of any rights
or opportunities (whether investment, commercial, management, advisory or
otherwise).

“Additional Bond Consideration” means any consideration provided in connection
with the Restructuring by or on behalf of any of the Caesars Parties or their
Affiliates after the date of this Agreement to any holder of First Lien Bond
Debt, in its capacity as such, that exceeds or is superior to that contemplated
under the Restructuring, including, without limitation, additional
consideration, the granting of any guaranty, and/or allocation of any rights or
opportunities (whether investment, commercial, management, advisory or
otherwise).

“Affiliate” means, with respect to any Person, any other Person (whether now or
hereinafter in existence) which directly or indirectly controls, or is under
common control with, or is controlled by, such Person. As used in this
definition, “control” (including, with its correlative meanings, “controlled by”
and “under common control with”) shall mean, with respect to any Person, the
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise or through
intermediaries) of such Person. For the avoidance of doubt, LS3 and LS5 shall be
considered Affiliates of the Caesars Parties.

“Agreement” has the meaning set forth in the preamble hereof.

“Alternative Proposal” means any plan of reorganization or liquidation,
proposal, offer, transaction, dissolution, winding up, liquidation,
reorganization, merger, consolidation, business combination, joint venture,
partnership, sale of material assets or equity interests or restructuring (other
than the Restructuring) involving the Company and its controlled subsidiaries.

 

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“Backstop Assumption Motion” has the meaning set forth on Exhibit D hereto.

“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§101 et
seq.

“Bankruptcy Court” means the United States Bankruptcy Court for the Northern
District of Illinois.

“Business Day” means any day other than Saturday, Sunday, and any day that is a
legal holiday or a day on which banking institutions in New York, New York are
authorized by law or other governmental action to close.

“Caesars-Commenced Litigation” means the case captioned Caesars Entertainment
Operating Company, Inc. and Caesars Entertainment Corporation v. Appaloosa
Investment Limited Partnership I, et. al., Index No. 652392/2014 (N.Y. Sup. Ct.,
N.Y. Cty.).

“Caesars Cases” means the cases captioned (a) Wilmington Savings Fund Society,
FSB, solely in its capacity as successor Indenture Trustee for the 10%
Second-Priority Senior Secured Notes due 2018, on behalf of itself and
derivatively on behalf of Caesars Entertainment Operating Company, Inc. v.
Caesars Entertainment Corporation, et. al., Case No. 10004-VCG (Del. Ch.),
(b) MeehanCombs Global Credit Opportunities Master Fund, LP, et. al. v. Caesars
Entertainment Corporation and Caesars Entertainment Operating Company, Inc.,
No. 14-cv-7097 (S.D.N.Y.), (c) Frederick Barton Danner v. Caesars Entertainment
Corporation and Caesars Entertainment Operating Company, Inc., No. 14-cv-7973
(S.D.N.Y.), (d) BOKF, N.A., solely in its capacity as successor Indenture
Trustee for the 12.75% Second-Priority Senior Secured Notes due 2018 v. Caesars
Entertainment Corporation, Case No. 15-cv-01561 (S.D.N.Y.), (e) UMB Bank, N.A.
solely in its capacity as Indenture Trustee under those certain indentures,
dated as of June 10, 2009, governing Caesars Entertainment Operating Company,
Inc.’s 11.25% Notes due 2017; dated as of February 14, 2012, governing Caesars
Entertainment Operating Company, Inc.’s 8.5% Senior Secured Notes due 2020;
dated August 22, 2012, governing Caesars Entertainment Operating Company. Inc.’s
9% Senior Secured Notes due 2020; dated February 15, 2013, governing Caesars
Entertainment Operating Company, Inc.’s 9% Senior Secured Notes due 2020 v.
Caesars Entertainment Corporation, Case No. 15-cv-04634 (S.D.N.Y.) and (f) all
claims in, and causes of action relating to, the Caesars Cases otherwise
described in clauses (a)–(e) above.

“Caesars Parties” has the meaning set forth in the preamble hereof.

“Cash Collateral” means the Company’s cash to the extent that such cash is
“Collateral” and subject to a perfected “Lien,” both as defined under the Credit
Agreement and/or First Lien Indentures, as the case may be, and in each case
that has not been avoided.

“Cash Collateral Stipulation” means a stipulation or agreed order governing the
use of Cash Collateral that shall be consistent with the Restructuring Term
Sheet and otherwise reasonably acceptable in form and substance to the Company,
CEC, and the Requisite Consenting Creditors.

 

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“CEC” has the meaning set forth in the preamble hereof.

“CEC Bankruptcy Event” means the commencement by or against CEC of a bankruptcy
or similar proceeding.

“CEC Transactions” means the transactions consummated pursuant to, in
contemplation of, or in connection with (a) the Amended and Restated Credit
Agreement, dated as of November 14, 2012, among CEOC, as borrower, and CEC, as
lenders, and (b) the Global Intercompany Note, dated as of January 28, 2008,
among CEC and certain Affiliates.

“CEOC” has the meaning set forth in the preamble hereof.

“CES” means Caesars Enterprise Services, LLC and its subsidiaries (whether now
or hereinafter in existence).

“Chapter 11 Cases” means the voluntary chapter 11 cases titled Caesars
Entertainment Operating Company, Inc., et. al., Case No. 15-01145 (Bankr. N.D.
Ill.).

“Claim” means any claim identified on a Party’s signature block hereto on
account of indebtedness issued by CEOC pursuant to the Credit Agreement, the
First Lien Indentures, or the Non-First Lien Indentures, or any other claim (as
that term is defined by section 101(5) of the Bankruptcy Code), in each case,
other than any claim for which the holder (x) does not have the right to control
voting or (y) is not permitted by a preexisting contractual obligation or
operation of law to vote in favor of the Restructuring. For the avoidance of
doubt (i) “Claim” shall not include any claims in respect of derivatives related
to or referencing indebtedness, (ii) without limiting Section 12 hereof, if the
holder of a claim ceases to have the right to control voting with respect to
such claim, such claim shall no longer be deemed a “Claim” for purposes of this
Agreement, unless and until such holder subsequently acquires the right to
control voting with respect to such claim, and (iii) the definition set forth
herein shall not limit nor be deemed to limit the scope of any release provided
under the Restructuring Term Sheet.

“Claim Holder” refers to (i) each Consenting Creditor, (ii) LS3, (iii) LS5, and
(iv) each Caesars Party, to the extent such Caesars Party, as of the date of
execution of this Agreement, either (a) is a beneficial owner of Claims or
(b) has investment or voting discretion with respect to Claims and has the power
and authority to bind the beneficial owner(s) of such Claims to the terms of
this Agreement.

“Collateral Agent” has the meaning ascribed to it in the Credit Agreement and
First Lien Indentures.

“Company” has the meaning set forth in the preamble hereof.

“Company Termination Event” has the meaning set forth in Section 10 hereof.

 

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“Confidential Claims Information” has the meaning set forth in Section 5(a)(iii)
hereof.

“Confirmation Order” has the meaning set forth on Exhibit D hereto.

“Consenting Creditors” has the meaning set forth in the preamble hereof.

“Credit Agreement” means the Third Amended and Restated Credit Agreement, dated
as of July 25, 2014, among CEC, CEOC, as borrower, the lenders party thereto and
Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral
agent.

“Creditor Termination Event” has the meaning set forth in Section 8 hereof.

“Creditor Termination Right” has the meaning set forth in Section 8 hereof.

“Definitive Documentation” means the Plan, Confirmation Order, Disclosure
Statement, Cash Collateral Stipulation, any court filings in the Chapter 11
Cases that could be reasonably expected to affect the interests of holders of
First Lien Bond Claims (but not, for the avoidance of doubt, any professional
retention motions or applications), in their capacities as such, and any other
documents or exhibits related to or contemplated in the foregoing.

“Disclosure Statement” means the Company’s disclosure statement, including any
exhibits, appendices, related documents, ballots, and procedures related to the
solicitation of votes to accept or reject the Plan, in each case, as amended,
supplemented, or otherwise modified from time to time in accordance with the
terms hereof, in respect of the Plan and that is prepared and distributed in
accordance with, among other things, sections 1125, 1126(b), and 1145 of the
Bankruptcy Code, Rule 3018 of the Federal Rules of Bankruptcy Procedure, and
other applicable law, each of which shall be substantially consistent with this
Agreement and shall otherwise be reasonably acceptable to the Requisite
Consenting Creditors (as evidenced by their written approval, which approval may
be conveyed in writing by counsel including by electronic mail) and the Company.

“Effective Date” means the date upon which all conditions precedent to the
effectiveness of the Plan have been satisfied or are expressly waived in
accordance with the terms thereof, as the case may be, and on which the
Restructuring and the other transactions to occur on the Effective Date pursuant
to the Plan become effective or are consummated.

“EMC” means certain entities or accounts managed or controlled by Elliott
Management Corporation who are named as defendants in the Caesars-Commenced
Litigation.

“Event of Default” has the meaning ascribed to it in the First Lien Indentures.

“Examiner Report” has the meaning set forth on Exhibit D hereto.

“Executory Contracts and Unexpired Leases” means any contracts or unexpired
leases to which the Company is a party that are subject to assumption or
rejection under sections 365 or 1123 of the Bankruptcy Code.

 

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“Fiduciary Out” has the meaning set forth in Section 10(c) hereof.

“First Lien Bank Claim” means a Claim in respect of First Lien Bank Debt.

“First Lien Bank Debt” means indebtedness incurred by the Company pursuant to
the Credit Agreement.

“First Lien Bank Documents” means the “Loan Documents” as defined in the Credit
Agreement.

“First Lien Bond Claim” means a Claim in respect of First Lien Bond Debt.

“First Lien Bond Debt” means indebtedness incurred by the Company pursuant to
the First Lien Indentures.

“First Lien Fees and Expenses” means (i) all reasonable and documented
out-of-pocket expenses (other than professional fees) incurred by any Initial
Consenting Creditor in connection with the negotiation and implementation of the
Restructuring plus (ii) First Lien Professional Fees.

“First Lien Indentures” means (i) the Indenture dated as of June 10, 2009, as it
may have been amended and supplemented from time to time, governing CEOC’s
11.25% Senior Secured Notes due 2017, (ii) the Indenture dated as of
February 14, 2012, as it may have been amended and supplemented from time to
time, governing CEOC’s 8.5% Senior Secured Notes due 2020, (iii) the Indenture
dated as of August 22, 2012, as it may have been amended and supplemented from
time to time, governing CEOC’s 9% Senior Secured Notes due 2020 and (iv) the
Indenture dated as of February 15, 2013, as it may have been amended and
supplemented from time to time, governing CEOC’s 9% Senior Secured Notes due
2020.

“First Lien Professional Fees” means all reasonable and documented fees and
expenses of the First Lien Professionals incurred in their representation of
holders of First Lien Bond Debt in connection with the Company, from the date of
the First Lien Professionals’ respective retentions by such holders of First
Lien Bond Debt through and including the later of either (i) the termination of
this Agreement pursuant to Sections 8, 9, or 10 of this Agreement or (ii) the
Effective Date; provided that documentation of such First Lien Professional Fees
shall be summary in nature and shall not include billing detail that may be
subject to the attorney-client privilege or other similar protective doctrines.

“First Lien Professionals” means Kramer Levin Naftalis & Frankel LLP, Miller
Buckfire & Co., Berkeley Research Group, LLC (formerly Capstone Advisory Group),
Breazeale, Sachse & Wilson, L.L.P., Ballard Spahr LLP, one (1) special REIT
counsel, and one (1) local counsel engaged by the Consenting Creditors in
connection with the Chapter 11 Cases, and such other legal, consulting,
financial, and/or other professional advisors as may be retained or may have
been retained from time to time by any of the Initial Consenting Creditors with
the prior written consent of the Company, which consent shall not be
unreasonably withheld.

“Forbearance Defaults” means defaults or Events of Default alleged in or in
connection with (a) the May 2014 Transactions, (b) the Services Transactions,
(c) the CEC Transactions, (d) the Incurrence Transactions, (e) the Restricted
Transactions, (f) the Caesars Cases, (g) the Caesars-Commenced Litigation, and
(h) any actions taken pursuant to and in compliance with the terms of this
Agreement.

 

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“Forbearance Fee First Lien Bond Claims” means the First Lien Bond Claims held
by any Forbearance Fee Party as of 11:59 pm, New York City time, on January 15,
2015.

“Forbearance Fee Parties” means those holders of First Lien Bond Claims who
signed this Agreement and became Consenting Creditors on or prior to 5 p.m. EST
on January 12, 2015, and shall include the transferees and assignees of such
holders with respect to any transfers or assignments of Forbearance Fee First
Lien Bond Claims permitted under this Agreement, unless a Notice of Retention of
RSA Forbearance Fee substantially in the form attached hereto as Exhibit F is
delivered to CEC, in which case the transferor/assignor shall remain the
Forbearance Fee Party with respect to such Forbearance Fee First Lien Bond
Claims.

“Forbearance Termination Event” has the meaning set forth in Section 3(a)
hereto.

“Guaranty Cases” means the cases captioned (a) BOKF, N.A., solely in its
capacity as successor Indenture Trustee for the 12.75% Second-Priority Senior
Secured Notes due 2018 v. Caesars Entertainment Corporation, Case
No. 15-cv-01561 (S.D.N.Y.), and (b) UMB Bank, N.A. solely in its capacity as
Indenture Trustee under those certain indentures, dated as of June 10, 2009,
governing Caesars Entertainment Operating Company, Inc.’s 11.25% Notes due 2017;
dated as of February 14, 2012, governing Caesars Entertainment Operating
Company, Inc.’s 8.5% Senior Secured Notes due 2020; dated August 22, 2012,
governing Caesars Entertainment Operating Company. Inc.’s 9% Senior Secured
Notes due 2020; dated February 15, 2013, governing Caesars Entertainment
Operating Company, Inc.’s 9% Senior Secured Notes due 2020 v. Caesars
Entertainment Corporation, Case No. 15-cv-04634 (S.D.N.Y.), and any similar
litigations filed against CEC.

“Incurrence Transactions” means the transactions consummated pursuant to, in
contemplation of, or in connection with the Incremental Facility Amendment and
Term B-7 Agreement, dated as of June 11, 2014, among CEC, Caesars Operating
Escrow LLC, the Incremental Lenders party thereto, Bank of America, N.A., Credit
Suisse AG, Cayman Islands Branch, and upon the assumption of the Term B-7 Loans,
CEOC.

“Initial Consenting Creditor” means the Consenting Creditors who are the
following signatories hereto: (i) Brigade Capital Management, LP; (ii) DDJ
Capital Management, LLC; (iii) Elliott International, L.P.; (iv) Elliott
Associates, L.P.; (v) The Liverpool Limited Partnership; (vi) J.P. Morgan
Investment Management Inc.; (vii) JPMorgan Chase Bank, N.A.; and (viii) Pacific
Investment Management Company LLC.

“Involuntary Petition” means the chapter 11 petition filed against CEOC on
January 12, 2015, in the United States Bankruptcy Court for the District of
Delaware, currently docketed as Case No. 15-3193 (Bankr. N.D. Ill.).

“LS3” has the meaning set forth in the preamble hereof.

 

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“LS5” has the meaning set forth in the preamble hereof.

“May 2014 Transactions” means the transactions consummated pursuant to, in
contemplation of, or in connection with the Transaction Agreement dated as of
March 1, 2014, as amended, by and among CEC, CEOC, Caesars License Company, LLC,
Harrah’s New Orleans Management Company, Corner Investment Company, LLC, 3535 LV
Corp., Parball Corporation, JCC Holding Company II, LLC, Caesars Acquisition
Company, and Caesars Growth Partners, LLC.

“Milestones” means those milestones set forth on Exhibit D hereto.

“MLSA” means that certain Management and Lease Support Agreement, as described
in the Restructuring Term Sheet.

“Non-First Lien Indentures” means the indentures governing CEOC’s (a) 10.00%
second-priority senior secured notes due 2015, (b) 10.00% second-priority senior
secured notes due 2018, (c) 12.75% second-priority senior secured notes due
2018, (d) 10.75% senior notes due 2016, (e) 10.75%/11.5% senior toggle notes due
2018, (f) 6.5% senior notes due 2016, and (g) 5.75% senior notes due 2017.

“Note Purchase and Support Agreement” means that certain agreement entered into
by CEC, CEOC, and certain holders of the 6.50% Senior Notes due 2016 and 5.7%
Notes due 2017, dated August 12, 2014.

“Outside Date” has the meaning set forth on Exhibit D hereto.

“Parties” has the meaning set forth in the preamble hereof.

“Person” means an individual, a partnership, a joint venture, a limited
liability company, a corporation, a trust, an unincorporated organization, a
group or any legal entity or association.

“Petition Date” means the date on which the Company commenced the Chapter 11
Cases.

“Plan” means the joint prenegotiated chapter 11 plan of reorganization of the
Company through which the Restructuring will be effected (as amended,
supplemented, or otherwise modified from time to time), and which Plan must be
materially consistent with this Agreement and the Restructuring Term Sheet and
shall otherwise be reasonably acceptable to the Requisite Consenting Creditors
(as evidenced by their written approval, which approval may be conveyed in
writing by counsel including by electronic mail) and the Company.

“Qualified Marketmaker” means an entity that holds itself out to the public or
applicable private markets as standing ready in the ordinary course of business
to purchase from customers and sell to customers claims against the Company, in
its capacity as a dealer or market maker in claims against the Company.

 

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“Requisite Consenting Creditors” means, as of any time of determination, the
Consenting Creditors holding greater than two-thirds of the aggregate amount of
all First Lien Bond Claims held at such time by all of the Consenting Creditors;
provided that any First Lien Bond Claims held by any of the Caesars Parties
and/or their respective Affiliates shall not be included in the foregoing
calculation.

“Restricted Transactions” means the transactions consummated pursuant to, in
contemplation of, or in connection with the Note Purchase and Support Agreement.

“Restructuring” has the meaning set forth in the recitals hereof.

“Restructuring Support Party” means each of (i) the Caesars Parties (other than
the Company), (ii) the Consenting Creditors, (iii) LS3, and (iv) LS5, together
with the respective Affiliates, subsidiaries, managed funds, representatives,
officers, directors, agents, and employees of each of the foregoing, in each
case to the extent controlled by such Restructuring Support Party.

“Restructuring Support Period” means the period commencing on December 19, 2014,
and ending on the earlier of (i) the date on which this Agreement is terminated
with respect to all Parties, and (ii) the Effective Date.

“Restructuring Term Sheet” has the meaning set forth in the recitals hereof.

“RSA Forbearance Fees” has the meaning set forth in the Restructuring Term
Sheet.

“Securities Act” has the meaning set forth in Section 7(c) hereof.

“Services Transactions” means the transactions consummated pursuant to, in
contemplation of, or in connection with the Omnibus License and Enterprise
Services Agreement, dated May 20, 2014, by and among CES, CEOC, CERP, Caesars
Growth Properties Holdings, LLC, Caesars License Company, LLC, and Caesars
World, Inc.

“Termination Events” has the meaning set forth in Section 10 hereto.

“Transfer” has the meaning set forth in Section 12 hereto.

“Transferee” has the meaning set forth on Exhibit E hereto.

“Trustee” has the meaning ascribed to it in the First Lien Indentures.

“Trustee Guaranty Litigation” means the case captioned UMB Bank, N.A. solely in
its capacity as Indenture Trustee under those certain indentures, dated as of
June 10, 2009, governing Caesars Entertainment Operating Company, Inc.’s 11.25%
Notes due 2017; dated as of February 14, 2012, governing Caesars Entertainment
Operating Company, Inc.’s 8.5% Senior Secured Notes due 2020; dated August 22,
2012, governing Caesars Entertainment Operating Company. Inc.’s 9% Senior
Secured Notes due 2020; dated February 15, 2013, governing Caesars Entertainment
Operating Company, Inc.’s 9% Senior Secured Notes due 2020 v. Caesars
Entertainment Corporation, Case No. 15-cv-04634 (S.D.N.Y.).

 

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“Trustee Litigation” means the case captioned UMB Bank v. Caesars Entertainment
Corporation, et al., C.A. No. 10393-VCG (Del. Ch.).

(b) Rules of Construction. Other than as contained within Section 28, each
reference in this Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein”, or words of like import shall mean and be a reference to this
Agreement, the Restructuring Term Sheet, and the Cash Collateral Stipulation
taken as a whole.

2. Commitment of Restructuring Support Parties.

(a) Affirmative Covenants. Subject to the terms and conditions hereof, for the
duration of the Restructuring Support Period, each Restructuring Support Party
shall:

(i) negotiate in good faith the Definitive Documentation, in form and substance
consistent in all material respects with this Agreement (including the
Restructuring Term Sheet and all exhibits thereto, which, for the avoidance of
doubt, shall be binding on all the Parties upon the effectiveness of this
Agreement), and as otherwise reasonably acceptable to the Requisite Consenting
Creditors (as evidenced by their written approval, which approval may be
conveyed in writing by counsel including by electronic mail), the Company, and
CEC (in respect of CEC, to the extent such Definitive Documents could be
reasonably expected to affect the interests of CEC);

(ii) consent to those actions contemplated by this Agreement or otherwise
required to be taken to effectuate the Restructuring, including entering into
all documents and agreements necessary to consummate the Restructuring, in each
case, to which such Restructuring Support Party is to be a party;

(iii) support the Restructuring and vote in favor of the Plan, when properly
solicited to do so under the Bankruptcy Code, all Claims now or hereafter
beneficially owned by such Restructuring Support Party or for which it now or
hereafter serves as the nominee, investment manager, or advisor for beneficial
holders of Claims (and not withdraw or revoke its tender, consent, or vote with
respect to the Plan); provided that the foregoing may be waived by the Company
in its sole discretion; provided, further, that (x) such vote may be revoked
(and, upon such revocation, deemed void ab initio) by any of the Consenting
Creditors at any time following the termination of this Agreement with respect
to such Consenting Creditor, but only to the extent this Agreement has
terminated on account of a breach by a Party other than such Consenting
Creditor, it being understood and agreed that no Restructuring Support Party
shall enter into any arrangement whereby it transfers voting rights for the
purpose of avoiding any obligations under this Agreement, and (y) if this
Agreement (including the Restructuring Term Sheet or any Exhibits thereto) or
the Plan is amended in a manner that would adversely affect a Consenting
Creditor’s First Lien Bank Claim(s), such Consenting Creditor (1) shall no
longer be obligated to vote hereunder in respect of any First Lien Bank Claim(s)
and shall be permitted to vote its First Lien Bank Claim(s) to reject such Plan,
(2) to the extent such Consenting Creditor has voted any First Lien Bank
Claim(s) hereunder, shall be permitted to

 

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revoke its vote in respect of such First Lien Bank Claim(s) (and upon such
revocation, such vote shall be deemed void ab initio) and to vote such First
Lien Bank Claim(s) to reject such Plan, and (3) notwithstanding anything herein
to the contrary, shall be permitted to support and vote its First Lien Bank
Claim(s) for, and consent to, an Alternative Proposal and take any action in
respect of its First Lien Bank Claims other than be a plan proponent under
section 1121(c) of the Bankruptcy Code (as identified in accordance with Federal
Rule of Bankruptcy Procedure 3016(a)); provided that nothing in this Section
2(a)(iii) shall in any way limit any Party’s rights or obligations arising under
the Bankruptcy Code or applicable non-bankruptcy law.

(iv) upon its execution of this Agreement, exercise its Put Option with respect
to OpCo New Common Stock as provided by the Restructuring Term Sheet, which
election shall be binding on such Restructuring Support Party and any Transferee
thereof; and

(v) support the mutual release and exculpation provisions to be provided in the
Plan.

(b) Negative Covenants. Subject to the terms and conditions hereof, for the
duration of the Restructuring Support Period, each Restructuring Support Party
shall not:

(i) seek, solicit, support, vote its Claims for, or consent to, an Alternative
Proposal; or

(ii) take any action materially inconsistent with the transactions expressly
contemplated by this Agreement, or that would materially delay or obstruct the
consummation of the Restructuring, including, without limitation, commencing, or
joining with any Person in commencing, any litigation or involuntary case for
relief under the Bankruptcy Code against the Company or CEC.

Subject in all respects as may otherwise be provided for under the applicable
documents governing the intercreditor relationships among the parties thereto,
nothing in this Agreement shall prohibit any Restructuring Support Party from
(x) appearing as a party-in-interest in any matter arising in the Chapter 11
Cases so long as such appearance and the positions advocated in connection
therewith are not inconsistent with this Agreement or the Restructuring, and do
not hinder, delay, or prevent consummation of the Restructuring, (y) taking or
directing any action relating to maintenance, protection, or preservation of any
collateral, to the extent such actions are not inconsistent with this Agreement,
and (z) enforcing any right, remedy, condition, consent, or approval requirement
under this Agreement or any Definitive Documentation entered into in connection
with the Restructuring; provided that, in each case, any such action is not
materially inconsistent with such Restructuring Support Party’s obligations
hereunder.

3. Consenting Creditors’ and Caesars Parties’ Forbearance.

(a) Until the earlier to occur of (i) the termination of this Agreement and
(ii) the occurrence of any Event of Default (other than any Forbearance Default)
that continues for five (5) consecutive Business Days after notice thereof from
the Trustee to the Company (each of clause (i) and clause (ii), a “Forbearance
Termination Event”), each Consenting Creditor agrees to forbear from exercising
its default-related rights and remedies (as well as any setoff rights and
remedies) under the First Lien Indentures or applicable law, against the Company
and CEC and, with respect to each, their property and interests in property.

 

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(b) Upon the occurrence of a Forbearance Termination Event, the agreement of the
Consenting Creditors hereunder to forbear from exercising rights and remedies in
respect of the Forbearance Defaults, shall immediately terminate without
requirement of any demand, presentment, protest, or notice of any kind, all of
which the Company hereby waives (to the extent permitted by applicable law).

(c) The Caesars Parties agree that, upon the occurrence of, and at any time
after the occurrence of, a Forbearance Termination Event, the Consenting
Creditors or the Collateral Agent or the Trustee, as applicable, may proceed,
subject to the terms of the First Lien Bank Documents, the First Lien
Indentures, and applicable law, to exercise any or all rights and remedies under
the First Lien Bank Documents, the First Lien Indentures, applicable law, and/or
in equity, including, without limitation, the rights and remedies on account of
the Forbearance Defaults, all of which rights and remedies are fully reserved.

(d) The Caesars Parties agree that, prior to the termination of this Agreement
with respect to any particular Consenting Creditor, the Caesars Parties shall
not commence any litigation or interpose or join in any claim arising from or in
any way related to the First Lien Bond Debt against any such Consenting
Creditor. The Consenting Creditors agree that, prior to the termination of this
Agreement with respect to any particular Caesars Party, the Consenting Creditors
shall not commence any litigation or interpose or join in any claim arising from
or in any way relating to the First Lien Bond Debt against any such Caesars
Party, including, without limitation, in connection with any of the Caesars
Cases or the Trustee Litigation; provided, however, that nothing in this
Agreement shall prevent a Consenting Creditor from taking any other action
(other than joining as a named plaintiff or providing a written direction to the
Trustee other than a written direction to stay or withdraw such action) in
connection with or relating to any of the Caesars Cases, including without
limitation (i) communicating and conferring with the Trustee regarding any of
the Caesars Cases, and (ii) responding to and taking action in connection with
any subpoena or discovery request relating to any of the Caesars Cases. The
Caesars Parties further acknowledge and agree that the preparation, filing and
prosecution of the Trustee Guaranty Litigation was not and is not a breach of
this Agreement.

(e) For the avoidance of doubt, and notwithstanding anything herein, the
forbearance set forth in this Section 3 shall not constitute a waiver with
respect to any defaults or any events of defaults under the First Lien
Indentures and shall not bar any Consenting Creditor from filing a proof of
claim or taking action to establish the amount of such Claim.

(f) Anything in this Agreement or otherwise notwithstanding, (i) the Trustee
Litigation may proceed unaffected by this Agreement, including, without
limitation, all Parties to this Agreement may take any and all actions, make any
and all omissions, give any and all directions and/or instructions, file any and
all papers and documents, provide any and all evidence, raise and/or prosecute
any and all claims and defenses, and otherwise act (or omit to act) in
connection with or in reference to the Trustee Litigation as they may elect in
their sole and absolute discretion, and all Parties to this Agreement hereby
reserve all of their respective rights, powers, and remedies in connection with
or in reference to the Trustee Litigation; and (ii) each of the Parties to this
Agreement hereby agrees not to allege, assert directly or indirectly, plead,
raise by claim or defense, challenge, or otherwise contend that the rights,
powers, or remedies of any Party or trustee in connection with or in reference
to the Trustee Action are in

 

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any manner restricted, limited, or otherwise prejudiced due to the existence of
this Agreement or anything contained in this Agreement, and nothing contained in
this Agreement shall be admissible for any such purpose. Notwithstanding the
foregoing, the Consenting Creditors agree that if and only if the Petition Date
occurs, then upon the occurrence of such Petition Date, they (x) shall not seek
to modify or otherwise oppose the imposition of the automatic stay under
Section 362 of the Bankruptcy Code until the earlier of (i) the termination of
this Agreement and (ii) the Effective Date and (y) to the extent a Consenting
Creditor has directed the Trustee in connection with the Trustee Litigation,
such Consenting Creditor shall direct the Trustee to agree to a consensual stay
of the Trustee Litigation commencing upon the Petition Date and expiring upon
the termination of this Agreement.

4. Withdrawal of Litigation and Tolling.

(a) Prior to the Petition Date, (i) the Company and CEC will dismiss without
prejudice, or otherwise stay, the claims asserted against EMC in the
Caesars-Commenced Litigation (and, for the avoidance of doubt, shall not attempt
to or otherwise cause the retraction revocation or termination of the dismissal
during the term of this Agreement) (provided, however, that the Company and CEC
may pursue all claims in the Caesars-Commenced Litigation against any entity
that is not an affiliate of EMC, directly or indirectly controlled or managed by
Elliott Management Corporation or its Affiliates, or a Consenting Creditor), and
(ii) within two (2) business days of such dismissal, EMC will withdraw, without
prejudice, its pending motion to dismiss (and, for the avoidance of doubt, shall
not attempt to or otherwise cause the retraction revocation or termination of
the withdrawal during the term of this Agreement). No Caesars Party shall,
during the term of this Agreement, prosecute or pursue against EMC any of the
claims asserted against EMC in the Caesars-Commenced Litigation or any similar
or related claims.

(b) Upon the termination of this Agreement with respect to the Company, CEC, and
EMC, the agreements between the Company, CEC, and EMC in respect of the
Caesars-Commenced Litigation as set forth above shall immediately terminate.

(c) [Reserved.]

(d) The Caesars Parties acknowledge and agree that the time from December 19,
2014, through and including the date that is five (5) Business Days after the
date that this Agreement has been terminated with respect to all Parties shall
not be counted for purposes of determining whether any litigation commenced or
claim interposed by any of the Consenting Creditors, the Trustee, or the
Collateral Agent against any Caesars Party, which litigation or claim relates in
any way to the Company or its Affiliates (including, but not limited to, any
claims relating to any transaction by or among, or approved by, the Caesars
Parties), was commenced or interposed within the applicable statute of
limitations or in compliance with any other rule or doctrine of timeliness. If
any Caesars Party commences any litigation or asserts any claim against any
particular Consenting Creditor, which litigation or claim relates to or arises
from the First Lien Indentures or any matters at issue in the Caesars-Commenced
Litigation (including but not limited to the assertion of claims by the Company
or CEC against EMC in the Caesars-Commenced Litigation), the time between
December 19, 2014, through and including the date that is five (5) Business Days
after the date that this Agreement has been terminated with respect to such
Consenting Creditor shall not be counted for purposes of determining whether any
such litigation was commenced or claim interposed within the applicable statute
of limitations or in compliance with any similar rule or doctrine of timeliness.

 

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5. Covenants of Caesars Parties.

(a) Affirmative Covenants of the Caesars Parties. Subject to the terms and
conditions hereof, for the duration of the Restructuring Support Period, each of
the Caesars Parties shall:

(i) (A) support and complete the Restructuring and all transactions contemplated
under the Restructuring Term Sheet and this Agreement, in accordance with the
Milestones, (B) negotiate in good faith the Definitive Documentation necessary
to effectuate the Restructuring, on the terms and subject to the conditions set
forth in this Agreement, (C) use its commercially reasonable efforts to obtain
any and all required governmental, regulatory, licensing, Bankruptcy Court, or
other approvals (including, without limitation, any necessary third-party
consents) necessary to the implementation or consummation of the Restructuring;
(D) use its commercially reasonable efforts to lift or otherwise reverse the
effect of any injunction or other order or ruling of a court or regulatory body
that would impede the consummation of a material aspect of the Restructuring,
and (E) operate the Company in the ordinary course consistent with industry
practice and the operations contemplated pursuant to the Company’s business
plan, taking into account the Restructuring and the commencement of the Chapter
11 Cases;

(ii) promptly notify or update the Consenting Creditors upon becoming aware of
any of the following occurrences: (A) an additional person becomes a Consenting
Creditor after the date of this Agreement; (B) a Termination Event has occurred;
(C) any person has challenged the validity or priority of, or has sought to
avoid, any lien securing the First Lien Bond Debt pursuant to a pleading filed
with the Bankruptcy Court or another forum of competent jurisdiction;
(D) material developments, negotiations, or proposals relating to the
Caesars-Commenced Litigation, the Caesars Cases, the Forbearance Defaults, and
any other case or controversy that may be commenced against such Caesars Party
in a court of competent jurisdiction or brought before a state or federal
regulatory, licensing, or similar board, authority, or tribunal that would
reasonably be expected to materially impede or prevent consummation of the
Restructuring; and

(iii) unless the Caesars Party obtains the prior written consent of a Consenting
Creditor: (x) use the information regarding any Claims owned at any time by such
Consenting Creditor (the “Confidential Claims Information”) solely in connection
with this Agreement (including any disputes relating thereto); and (y) except as
required by law, rule, or regulation or by order of a court or as requested or
required by the Securities and Exchange Commission or by any other federal or
state regulatory, judicial, governmental, or supervisory authority or body, keep
the Confidential Claims Information strictly confidential and not disclose the
Confidential Claims Information to any other Person; provided, however, that the
Caesars Parties may combine the Confidential Claims Information provided to the
Caesars Parties by a Consenting Creditor with the corresponding data provided to
the Company by the Consenting Creditors and freely disclose such combined data
on an aggregate basis. In the event that any of

 

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the Caesars Parties is required (by law, rule, regulation, deposition,
interrogatories, requests for information or documents in legal or
administrative proceedings, subpoena, civil investigative demand or other
similar process, or by any governmental, judicial, regulatory, or supervisory
body) to disclose the Confidential Claims Information or the contents thereof,
the Caesars Parties shall, to the extent legally permissible, provide affected
Consenting Creditors with prompt notice of any such request or requirement so
that such Consenting Creditors may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this section. If, in the
absence of a protective order or other remedy or the receipt of a waiver from a
Consenting Creditor, a Caesars Party believes that it is nonetheless, following
consultation with counsel, required to disclose the Confidential Claims
Information, such Caesars Party may disclose only that portion of the
Confidential Claims Information that it believes, following consultation with
counsel, it is required to disclose, provided that it exercises reasonable
efforts to preserve the confidentiality of the Confidential Claims Information,
including, without limitation, by marking the Confidential Claims Information
“Confidential – Attorneys’ Eyes Only” and by reasonably cooperating with the
affected Consenting Creditor to obtain an appropriate protective order or other
reliable assurance that confidential and attorneys’ eyes only treatment will be
accorded the Confidential Claims Information. In no event shall this Agreement
be construed to impose on a Consenting Creditor an obligation to disclose the
price for which it acquired or disposed of any Claim. The Caesars Parties’
obligations under this Section 5(a)(iii) shall survive termination of this
Agreement.

(b) Negative Covenants of the Caesars Parties. Subject to the terms and
conditions hereof, for the duration of the Restructuring Support Period, each of
the Caesars Parties (except with the prior written consent of the Requisite
Consenting Creditors) shall not, directly or indirectly:

(i) take any action to solicit, initiate, encourage, or assist the submission of
an Alternative Proposal; provided that this Section 5(b)(i) shall not apply to
the Company after the Petition Date. If any Caesars Party receives a proposal or
expression of interest in undertaking an Alternative Proposal, so long as the
Consenting Creditors have agreed to comply with any applicable confidentiality
restrictions related thereto (it being understood that CEC will not require any
confidentiality restrictions that are in addition to the confidentiality
restrictions set forth in any non-disclosure agreement between (1) any
Consenting Creditor and the Company, or (2) the First Lien Professionals and the
Company, that is in effect on the date hereof), the Caesars Party shall promptly
notify the First Lien Professionals of the receipt of such proposal or
expression of interest, with such notice to include the identity of the Person
or group of Persons involved as well as the terms of such Alternative Proposal;
it being acknowledged and agreed that, without limiting the restrictions imposed
on the Company pursuant to this Section 5(b)(i), the Company may pursue such
Alternative Proposal (including by facilitating diligence in connection with
such Alternative Proposal) in accordance with the Company’s fiduciary duties as
set forth by Section 20 hereof;

(ii) (A) publicly announce its intention not to pursue the Restructuring;
(B) suspend or revoke the Restructuring; or (C) execute any agreements,
instruments, or other documents (including any modifications or amendments to
any material Definitive Documentation necessary to effectuate the Restructuring)
that, in whole or in part, are not substantially consistent with this Agreement,
or are not otherwise reasonably acceptable to the Requisite Consenting Creditors
(as evidenced by their written approval, which approval may be conveyed in
writing by counsel including by electronic mail) and the Company; or

 

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(iii) take any action or omit to take any action, or incur, enter into, or
suffer any transaction, arrangement, condition, matter, or circumstance, that
(in any such case) materially impairs, or would reasonably be expected to
materially impair, the ability of CEC to perform its obligations under the MLSA
relative to its ability to perform its obligations under the MLSA as of
December 19, 2014 (after giving effect to the consummation of the Restructuring
as if the Restructuring had been consummated on December 19, 2014).

In the event the Company receives and determines to pursue an Alternative
Proposal in an exercise of its fiduciary duties as set forth by Section 20
hereof, the Company shall promptly notify the Consenting Creditors of the
existence and material terms of such Alternative Proposal; provided that the
Company may withhold the material terms of such Alternative Proposal from any
Consenting Creditor(s) who do not agree to applicable reasonable and customary
confidentiality restrictions with respect thereto and/or who are in breach of
this Agreement. After receipt of the material terms of such Alternative
Proposal, the Requisite Consenting Creditors shall have three (3) Business Days
after notice by the Company to propose changes to the terms of this Agreement,
including the Restructuring Term Sheet and any exhibits thereto. The Company
shall keep the Consenting Creditors informed of any amendments, modifications or
developments with respect to such Alternative Proposal and any material
information related to such Alternative Proposal, and, to the extent an
Alternative Proposal is amended in any material respect, the Requisite
Consenting Creditors shall have three (3) Business Days from any such amendment
to propose changes to the terms of this Agreement.

For the avoidance of doubt, the covenants set forth in this Section 5 are in
addition to, and not in lieu of, any covenants, obligations, or agreements of
CEC contained in the Guaranty and Pledge Agreement, all of which covenants,
obligations and agreements of CEC contained in the Guaranty and Pledge Agreement
are hereby ratified and confirmed in all respects and shall survive and continue
in full force and effect.

(c) Additional Covenants in Respect of CES. The Company and CEC shall use
commercially reasonable efforts to cause, subject to the terms and conditions
hereof and for the duration of the Restructuring Support Period, CES (except
with the prior written consent of the Requisite Consenting Creditors) (i) to
operate its business in the ordinary course, and (ii) to preserve and maintain
intact all material assets, properties, and other interests (including, without
limitation, intellectual property interests and intangible assets, such as
reward programs and customer lists) that are currently owned, licensed, used, or
enjoyed by the Company.

(d) Additional Affirmative Covenants of the Company. Subject to the terms and
conditions hereof, for the duration of the Restructuring Support Period, the
Company shall:

(i) to the extent permitted by the Bankruptcy Court and applicable law, cause
the signature pages attached to this Agreement to be redacted to the extent this
Agreement is filed on the docket maintained in the Chapter 11 Cases, posted on
the Company’s website, or otherwise made publicly available; and

 

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(ii) to the extent not otherwise paid in connection with the Chapter 11 Cases
(including pursuant to any debtor-in-possession financing or the Cash Collateral
Stipulation), promptly pay in cash (A) upon the execution of this Agreement by
the Company, all accrued First Lien Fees and Expenses for which invoices or
receipts are furnished by the First Lien Professionals and/or Consenting
Creditors, (B) following the execution of this Agreement by the Company and
prior to the Petition Date, all First Lien Fees and Expenses for which invoices
or receipts are furnished by the First Lien Professionals and/or Consenting
Creditors, and (C) after the Petition Date, subject to the Bankruptcy Court’s
approval of the Company’s use of Cash Collateral, all unpaid First Lien Fees and
Expenses incurred after the date of this Agreement from time to time, in any
event within ten (10) Business Days of delivery to the Company of any applicable
invoice or receipt, which shall be in compliance with any order of the
Bankruptcy Court and payment of which shall be authorized pursuant to the Cash
Collateral Stipulation. For the avoidance of doubt, invoices on account of First
Lien Professional Fees shall contain summary detail of services performed to
enable the Company to determine the reasonableness of such First Lien
Professional Fees. The Company’s obligations to pay the First Lien Professional
Fees shall not be affected or reduced by the payment of any First Lien
Professional Fees by any holder of First Lien Bond Debt, irrespective of whether
such holder remains a holder of First Lien Bond Debt as of the date of this
Agreement or is a Consenting Creditor.

(e) Additional Negative Covenants of the Company. Subject to the terms and
conditions hereof, for the duration of the Restructuring Support Period, the
Company (except with the prior written consent of the Requisite Consenting
Creditors) shall not, directly or indirectly:

(i) take any action in connection with the Restructuring that violates this
Agreement;

(ii) (A) redeem, purchase or acquire, or offer to acquire any shares of, or any
options, warrants, conversion privileges, or rights of any kind to acquire any
shares of, any of its capital stock or other equity interests, or (B) issue,
sell, pledge, dispose of, or grant or incur any encumbrance on, any shares of,
or any options, warrants, conversion privileges, or rights of any kind to
acquire any shares of, any of its capital stock or other equity interests (other
than issuances of equity interests upon the exercise, exchange, or conversion of
options, warrants, or other conversion privileges that are outstanding as of the
date hereof and only in accordance with the terms of such options, warrants, or
other conversion privileges as in effect on the date hereof);

(iii) to the extent it would materially impair the rights of the Consenting
Creditors and the Company’s ability to consummate the Restructuring, and other
than as required by the Plan, amend or propose to amend its respective
certificate or articles of incorporation, bylaws, or comparable organizational
documents;

(iv) to the extent it would materially impair the rights of the Consenting
Creditors, (A) split, combine or reclassify any outstanding shares of its
capital stock or other equity interests, or (B) declare, set aside or pay any
dividend or other distribution payable in cash, stock, property, a combination
thereof, or otherwise with respect to any of its capital stock or other equity
interests or any capital stock or other equity interests of any other Person;

 

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(v) pay or make any payment, transfer, or other distribution (whether in cash,
securities, or other property) of or in respect of principal of or interest on
any funded indebtedness of the Company that either (A) is expressly subordinate
in right of payment to the First Lien Bond Debt or (B) secured by an interest in
collateral, which interest is subordinate in priority to that securing any of
the First Lien Bond Debt, or any payment or other distribution (whether in cash,
securities, or other property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancellation,
or termination in respect of any such funded indebtedness that is not
contemplated by the Restructuring Term Sheet; or

(vi) enter into any proposed settlement (other than as contemplated by this
Agreement and the Restructuring or as previously disclosed to the First Lien
Professionals prior to the date hereof) of any claim, litigation, dispute,
controversy, cause of action, proceeding, appeal, determination, investigation,
matter, or otherwise that will materially impair the Company’s ability to
consummate the Restructuring;

(f) The Company acknowledges that it has reviewed this Agreement and has decided
to enter into this Agreement on the terms and conditions set forth herein and in
the Restructuring Term Sheet in the exercise of its fiduciary duties.

(g) Additional Negative Covenants of CEC. Subject to the terms and conditions
hereof, for the duration of the Restructuring Support Period, CEC (except with
the prior written consent of the Requisite Consenting Creditors) shall not,
directly or indirectly through any of its non-Debtor subsidiaries take any
actions outside the ordinary course of business that would have a material
adverse effect on Consenting Creditors’ recoveries under the Plan or the
contributions to be provided to the Debtors under the Plan.

6. Mutual Representations, Warranties and Covenants.

(a) Each of the Parties, severally and not jointly, represents and warrants to
each other Party that the following statements are true, correct, and complete
as of the date hereof and as of December 19, 2014 (or, if later, the date that
such Party (or if such Party is a Transferee, such Transferee) first became or
becomes a Party):

(i) it is validly existing and in good standing under the laws of the state of
its organization, and this Agreement is a legal, valid, and binding obligation
of such Party, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or limiting creditors’ rights
generally or by equitable principles relating to enforceability;

(ii) except as expressly provided in this Agreement or in the Bankruptcy Code
(if applicable) or as may be required for disclosure by the Securities and
Exchange Commission, no material consent or approval of, or any registration or
filing with, any other Person is required for it to carry out the Restructuring
contemplated by, and perform its obligations under, this Agreement;

 

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(iii) except as expressly provided in this Agreement or the Bankruptcy Code (if
applicable), it has all requisite organizational power and authority to enter
into this Agreement and to carry out the Restructuring contemplated by, and
perform its obligations under, this Agreement;

(iv) the execution and delivery by it of this Agreement, and the performance of
its obligations hereunder, have been duly authorized by all necessary
organizational action on its part;

(v) it has been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement; and

(vi) the execution, delivery, and performance by such Party of this Agreement
does not and will not (1) violate any provision of law, rule, or regulation
applicable to it or any of its subsidiaries or its charter or bylaws (or other
similar governing documents) or those of any of its subsidiaries, (2) conflict
with, result in a breach of, or constitute (with or without notice or lapse of
time or both) a default under any material debt for borrowed money to which it
or any of its subsidiaries is a party, or (3) violate any order, writ,
injunction, decree, statute, rule, or regulation; provided that, (x) the
foregoing shall not apply with respect to the Company on account of any defaults
arising from the commencement of the Chapter 11 Cases or the pendency of the
Restructuring and (y) for the avoidance of doubt, but without limiting the
Company’s obligations pursuant to Section 5(b)(i) hereof, nothing in this
Section 6(a)(vi) shall, or shall be deemed to, waive, limit, or otherwise impair
the Company’s ability to exercise its fiduciary duties as set forth by
Section 20 hereof.

(b) The Caesars Parties represent and warrant to the Restructuring Support
Parties that there are no pending agreements (oral or written), understandings,
negotiations, or discussions with respect to any Alternative Proposal.

(c) Each Caesars Party, severally and not jointly, on behalf of itself and its
Affiliates, represents, warrants and covenants that it has not offered, and will
not offer any Additional Bank Consideration or Additional Bond Consideration to
any holder of First Lien Bank Debt or First Lien Bond Debt, respectively,
without making such Additional Bank Consideration or Additional Bond
Consideration available to Consenting Creditors on a pro rata basis in the
manner contemplated in Section 34 in this Agreement.

(d) Within five (5) Business Days after this Agreement becomes effective, the
Company will report to counsel to the Consenting Creditors its calculation of
the total amount of First Lien Bond Claims held by Consenting Creditors and
provide documents sufficient to substantiate this calculation; provided that
such calculation may be based solely on the information provided by each
Consenting Creditor on its signature page(s) hereto. To the extent the Company
subsequently becomes aware of any additional First Lien Bond Claims held by
Consenting Creditors, it will promptly report its adjusted calculation of First
Lien Bond Claims held by Consenting Creditors and provide documents sufficient
to substantiate this calculation. The Parties acknowledge and agree that, for
purposes of determining whether Requisite Consenting Creditors have authorized
or taken any action under this Agreement, the Parties will not contest any
calculation of Requisite Consenting Creditors premised on the last report of the

 

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total amount of First Lien Bond Claims held by Consenting Creditors provided by
the Company to counsel for the Consenting Creditors. The Parties agree that the
Company may rely entirely on information provided to it by the Consenting
Creditors in making its calculation(s) pursuant to this Section 6(d), and that
the Company will have no independent duty to verify or otherwise investigate the
accuracy of any such information.

7. Ownership of Claims. Each Claim Holder, severally and not jointly, represents
and warrants as follows:

(a) as of the date of this Agreement, it (i) is either (A) the sole beneficial
owner of the principal amount of Claims set forth below its signature hereto, or
(B) has sole investment or voting discretion with respect to the principal
amount of Claims set forth below its signature hereto and has the power and
authority to bind the beneficial owner(s) of such Claims to the terms of this
Agreement, (ii) has full power and authority to act on behalf of, vote, and
consent to matters concerning such Claims and dispose of, exchange, assign, and
transfer such Claims, and (iii) holds no Claims (other than potential causes of
action or litigation claims, contingent, unmatured or unliquidated claims, or
claims for interest or fees arising under or in connection with any indenture,
credit agreement, or other credit document) that are not identified below its
signature hereto; in each case except as this provision may be specifically
waived, in writing by the Company;

(b) other than pursuant to this Agreement, such Claims that are subject to
Section 7(a) hereof are free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction, right of first refusal
or other limitation on disposition or encumbrance of any kind, that would
adversely affect in any way such Consenting Creditor’s performance of its
obligations contained in this Agreement at the time such obligations are
required to be performed; and

(c) (i) it is either (A) a qualified institutional buyer as defined in Rule 144A
of the Securities Act, (B) an institutional accredited investor (as defined in
Rule 501(a)(1), (2), (3), or (7) under the Securities Act of 1933, as amended
(the “Securities Act”), (C) a non-U.S. person under Regulation S under the
Securities Act, or (D) the foreign equivalent of (A) or (B) above, and (ii) any
securities of any Caesars Party acquired by the applicable Claim Holder in
connection with the Restructuring will have been acquired for investment and not
with a view to distribution or resale in violation of the Securities Act.

8. Termination by Consenting Creditors. (i) The Requisite Consenting Creditors
may terminate this Agreement and (ii) CEC, other than with respect to
Sections 8(i), 8(k), 8(l), 8(m), and 8(n) hereof, may terminate this Agreement
(each, a “Creditor Termination Right”), in each case, upon delivery of written
notice to the Company in accordance with Section 26 hereof at any time after the
occurrence of, and in the case of Sections 8(a), 8(b), 8(d), 8(e), or 8(f),
during the continuation of, any of the following events (each, a “Creditor
Termination Event”):

(a) the breach by any of the Caesars Parties, LS3, or LS5 of any of their
obligations, representations, warranties, or covenants set forth in this
Agreement in any material respect, which breach of covenant or obligation (if
curable) remains uncured for a period of five

 

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(5) consecutive Business Days after the receipt by such breaching Party or the
Company of written notice of such breach from the Requisite Consenting Creditors
or CEC, as the case may be; provided that for the avoidance of doubt, CEC may
not exercise a Creditor Termination Right arising from its own breach, or that
of LS3 or LS5, of any obligation, representation, warranty, or covenant set
forth in this Agreement;

(b) the issuance, promulgation, or enactment by any governmental entity,
including any regulatory or licensing authority or court of competent
jurisdiction (including, without limitation, the Bankruptcy Court), of any
statute, regulation, ruling or order declaring this Agreement or any material
portion hereof to be unenforceable or enjoining or otherwise restricting the
consummation of a material portion of the Restructuring (including with respect
to the regulatory approvals or tax treatment contemplated by the Restructuring),
which action (if curable) remains uncured for a period of five (5) consecutive
Business Days after the receipt by the Company and the Consenting Creditors of
written notice of such event;

(c) a trustee under section 1104 of the Bankruptcy code or an examiner (with
expanded powers beyond those set forth in section 1106(a)(3) and (4) of the
Bankruptcy Code) shall have been appointed in the Chapter 11 Cases;

(d) the Chapter 11 Cases are converted to cases under chapter 7 of the
Bankruptcy Code or the Chapter 11 Cases shall have been dismissed, in each case,
by order of the Bankruptcy Court, which order has not otherwise been stayed;

(e) if any of the Definitive Documentation necessary to effectuate the
Restructuring (including any amendment or modification thereof) filed with the
Bankruptcy Court or otherwise finalized, or has become effective, shall contain
terms and conditions that are not materially consistent with this Agreement or
shall otherwise not be on terms reasonably acceptable to the Requisite
Consenting Creditors (as evidenced by their written approval, which approval may
be conveyed in writing by counsel including by electronic mail), the Company,
and CEC, and such material inconsistency remains uncured for a period of five
(5) consecutive Business Days after the receipt by the Company and the
Consenting Creditors of written notice of such material inconsistency;

(f) a Caesars Party, LS3, LS5, or any of their respective Affiliates files any
motion or pleading with the Bankruptcy Court that is not substantially
consistent with this Agreement and such motion or pleading has not been
withdrawn within two (2) Business Days of each of the Company’s and the
applicable filing Party’s receiving written notice from the Requisite Consenting
Creditors that such motion or pleading is materially inconsistent with this
Agreement, unless such motion or pleading does not seek, and could not result
in, relief that would have any adverse impact on the interest of holders of
First Lien Bond Claims in connection with the Restructuring; provided that CEC
may only terminate this Agreement pursuant to this Section 8(f) if CEC is
materially and adversely affected by such motion or pleading;

(g) the Company executes a letter of intent (or similar document) stating its
intention to pursue an Alternative Proposal;

 

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(h) other than pursuant to any relief sought by the Company that is not
materially inconsistent with its obligations hereunder, the Bankruptcy Court
grants relief terminating, annulling, or modifying the automatic stay (as set
forth in section 362 of the Bankruptcy Code) with regard to any assets of the
Company having an aggregate fair market value in excess of $5,000,000 without
the written consent of the Requisite Consenting Creditors;

(i) the Company fails to satisfy or comply with any Milestone;

(j) the occurrence of the Outside Date if all of the material transactions
contemplated hereby have not been consummated;

(k) any Caesars Party commences an action to challenge the validity or priority
of, or to avoid, the liens on any asset or assets comprising any material
portion of the collateral securing the First Lien Bond Debt;

(l) a CEC Bankruptcy Event; provided, however, that this Agreement shall in any
event terminate, without notice or action by any of the Parties, on the
fifteenth calendar day (if not earlier terminated by the Requisite Consenting
Creditors) following such CEC Bankruptcy Event, if such CEC Bankruptcy Event
remains in existence and this provision has not been waived, amended or
otherwise altered in writing by the Requisite Consenting Creditors;

(m) CEOC consents to the Involuntary Petition; or

(n) (i) a court of competent jurisdiction enters a judgment (including, without
limitation, an order granting partial summary judgment) that is not subject to a
stay at any time following the 10th day after the entry thereof against CEC on
any of the counts asserted against it (currently or in the future) in any of the
Guaranty Cases, which judgment materially and adversely affects (or would
materially and adversely affect if enforced) Consenting Creditors’ ability to
obtain the recoveries contemplated in the Plan, including but not limited to the
value of any guaranties of indebtedness or other obligations to be provided by
CEC thereunder, and/or (ii) CEC enters into a settlement or other agreement in
respect of any of the counts asserted against it in any of the Guaranty Cases
that materially and adversely affects (or would materially and adversely affect
if consummated) Consenting Creditors’ ability to obtain the recoveries
contemplated in the Plan, including but not limited to the value of any
guaranties of indebtedness or other obligations to be provided by CEC
thereunder; for the avoidance of doubt, the terms embodied in the restructuring
agreement with certain of the Second Lien Noteholders announced in the Form 8-K
filed by CEC dated July 21, 2015 (and only such terms, without amendment, as
were explicitly announced therein), shall not give rise to a Creditor
Termination Right under this section to the extent they are consistent with the
terms of this Agreement.

9. Mutual Termination. This Agreement may be terminated by mutual agreement
among (a) the Caesars Parties, and (b) the Requisite Consenting Creditors.

10. Company Termination Events. This Agreement may be terminated by delivery to
the other Parties of a written notice, delivered in accordance with Section 26
of this Agreement, by the Company upon the occurrence of any of the following
events (each a “Company Termination Event,” and together with the Creditor
Termination Events, the “Termination Events”):

 

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(a) the breach by any Restructuring Support Party of any of the obligations,
representations, warranties, or covenants of such Restructuring Support Party
set forth in this Agreement in any respect that materially and adversely affects
the Company’s interests in connection with the Restructuring, which breach
remains uncured for a period of five (5) consecutive Business Days after the
receipt by such breaching Restructuring Support Party from the Company of
written notice of such breach; provided that, with respect to a breach by one or
more Consenting Creditors, the foregoing shall apply only if (x) such breaching
Consenting Creditor(s) hold(s) in excess of 5.0% of First Lien Bond Claims held
by all Consenting Creditors, (y) non-breaching Consenting Creditors with power
to vote in favor of the Plan do not then hold at least 2/3 plus one dollar of
First Lien Bond Debt (measured by notional value), or (z) such breach would
otherwise have a material adverse effect on the Restructuring;

(b) the issuance, promulgation, or enactment by any governmental entity,
including any regulatory or licensing authority or court of competent
jurisdiction, of any statute, regulation, ruling or order declaring this
Agreement or any material portion hereof to be unenforceable or enjoining or
otherwise restricting the consummation of a material portion of the
Restructuring (including with respect to the regulatory approvals or tax
treatment contemplated by the Restructuring), which action remains uncured for a
period of five (5) consecutive Business Days after the receipt by the Company
and the Consenting Creditors of written notice of such event; provided that the
Caesars Parties have otherwise complied with their obligations under
Section 5(a)(i)(D) of this Agreement;

(c) the exercise by the Company of its fiduciary duties as set forth by
Section 20 hereof (the “Fiduciary Out”);

(d) any Party other than the Caesars Parties or their Affiliates files any
motion or pleading with the Bankruptcy Court that is not substantially
consistent with this Agreement and such motion or pleading has not been
withdrawn or corrected within seven (7) Business Days of such Party receiving
written notice from the Company that such motion or pleading is materially
inconsistent with this Agreement, or CEC and/or any of its Affiliates (other
than the Company) obtains relief with respect to any motion or pleading with the
Bankruptcy Court that is not substantially consistent with this Agreement;

(e) CEC enters into a settlement or other agreement in respect of any of the
counts asserted against it in any of the Guaranty Cases that materially and
adversely affects (or would materially and adversely affect if consummated)
CEC’s ability to fund the recoveries contemplated in the Plan, including but not
limited with respect to the value of any guaranties of indebtedness or other
obligations to be provided by CEC thereunder;

(f) if any of the Definitive Documentation (including any amendment or
modification thereof) is filed with the Bankruptcy Court or otherwise finalized,
or has become effective, shall contain terms and conditions that are not
substantially consistent with this Agreement or shall otherwise not be on terms
reasonably acceptable to the Company, and such material inconsistency remains
uncured for a period of five (5) consecutive Business Days after the receipt by
the Restructuring Support Parties of written notice of such material
inconsistency; or

 

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(g) the Effective Date has not occurred by the Outside Date.

11. Termination.

(a) No Party may exercise any of its respective termination rights as set forth
in Section 8 or Section 10 hereof, as applicable, if such Party has failed to
perform or comply in all material respects with the terms and conditions of this
Agreement (unless such failure to perform or comply arises as a result of
another Party’s actions or inactions), with such failure to perform or comply
causing, or resulting in, the occurrence of the Termination Event specified
herein.

(b) Upon the termination of this Agreement pursuant to Section 8, Section 9, or
Section 10 hereof, all Parties shall be released from their commitments,
undertakings, and agreements under or related to this Agreement, and there shall
be no liability or obligation on the part of any Party. Upon the termination of
this Agreement pursuant to Section 34 hereof, the terminating Consenting
Creditor shall be released from its commitments, undertakings, and agreements
under or relating to this Agreement, and there shall be no liability or
obligation on the part of such Consenting Creditor. Notwithstanding anything
herein to the contrary, the termination of this Agreement by a Consenting
Creditor under Section 34 hereof shall not be deemed a termination of this
Agreement for purposes of the Backstop Commitment Agreement.

(c) Notwithstanding Section 11(b) hereof, in no event shall any termination of
this Agreement relieve a Party from (i) liability for its breach or
non-performance of its obligations hereunder prior to the termination date,
including but not limited to CEC’s and the Company’s obligations to pay the
First Lien Professional Fees, and (ii) obligations under this Agreement which by
their terms expressly survive a termination date; provided, however, that,
notwithstanding anything to the contrary contained herein, any Termination Event
(including any automatic termination) may be waived in accordance with the
procedures established by Section 14 hereof, in which case such Termination
Event so waived shall be deemed not to have occurred, this Agreement
consequently shall be deemed to continue in full force and effect, and the
rights and obligations of the Parties shall be restored, subject to any
modification set forth in such waiver. Upon a Termination Event that releases a
Consenting Creditor from its commitments, undertakings, and agreements under or
related to this Agreement (as set forth in Section 11(b)), unless otherwise
agreed to in writing by such Consenting Creditor, any and all votes, approvals,
or consents delivered by such Consenting Creditor and, as applicable, its
Affiliates, subsidiaries, managed funds, representatives, agents, and employees
in connection with the Restructuring prior to such termination date shall be
deemed, for all purposes, to be null and void from the first instance and shall
not be considered or otherwise used in any manner by the Company.

12. Transfer of Claims. The Restructuring Support Parties agree, with the
exception of the permitted transfers and purchases enumerated in (a) and
(b) below, that no Restructuring Support Party will, directly or indirectly,
sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a
security interest in, offer, sell any option or contract to purchase, or
otherwise transfer or dispose of, any economic, voting or other rights in or to,
by operation of law or otherwise (collectively, “Transfer”), all or any portion
of its First Lien Bond Claims or First Lien Bank Claims now or hereafter owned,

 

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and no such Transfer will be effective, unless the transferee executes and
provides to the Company and counsel to the Consenting Creditors a transfer
agreement in the form attached hereto as Exhibit E within two (2) Business Days
of the execution of an agreement (or trade confirmation) in respect of such
Transfer. For the avoidance of doubt, the Caesars Parties agree that any such
transfer agreement shall be included in the definition of “Confidential Claims
Information” in Section 5(a)(iii) hereof. In addition to the foregoing Transfer,
the following Transfers shall be permitted:

(a) any Transfer by one Consenting Creditor to an Affiliate of such Consenting
Creditor or one or more of its affiliated funds or an affiliated entity or
entities with a common investment advisor or investment manager (in each case,
other than portfolio companies); provided that, for the avoidance of doubt, any
transferee under this Section 12(a) shall be deemed a Consenting Creditor for
purposes of this Agreement, effective as of the date of the Transfer, and any
transferor under this Section 12(a) shall remain liable in all respects for any
breach of this Agreement by such transferee; and

(b) any Transfer by one Consenting Creditor to another Consenting Creditor.

Any Transfer of any Restructuring Support Party’s First Lien Bond Claims or
First Lien Bank Claims that does not comply with the foregoing shall be deemed
void ab initio; provided, however, for the avoidance of doubt, that upon any
purchase, acquisition, or assumption by any Restructuring Support Party of any
Claims (including but not limited to First Lien Bond Claims and First Lien Bank
Claims), such Claims shall automatically be deemed to be subject to all the
terms of this Agreement. The restrictions in this Agreement are in addition to
any Transfer restrictions in the Credit Agreement, the First Lien Indentures,
and Non-First Lien Indentures, and in the event of a conflict the Transfer
restrictions contained in this Agreement shall control; provided, however, that
nothing herein shall restrict, waive, or suspend any consent right the Company
may have with respect to any Transfer.

Notwithstanding the foregoing, a Qualified Marketmaker, acting solely in its
capacity as such, that acquires any First Lien Bond Claim or First Lien Bank
Claim subject to this Agreement shall not be required to execute a Transfer
Agreement or otherwise agree to be bound by the terms and conditions set forth
herein if, and only if, such Qualified Marketmaker sells or assigns such First
Lien Bond Claim or First Lien Bank Claim within ten (10) Business Days of its
acquisition and the purchaser or assignee of such First Lien Bond Claim or First
Lien Bank Claim is a Consenting Creditor or an entity that executes and provides
a Transfer Agreement in accordance with the terms set forth herein; provided
that if a Qualified Marketmaker, acting solely in its capacity as such, acquires
First Lien Bond Debt or First Lien Bank Debt from an entity who is not a
Consenting Creditor with respect to such debt (collectively, “Qualified
Unrestricted Claims”), such Qualified Marketmaker may Transfer any right, title
or interest in such Qualified Unrestricted Claims without the requirement that
the transferee execute a Transfer Agreement; provided further that any such
Qualified Marketmaker that is a Party to this Agreement shall otherwise be
subject to the terms and conditions of this Agreement (including
Section 2(a)(iii) hereof) with respect to Qualified Unrestricted Claims pending
the completion of any such Transfer.

 

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Notwithstanding anything herein to the contrary: (a) to the extent that a
Restructuring Support Party effects the Transfer of all of its Claims in
accordance with this Agreement, such Restructuring Support Party shall cease to
be a Party to this Agreement in all respects and shall have no further
obligations hereunder; provided, however, that if such Restructuring Support
Party acquires a Claim at any point thereafter, it shall be deemed to be a Party
to this Agreement on the same terms as if it had not effected a Transfer of all
of its Claims; and (b) subject to Section 2(a)(iii) hereof, to the extent that a
Restructuring Support Party effects the Transfer of a Claim that it holds as a
participant (and not grantor) pursuant to a participation agreement with voting
provisions substantially similar to those set forth in the form of participation
agreement produced by the Loan Syndications & Trading Association, the
transferee thereof shall not be required to execute a Transfer Agreement.

13. Cooperation. Before the filing of and during the Chapter 11 Cases, (i) the
Company shall use commercially reasonable efforts to provide to counsel for the
Consenting Creditors (a) drafts of all material motions, applications (other
than applications seeking to retain professional advisors), and other documents
the Company intends to file with the Bankruptcy Court, no less than three
(3) Business Days before the date when the Company intends to file any such
document unless such advance notice is impossible or impracticable under the
circumstances, in which case the Company shall notify telephonically or by
electronic mail counsel to the Consenting Creditors to advise it of the
documents to be filed and the facts that make the provision of advance copies no
less than three (3) Business Days before submission impossible or impracticable,
and shall provide such copies as soon as reasonably possible thereafter, and
(b) copies of all material documents actually filed by the Company with the
Bankruptcy Court promptly but not later than one (1) day after such filing.

14. Amendments. No amendment, modification, waiver, or other supplement of the
terms of this Agreement (including the Restructuring Term Sheet) shall be valid
unless such amendment, modification, waiver, or other supplement is in writing
and has been signed by the Caesars Parties, the Requisite Consenting Creditors,
LS3, and LS5; provided, however, that:

(a) no such consents shall be required from any Consenting Creditor with respect
to any modification or amendment or any other agreement, document or other
instrument implementing the Restructuring, regarding the treatment of Claims
other than with respect to First Lien Bond Claims, so long as it would not,
reasonably construed, have an adverse impact on the interests of holders of
First Lien Bond Claims (including with respect to the form or value of
recoveries to be provided on account of such Claims pursuant to the
Restructuring, including the value of any guaranties of indebtedness or other
obligations to be provided by CEC thereunder), in their capacities as such, in
connection with the Restructuring;

(b) any amendment to this Agreement to (i) the defined terms
“Consenting Creditors” or “Requisite Consenting Creditors” or (ii) Section 12
hereof, shall require the written consent of the Company, CEC and each
Consenting Creditor;

(c) any amendment that would materially and adversely affect any Consenting
Creditor that is a holder of First Lien Bond Claims, solely in its capacity as
such, in a manner that is disproportionate to any other holder of First Lien
Bond Claims, solely in its capacity as such, shall require the prior written
consent of the adversely affected Consenting Creditor;

 

26

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(d) for the avoidance of doubt, any waiver of the conditions to the
effectiveness of this Agreement set forth by Section 15 hereof may be waived
only upon the express written consent of each of the Caesars Parties;

(e) the Company may waive application of the representations and warranties set
forth by Section 7(a)(ii) and Section 7(a)(iii) hereof in all or in part with
respect to any Consenting Creditor in its sole discretion, but in consultation
with CEC;

(f) any amendment to this Agreement to the defined term “Initial Consenting
Creditor” shall require the written consent of the Company, CEC, and each
Initial Consenting Creditor;

(g) any amendment, modification, supplement or other change with respect to the
amount, form, timing, economics or value or any party’s entitlement to the RSA
Forbearance Fees as set forth herein and in the Restructuring Term Sheet shall
require the written consent of the Company, CEC and such party;

(h) in addition to the rights of the Required Preferred Backstop Investors in
the Backstop Commitment Agreement, any amendment, modification, waiver, or
supplement of or to the terms of this Agreement, its Exhibits, or the Plan that,
reasonably construed, adversely affects the Backstop Commitment Agreement or the
PropCo Preferred Equity shall require the express written consent of the
Required Preferred Backstop Investors, and any such amendment, modification,
waiver or supplement not in compliance with this provision shall be deemed null
and void ab initio. If any plan of reorganization is proposed that fails to
adopt and implement the Backstop Commitment Agreement and the PropCo Preferred
Equity as set forth herein (as such may be modified in accordance with this
Section 14(h), then notwithstanding anything herein to the contrary, each
Preferred Backstop Investor shall be deemed fully excused from further
performance under this Agreement. Any amendment, modification, waiver, or
removal of this Section 14(h) shall require the express written consent of the
Required Preferred Backstop Investors (and not the Requisite Consenting
Creditors); and

(i) any amendment to Sections 14(b), 14(c), 14(f), 14(g) or this 14(i) hereof
shall require the consent of each Consenting Creditor.

15. [Reserved].

16. Entire Agreement. This Agreement, including the Restructuring Term Sheet and
the Cash Collateral Stipulation, constitutes the entire agreement of the Parties
with respect to the subject matter of this Agreement, and supersedes all other
prior negotiations, agreements and understandings, whether written or oral,
among the Parties with respect to the subject matter of this Agreement;
provided, however, that any confidentiality agreement executed by any
Restructuring Support Party shall survive this Agreement and shall continue to
be in full force and effect in accordance with its terms.

 

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17. Survival of Agreement. Each of the Parties acknowledges and agrees that this
Agreement is being executed in connection with negotiations concerning a
possible restructuring of the Company and in contemplation of possible filings
by the Company under Chapter 11 of the Bankruptcy Code, and (a) the exercise of
the rights granted in this Agreement (including giving of notice of termination)
shall not be a violation of the automatic stay provisions of section 362 of the
Bankruptcy Code and (b) the Company hereby waives its right to assert a contrary
position in the Chapter 11 Cases, if any, with respect to the foregoing. The
Parties further acknowledge and agree that, if a CEC Bankruptcy Event occurs,
(a) the exercise of the rights granted in this Agreement (including giving of
notice of termination) shall not be a violation of the automatic stay provisions
of section 362 of the Bankruptcy Code with respect to any CEC bankruptcy and
(b) CEC hereby waives its right to assert a contrary position in any such
bankruptcy with respect to the foregoing and agrees that it will cooperate fully
with Consenting Creditors in obtaining a modification of the automatic stay to
the extent necessary to permit Consenting Creditors to exercise their rights
under this Agreement.

18. No Waiver of Participation and Preservation of Rights. If the transactions
contemplated herein are not consummated, or following the occurrence of the
termination of this Agreement with respect to all Parties, if applicable,
nothing herein shall be construed as a waiver by any Party of any or all of such
Party’s rights, remedies, claims, and defenses and the Parties expressly reserve
any and all of their respective rights, remedies, claims and defenses.

19. Counterparts. This Agreement may be executed in one or more counterparts,
each of which, when so executed, shall constitute the same instrument and the
counterparts may be delivered by facsimile transmission or by electronic mail in
portable document format (.pdf).

20. Company Fiduciary Duties.

(a) Nothing in this Agreement shall otherwise require the Company or any
directors, officers, or members of the Company, each in its capacity as a
director, officer, or member of the Company, to take any action, or to refrain
from taking any action, to the extent inconsistent with its or their fiduciary
obligations under applicable law (as reasonably determined by them in good faith
after consultation with legal counsel).

(b) All Consenting Creditors reserve all rights they may have, including the
right (if any) to challenge any exercise by the Company of its fiduciary duties.

21. Headings. The headings of the Sections, paragraphs, and subsections of this
Agreement are inserted for convenience only and shall not affect the
interpretation hereof.

 

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22. Relationship Among Parties. Notwithstanding anything herein to the contrary,
the duties and obligations of the Restructuring Support Parties under this
Agreement shall be several, not joint. No Restructuring Support Party shall, as
a result of its entering into and performing its obligations under this
Agreement, be deemed to be part of a “group” (as that term is used in section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder) with any of the other Restructuring Support
Parties. It is understood and agreed that no Consenting Creditor has any duty of
trust or confidence in any kind or form with any other Consenting Creditor, and,
except as expressly provided in this Agreement, there are no commitments among
or between them. In this regard, it is understood and agreed that any Consenting
Creditor may trade in the Claims or other debt or equity securities of the
Company without the consent of the Company or any other Consenting Creditor,
subject to applicable securities laws, the terms of this Agreement, and the
terms of the First Lien Bank Documents and the First Lien Indentures; provided,
however, that no Consenting Creditor shall have any responsibility for any such
trading to any other entity by virtue of this Agreement. No prior history,
pattern, or practice of sharing confidences among or between the Consenting
Creditors shall in any way affect or negate this understanding and agreement.

23. Specific Performance; Remedies Cumulative. It is understood and agreed by
the Parties that, without limiting any other remedies available at law or
equity, money damages would be an insufficient remedy for any breach of this
Agreement by any Party and each non-breaching Party shall be entitled to
specific performance and injunctive or other equitable relief as a remedy of any
such breach, including, without limitation, an order of the Bankruptcy Court or
other court of competent jurisdiction requiring any Party to comply promptly
with any of its obligations hereunder, without the necessity of proving the
inadequacy of money damages as a remedy. Each of the Parties hereby waives any
defense that a remedy at law is adequate and any requirement to post bond or
other security in connection with actions instituted for injunctive relief,
specific performance, or other equitable remedies.

24. No Commitment. No Restructuring Support Party shall be obligated to fund or
otherwise be committed to provide funding in connection with the Restructuring,
except pursuant to a separate commitment letter or definitive documentation
relating specifically to such funding, if any, that has been (i) executed by
such Restructuring Support Party and (ii) approved by the Bankruptcy Court, as
necessary, along with the satisfaction of any conditions precedent to such
funding requirements.

25. Governing Law and Dispute Resolution. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to such state’s choice of law provisions which would require the
application of the law of any other jurisdiction. Each of the Parties hereby
agrees that the Bankruptcy Court shall have exclusive jurisdiction of all
matters arising out of or in connection with this Agreement; provided however,
that if a CEC Bankruptcy Event occurs, the court in which the proceeding
initiated by such CEC Bankruptcy Event is pending shall have concurrent
jurisdiction to enforce CEC’s compliance with this Agreement.

 

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26. Notices. All notices, requests, documents delivered, and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally, by facsimile transmission, mailed (first
class postage prepaid) or by electronic mail (“e-mail”) to the Parties at the
following addresses, facsimile numbers, or e-mail addresses:

If to the Company:

Caesars Entertainment Operating Company, Inc.

One Caesars Palace Drive

Las Vegas, NV 89109

Attn: General Counsel

E-mail Address: tlambert@caesars.com

With a copy to (which shall not constitute notice):

Kirkland & Ellis LLP

601 Lexington Ave

New York, NY 10022

Attn: Paul M. Basta, P.C.

Nicole L. Greenblatt

Facsimile: (212) 446 4900

E-mail Address: paul.basta@kirkland.com

ngreenblatt@kirkland.com

-and-

Kirkland & Ellis LLP

300 North LaSalle

Chicago, IL 60654

Attn: David R. Seligman, P.C.

Ryan Preston Dahl

E-mail Address: dseligman@kirkland.com

rdahl@kirkland.com

Facsimile: (312) 862-2200

If to CEC:

Caesars Entertainment Corp.

One Caesars Palace Drive

Las Vegas, NV 89109

Attn: General Counsel

E-mail Address: tdonovan@caesars.com

With a copy to (which shall not constitute notice):

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

 

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New York, NY 10019

Attn: Jeffrey D. Saferstein

Samuel E. Lovett

Telephone: (212) 373-3000

Facsimile (212) 373-2053

E-mail Address: jsaferstein@paulweiss.com

slovett@paulweiss.com

If to a Consenting Creditor, to the address set forth beneath such lender’s
signature block,

with a copy to (which shall not constitute notice):

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, NY 10036

Attn: Kenneth H. Eckstein

Daniel M. Eggermann

Telephone: (212) 715-9100

Facsimile: (212) 715-8229

E-mail Address: keckstein@kramerlevin.com

deggermann@kramerlevin.com

27. Third-Party Beneficiaries. Unless expressly stated herein, the terms and
provisions of this Agreement are intended solely for the benefit of the Parties
hereto and their respective successors and permitted assigns, and it is not the
intention of the Parties to confer third-party beneficiary rights upon any other
Person.

28. Conflicts Between the Restructuring Term Sheet and this Agreement. In the
event of any conflict among the terms and provisions in the Restructuring Term
Sheet and this Agreement, the terms and provisions of the Restructuring Term
Sheet shall control. Nothing contained in this Section 28 shall affect, in any
way, the requirements set forth herein for the amendment of this Agreement and
the Restructuring Term Sheet as set forth in Section 14 herein.

29. Settlement Discussions. This Agreement is part of a proposed settlement of
matters that could otherwise be the subject of litigation among the Parties
hereto. Nothing herein shall be deemed an admission of any kind. Pursuant to
Federal Rule of Evidence 408 and any applicable state rules of evidence, this
Agreement and all negotiations relating thereto shall not be admissible into
evidence in any proceeding other than to prove the existence of this Agreement
or in a proceeding to enforce the terms of this Agreement.

30. Good-Faith Cooperation; Further Assurances. The Parties shall cooperate with
each other in good faith in respect of matters concerning the implementation and
consummation of the Restructuring.

 

31

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31. Access. The Company will promptly provide the First Lien Professionals
reasonable access, upon reasonable notice, during normal business hours to
relevant properties, books, contracts (including any Executory Contracts and
Unexpired Leases), commitments, records, management and executive personnel, and
advisors of the Company (other than with respect to materials subject to
attorney-client privilege or where granting such access is prohibited by law);
provided, however, that the Company’s obligations hereunder shall be conditioned
upon such Party being party to an appropriate confidentiality agreement or
undertaking; provided, further, however, that any existing confidentiality
agreements entered into between the Company or CEC, on one hand, and a Party, on
the other hand, shall be deemed to be appropriate.

32. Qualification on Consenting Creditor Representations. The Parties
acknowledge that all representations, warranties, covenants, and other
agreements made by any Consenting Creditor that is a separately managed account
of an investment manager are being made only with respect to the Claims managed
by such investment manager (in the amount identified on the signature pages
hereto), and shall not apply to (or be deemed to be made in relation to) any
Claims that may be beneficially owned by such Consenting Creditor that are not
held through accounts managed by such investment manager.

33. Publicity. The Company shall use its commercially reasonable efforts to
submit drafts to the First Lien Professionals of any press releases and public
documents that constitute disclosure of the existence or terms of this Agreement
or any amendment to the terms of this Agreement at least three (3) Business Days
prior to making any such disclosure, and shall afford them a reasonable
opportunity under the circumstances to comment on such documents and disclosures
and shall incorporate any such reasonable comments in good faith.

34. Additional Consideration. To the extent that a holder of First Lien Bank
Debt, in its capacity as such, receives Additional Bank Consideration in
connection with the Restructuring, such Additional Bank Consideration shall be
made available to all Consenting Creditors that are holders of First Lien Bank
Claims, in their capacities as such, on the same terms and on a pro rata basis
in accordance with their respective First Lien Bank Claims holdings. Any
Consenting Creditor that is a holder of First Lien Bank Claims who is not
accorded such Additional Bank Consideration shall have the right to terminate
this Agreement upon three (3) Business Days’ written notice to the Parties in
accordance with Section 26 hereof; provided that such termination shall only be
with respect to the terminating Consenting Creditor, and not with respect to any
non-terminating Parties.

To the extent that a holder of First Lien Bond Debt, in its capacity as such,
receives Additional Bond Consideration in connection with the Restructuring,
such Additional Bond Consideration shall be made available to all Consenting
Creditors that are holders of First Lien Bond Claims, in their capacities as
such, on the same terms and on a pro rata basis in accordance with their
respective First Lien Bond Claims holdings. Any Consenting Creditor that is a
holder of First Lien Bond Claims who is not accorded such Additional Bond
Consideration shall have the right to terminate this Agreement upon three
(3) Business Days’ written notice to the Parties in accordance with Section 26
hereof; provided that such termination shall only be with respect to the
terminating Consenting Creditor, and not with respect to any non-terminating
Parties.

 

32

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35. CEC Bankruptcy or Similar Proceeding. Nothing herein shall be construed to
limit or impair in any way a Consenting Creditor’s, the Trustee’s or the
Collateral Agent’s respective rights or ability to appear in or take any other
action to protect its interests (or, in the case of the Trustee and the
Collateral Agent, the interests of their beneficiaries) in connection with any
proceeding related to a CEC Bankruptcy Event.

36. Condition to Effectiveness of Fourth Amended & Restated Restructuring
Support and Forbearance Agreement. This Agreement (and the obligations of the
Parties hereunder) shall not become effective or enforceable against or by any
of the Parties until it has been signed by the Requisite Consenting Creditors,
the Caesars Parties, and LS3 and LS5; provided that if this condition is not met
on or before the date that is fourteen (14) days after the filing by CEC of a
Form 8-K or other public announcement disclosing the proposed terms of this
Agreement, this Agreement shall be null and void ab initio and of no force and
effect. For the avoidance of doubt, this provision may only be waived upon the
written agreement of the Parties.

[Signature Pages Follow]

 

33

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.

 

CAESARS ENTERTAINMENT OPERATING COMPANY, INC., on behalf of itself and each of
the debtors in the Chapter 11 Cases By:  

/s/ Mary E. Higgins

  Name: Mary E. Higgins   Title: Chief Financial Officer

 

CAESARS ENTERTAINMENT CORPORATION By:  

/s/ Eric Hession

Name:   Eric Hession Title:   EVP and Chief Financial Officer

 

34

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Exhibit A

[INTENTIONALLY OMITTED]

 

35

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Exhibit B

Restructuring Term Sheet

 

36

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This document and any related communications shall not be

used for any purpose in any litigation or proceeding.

This Term Sheet is highly confidential and this Term Sheet, its contents and its
existence may not

be distributed, disclosed or discussed to or with any party other than in
accordance with the

express terms of confidentiality agreements/arrangements

among the respective parties and the Company.

SUMMARY TERM SHEET FOR PROPOSED RESTRUCTURING12

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.

(“CEOC” and together with its direct or indirect subsidiaries that are the
debtors in the chapter 11 cases

pending in the United States Bankruptcy Court for the Northern District of
Illinois, jointly administered

under Case No. 15-01145, the “Company”)

 

 

 

1  Nothing herein shall be deemed to be the solicitation of an acceptance or
rejection of a plan of reorganization; any such solicitation shall be in
compliance with the relevant provisions of securities laws, the Bankruptcy Code
and other applicable statutes and rules.

2  This Term Sheet is an exhibit to, and part of, the Fourth Amended & Restated
Restructuring Support and Forbearance Agreement (the “RSA”), which contains
additional descriptive language and legal terms in respect of the Company’s
restructuring.

 

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I. Summary of Proposed Treatment3

 

Holders of the obligations (the “First Lien Bank Obligations”) under the First
Lien Bank Documents4 ($5,357 million plus interest thereon accrued through the
Petition Date) and swaps entered into pursuant to First Lien Bank Documents ($42
million) (collectively, the “First Lien Bank Lenders”)    Each First Lien Bank
Lender shall receive its pro rata share of (a) $705 million in cash, (b) $882
million in New First Lien OpCo Debt (or cash in lieu thereof if such debt is
syndicated as described in the description of the New First Lien OpCo Debt
below), (c) $406 million of New Second Lien OpCo Debt, (d) $1,961 million in New
First Lien PropCo Debt, and (e) $1,450 million in additional cash if the full
amount of the CPLV Market Debt is financed for cash and, if not fully financed,
Mezzanine CPLV Debt for the portion not so financed subject to the limitations
set forth herein5. Each First Lien Bank Lender waives any entitlement to
post-petition interest to the extent First Lien Noteholders do not receive
post-petition interest. Secured claims of Holders of the obligations (the “First
Lien Note Obligations”) under the First Lien Indentures ($6,345 million plus
interest thereon accrued through the Petition Date) (the “First Lien
Noteholders”)    Each First Lien Noteholder shall receive in respect of its
secured claim, its pro rata share of (a) $207 million in cash, (b) $306 million
in New First Lien OpCo Debt (or cash in lieu thereof if such debt is syndicated
as described in the description of the New First Lien OpCo Debt below), (c) $141
million of New Second Lien OpCo Debt, (d) $431 million in New First Lien PropCo
Debt, (e) $1,425 million in New Second Lien PropCo Debt, (f) $1,150 million in
additional cash if the CPLV Market Debt is financed for cash and, if not fully
financed, Mezzanine CPLV Debt for the portion not so financed subject to the
limitations set forth herein, (g) 69.9% directly or indirectly of the common
equity of PropCo6 on a fully diluted basis (excluding dilution from Bank
Mezzanine Transfer Amount and PropCo Preferred Equity, if applicable), (or cash
to the extent of any Equity Rights exercised and/ or such Holder exercises its
Put Option, as further described below), (h) 100% of the OpCo New Common Stock
(or, at its option, cash in the event such Holder exercises its Put Option, as
further described below) and (i) the Additional Consideration (if applicable).

 

3  Administrative, priority and critical trade claims shall be paid in full in
cash as soon as practicable following consummation of the Restructuring or as
otherwise provided for in definitive documentation. The plan may provide for
separate classification for general unsecured claims on terms and with treatment
that is reasonably acceptable to the Requisite Consenting Creditors (as defined
in the RSA).

4  Capitalized terms not defined herein have the meanings set forth in the RSA.

5  The First Lien Bank Lenders may choose to have up to $100 million of
Mezzanine CPLV Debt they are to receive converted to a corresponding amount of
New First Lien OpCo Debt, New Second Lien OpCo Debt, New First Lien PropCo Debt,
New Second Lien PropCo Debt or equity in PropCo (the “Bank Mezzanine Transfer
Amount”).

6 

Pending regulatory and REIT requirements, the First Lien Noteholders will
receive their interest in PropCo indirectly through REIT New Common Stock (as
opposed to directly through PropCo New LP Interests as Caesars Entertainment
Company or its designee (“CEC”) and CEOC will). “PropCo Common Stock” means
PropCo New LP Interests or REIT New Common Stock, as applicable.

 

2

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As more fully described under Put Options, Equity Rights and Purchase Option
(and subject to the limitations set forth therein), each First Lien Noteholder
(a) will have the opportunity to be a Put Participant and sell the right to
receive under the Plan some or all of its OpCo New Common Stock and PropCo
Common Stock to the Backstop Parties for cash, (b) will have the opportunity to
purchase PropCo Preferred Equity and/or (c) may receive cash from the Non-First
Lien Noteholders for the right to receive some or all of their PropCo Common
Stock in connection with the exercise of the Equity Rights.

 

If the First Lien Noteholders fully exercise the Put Options, the First Lien
Noteholders, on an aggregate basis, will receive an additional $969 million in
cash and a corresponding decrease in their equity recoveries, as more fully
described in Section II below under “Put Options Price.”

Deficiency Claims of First Lien Noteholders and all claims of non-critical trade
creditors and Holders of the obligations (collectively the “Non-First Lien
Obligations”) under (a) the Second Lien Indentures ($5,238 million plus interest
thereon accrued through the Petition Date) (the “Second Lien Noteholders,” and
such obligations, “Second Lien Obligations”), (b) the guaranteed unsecured
indentures ($479 million plus interest thereon accrued through the Petition
Date) (the “Unsecured Guaranteed Noteholders,” and such obligations, “Unsecured
Guaranteed Obligations”), and (c) the unsecured note indentures ($530 million
plus interest thereon accrued through the Petition Date) (the “Unsecured
Noteholders,” and such obligations, “Unsecured Noteholder Obligations,” and with
the Unsecured Guaranteed Obligations, the “Unsecured Debt Obligations,” and the
Unsecured Noteholders collectively with the Second Lien Noteholders and
Unsecured Guaranteed Noteholders, the “Non-First Lien Noteholders”)   

If the Non-First Lien Noteholders, and with respect to their deficiency claims,
the First Lien Noteholders, vote as a class to accept the Plan, then the First
Lien Noteholders will, solely in their capacity as such, waive or assign at
CEOC’s direction distributions in respect of their deficiency claims and
distributions under the turnover provisions in all intercreditor agreements, and
each Non-First Lien Noteholder shall receive its pro rata share of an amount of
30.1% of the PropCo Common Stock on a fully diluted basis (excluding dilution
from Bank Mezzanine Transfer Amount and PropCo Preferred Equity, if applicable),
which shall be deemed to include consideration for the value of any unencumbered
assets. And, as more fully described under the Equity Right, if the Non-First
Lien Noteholders vote as a class to accept the Plan, each Non-First Lien
Noteholder shall also have the option to be a Rights Participant.

 

If the Non-First Lien Noteholders, and with respect to their deficiency claims,
the First Lien Noteholders, do not vote as a class to accept the Plan, then each
Non-First Lien Noteholder shall receive its pro rata share of 17.5% of the
PropCo Common Stock on a fully diluted basis (excluding dilution from Bank
Mezzanine Transfer Amount and PropCo Preferred Equity, if applicable), which
shall be deemed to include consideration for the value of any unencumbered
assets. The First Lien Noteholders will waive or assign at CEOC’s direction
distributions in respect of their deficiency claims and distributions under the
turnover provisions in all intercreditor agreements on account of the 17.5% of
equity to the Non-First Lien Noteholders. If the Non-First Lien Noteholders, and
with respect to their deficiency claims, the First Lien Noteholders, do not vote
as a class to accept the Plan, then the remaining 12.6% of the PropCo Common
Stock shall be allocated to the other holders of PropCo, excluding the Non-First
Lien Noteholders, based on their pro rata ownership in PropCo (after giving
effect to the exercise of the Put Options).

 

The Plan may provide for the separate classification of Non-First Lien
Noteholders in separate classes or subclasses in a manner not inconsistent with
this Term Sheet.

 

3

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II. Put Options, Equity Rights and Purchase Option7

 

Put Options   

Each First Lien Noteholder shall have the option to put some or all of its right
under the Plan to receive (i) the OpCo New Common Stock it would otherwise
receive pursuant to the Plan (the “OpCo New Common Stock Put Options”); and/ or
(ii) the PropCo Common Stock it would otherwise receive pursuant to the Plan
(provided that no more than 14.8% (excluding dilution from Bank Mezzanine
Transfer Amount and PropCo Preferred Equity, if applicable) of such interests
are put in the aggregate) (the “REIT New Common Stock Put Options” and, together
with OpCo New Common Stock Put Options, the “Put Options”), and to instead
receive cash as described below under “Put Options Price,” in which case CEC and
any other Backstop Parties will purchase such equity interests as further
described below, subject in the case of PropCo Common Stock to the exercise of
the Equity Rights described below, provided however that, in the event the
UPREIT Structure is used (as defined herein), the First Lien Noteholders shall
be required to put at least 5% of their PropCo Common Stock to CEC. The Put
Options must be selected in connection with plan solicitation provided that with
respect to First Lien Noteholders that are parties to the RSA, elections to
exercise the OpCo New Common Stock Put Options were made at the time of
execution of the RSA and such elections remain in place.

 

Each First Lien Noteholder that exercises any of its Put Options in whole or in
part shall be referred to herein as a “Put Participant.”

Put Options Allocation Between the Backstop Parties    As detailed in Annex I,
CEC shall purchase the right to receive all the OpCo New Common Stock subject to
the OpCo New Common Stock Put Options and the PropCo Common Stock subject to the
REIT New Common Stock Put Options exercised by the Put Participants.

 

 

7  For tax efficiency or other purposes, the cash consideration to be paid to
First Lien Noteholders through the exercise of either the Put Options or the
Equity Rights may flow through the Company to the First Lien Noteholders as part
of their recovery under the Plan as direct payments of cash, rather than be paid
in respect of the receipt of stock or Mezz Equitized Debt or be paid directly by
the Backstop Parties and/or the Rights Participants. The Company and CEC shall
consult with the First Lien Professionals in respect of the preceding and, if
the decision could reasonably be expected to adversely affect the recovery of
the First Lien Noteholders (in form, value, or otherwise as determined by the
Requisite Consenting Creditors), it shall be subject to the reasonable consent
of the Requisite Consenting Creditors.

 

4

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The First Lien Noteholders may elect to become backstop parties (together with
CEC, the “Backstop Parties”) (which election shall be made in connection with
plan solicitation) and purchase a portion of the PropCo Common Stock subject to
the REIT New Common Stock Put Options. First Lien Noteholders who wish to become
Backstop Parties must make any required investor representations required for
federal and state securities law purposes.

 

The Backstop Parties shall receive no fee for purchasing or agreeing to purchase
the equity subject to the Put Participants’ Put Options.

Put Options Price    The Put Options shall be at a price per share implying a
total value of $700 million for 100% of the OpCo New Common Stock and $269
million for 14.8% of the PropCo Common Stock on a fully diluted basis (excluding
dilution from Bank Mezzanine Transfer Amount and PropCo Preferred Equity, if
applicable). Equity Rights   

Subject to the terms below, the “Equity Rights” as detailed below shall occur
and each Non-First Lien Noteholder shall have the non-transferable right to be a
“Rights Participant.”8

 

Each Rights Participant may elect to purchase (with the purchase immediately
occurring after the closing of the Put Option) the right to receive its pro rata
share of the greater of (a) 5% of the PropCo Common Stock to be distributed to
the First Lien Noteholders if the holders of at least 66.66% of the Non-First
Lien Obligations execute the RSA (or a similar restructuring support agreement
agreeable to CEOC and CEC and consistent with the terms of the RSA) on or before
90 days from the date the Fourth Amended and Restated RSA becomes effective
pursuant to Section 36 thereof (the “RSA Effective Date”) or 2.5% of such PropCo
Common Stock if such holders do not so execute by such date and (b) the First
Lien Election Amount (as defined below) from the First Lien Noteholders (the
“Equity Rights”), subject to being cut back on a pro rata basis based on the
amount of Equity Rights exercised. Any Non-First Lien Noteholder exercising an
Equity Right must (a) make any required investor representations required for
federal and state securities law purposes and (b) execute the RSA (or a similar
restructuring support agreement agreeable to CEOC and CEC and consistent with
the terms of the RSA).

 

Each Non-First Lien Noteholder shall have 90 days, subject to the terms below,
from the date hereof to execute the RSA (or a similar restructuring support
agreement agreeable to CEOC and CEC and consistent with the

 

8  The dates by which Rights Participant may exercise the Equity Rights may be
extended as may be mutually agreed to by the Company, CEC, and the Requisite
Consenting Creditors, each in their reasonable discretion to the extent such
extensions may be necessary in accordance with generally applicable law.

 

5

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terms of the RSA), become a Rights Participant, and elect whether to exercise
its Equity Rights, which Equity Rights shall be subject to and contingent on the
Non-First Lien Noteholders voting as a class (or all Non-First Lien Noteholder
classes if applicable) to accept the Plan as part of Plan solicitation.

 

For those Non-First Lien Noteholders becoming Rights Participants with respect
to any series of Non-First Lien Obligations from, or prior to, the RSA Effective
Date, for every $1 of PropCo Common Stock purchased pursuant to the Equity
Rights, the Rights Participant shall also purchase $0.50 of CPLV Mezzanine Debt
to be received by the First Lien Noteholders at par until there is no more such
CPLV Mezzanine Debt to purchase, then New Second Lien OpCo Debt to be received
by the First Lien Noteholders at par until there is no more such New Second Lien
OpCo Debt to purchase, then New First Lien OpCo Debt to be received by the First
Lien Noteholders at par until there is no more such New First Lien OpCo Debt to
purchase, then New Second Lien PropCo Debt to be received by the First Lien
Noteholders at par until there is no more such New Second Lien PropCo Debt to
purchase (such debt, the “Equity Rights Debt”).

 

For those Non-First Lien Noteholders becoming Rights Participants with respect
to any series of Non-First Lien Obligations from 31 days following the RSA
Effective Date until 60 day days following the RSA Effective Date, for every $1
of PropCo Common Stock purchased pursuant to the Equity Rights, the Rights
Participant shall also purchase $0.60 of Equity Rights Debt at par in the same
order as set forth above.

 

For those Non-First Lien Noteholders becoming Rights Participants with respect
to any series of Non-First Lien Obligations from 61 days following the RSA
Effective Date until 90 days following the RSA Effective Date, for every $1 of
PropCo Common Stock purchased pursuant to the Equity Rights, the Rights
Participant shall also purchase $0.70 of Equity Rights Debt at par in the same
order as set forth above.

 

The Rights Participants must make their purchases of PropCo Common Stock (and
the corresponding Equity Rights Debt) first from the First Lien Noteholders who
elect to sell to the Rights Participants pursuant to the Put Rights (the
“Electing First Lien Sellers”) (pro rata among the Electing First Lien Sellers)
with such election to exercise the Put Rights to be made in connection with plan
solicitation and second from the First Lien Noteholders who are not Electing
First Lien Sellers (pro rata among such First Lien Noteholders), provided that
the aggregate amount of PropCo Common Stock purchased from non-Electing First
Lien Sellers shall not exceed the difference between the First Lien Election
Amount and 5% of the PropCo Common Stock to be distributed to all First Lien
Noteholders (or 2.5% if holders of 66.66% of the Non-First Lien Obligations do
not execute the RSA (or a similar restructuring support agreement agreeable to
CEOC and CEC and consistent with the terms of the RSA) on or before 90 days
following the RSA Effective Date.

 

6

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The “First Lien Election Amount” means the aggregate amount of PropCo Common
Stock elected to be sold by the Electing First Lien Sellers to the Rights
Participants in connection with Plan solicitation.

 

For the avoidance of doubt, the First Lien Noteholders must sell their
respective right to receive PropCo Common Stock (and the Equity Rights Debt),
pursuant to the terms of the Equity Rights, to the Rights Participants. The
Rights Participants shall receive no fee for acting as Rights Participants.

 

The procedures implementing the Equity Rights and exercise thereof shall be
subject to the reasonable consent of the Requisite Consenting Creditors.

Equity Rights Price    The Equity Rights shall be at the same price per share as
the Put Option. Purchase Option9    Each First Lien Noteholder shall have the
non-transferable option to purchase its pro rata share (based on its holdings of
the First Lien Note Obligations) of at least 50% of the PropCo Preferred Equity
(as defined below), with such purchases proportionally diluting the PropCo
Preferred Equity purchased by the Preferred Backstop Investors (as defined in
the Backstop Commitment Agreement to be attached hereto). Purchase Option Price
   The Purchase Option shall be at a price per share implying a total value of
$250 million for every $300 million of PropCo Preferred Equity. Regulatory
Requirements    All parties shall abide by, and use their commercially
reasonable efforts to obtain, any regulatory and licensing requirements or
approvals to consummate the Restructuring as promptly as practicable including,
but not limited to requirements or approvals that may arise as a result of such
party’s equity holdings in the REIT, PropCo or OpCo, as the case may be.

 

9  For tax efficiency or other purposes, rather than being issued to the
Preferred Backstop Investors and electing First Lien Noteholders for cash, the
PropCo Preferred Equity (including any issued pursuant to the Preferred Equity
Upsize) may, following consultation with, and consent from, the First Lien
Professionals (in their sole and absolute discretion), be issued directly to the
First Lien Noteholders subject to (a) the right of the First Lien Noteholders to
put up to 100% of such PropCo Preferred Equity to the Preferred Backstop
Investors for $250 million in cash (plus the equivalent purchase price of any
Preferred Equity Upsize), and (b) the right of the Preferred Backstop Investors
to call up to 50% of such PropCo Preferred Equity (excluding any Preferred
Equity Upsize) from the First Lien Noteholders for $125 million in cash. In such
case the First Lien Noteholders’ direct cash distribution from CEOC would be
reduced by $250 million plus the equivalent purchase price of any Preferred
Equity Upsize. For the avoidance of doubt, this change in the manner in which
the PropCo Preferred Equity may be issued shall not adversely affect the First
Lien Noteholders’ recoveries under the Plan on account of First Lien Note
Obligations.

 

7

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Such parties receiving equity shall use commercially reasonable efforts to
cooperate with, and timely obtain and submit, all applicable licensing materials
and information to, applicable gaming authorities throughout any regulatory or
licensing process, including without limitation with respect to any applicable
license, permit, or finding of suitability, and shall cause any individual
subject to regulatory, licensing, or suitability approval to similarly cooperate
and provide all such relevant materials and information. To facilitate
regulatory approvals and prompt consummation of the Restructuring, any party
signing the RSA must irrevocably elect upon execution of the RSA the amount of
Put Options with respect to OpCo New Common Stock.

 

The Company and its affiliates will assist with required regulatory approvals
and structuring issues, including common stock voting structures to ensure
compliance with regulatory requirements.

 

To the extent any required regulatory approvals are not obtained by the Closing
of the Restructuring, the parties agree to work together to facilitate
consummation of the Restructuring as promptly as practicable. Actions to be
taken may include entering into transactions to permit the Closing to occur
while such regulatory approvals are pending (alternate temporary structures),
temporary escrowing of equity and/or selling down equity below regulatory
threshold levels. Any actions proposed to be taken in connection with obtaining
regulatory approvals that adversely affect any First Lien Noteholder, in an
economic or other material respect, must be reasonably acceptable to the
Requisite Consenting Creditors, and will be binding on all First Lien
Noteholders.

REIT and Separation Structure Requirements    To the extent any party would
otherwise receive more than 9.8% of the outstanding REIT New Common Stock and/or
PropCo Preferred Equity, such party shall instead receive direct PropCo New LP
Interests equal to the value of such REIT New Common Stock and/or PropCo
Preferred Equity above 9.8%, except to the extent that a First Lien Noteholder
enters into an ownership limit waiver agreement substantially in the form
attached hereto as Annex VII, provided however, that in the event the Spin (as
defined below) is to be utilized and any party would otherwise receive more than
49.8% of the REIT New Common Stock and/or PropCo Preferred Equity, such party
shall instead receive direct PropCo New LP Interests equal to the value of such
REIT New Common Stock and/or PropCo Preferred Equity above 49.8%. Closing    The
Put Options and Equity Rights will close immediately following distribution of
the equity securities under the Plan (it being understood that the exercise date
for the Put Options and Equity Rights will be set forth in the solicitation
materials and shall occur on a date determined by the Company prior to the
projected effective date of the Plan).10

 

10  For tax efficiency or other purposes, the cash consideration to be paid to
First Lien Noteholders through the exercise of either the Put Options or the
Equity Rights may flow through the Company to the First Lien Noteholders as part
of their recovery under the Plan as direct payments of cash, rather than be paid
in respect of the receipt of stock or Mezz Equitized Debt or be paid directly by
the Backstop Parties and/or the Rights Participants. The Company and CEC shall
consult with the First Lien Professionals in respect of the preceding and, if
the decision could reasonably be expected to adversely affect the recovery of
the First Lien Noteholders (in form, value, or otherwise as determined by the
Requisite Consenting Creditors), it shall be subject to the reasonable consent
of the Requisite Consenting Creditors.

 

8

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Put Options Conditions Precedent   

The exercise of the Put Options and Equity Rights will be subject to customary
conditions precedent including:

 

•    the Bankruptcy Court shall have entered orders (a) approving the disclosure
statement in respect of the Plan and (b) confirming the Plan;

 

•    the effective date of the Plan shall have occurred;

 

•    all regulatory approvals, or waiting periods, shall have been received or
expired; and

 

•    other customary conditions precedent in form and substance reasonably
satisfactory to the Company, the Backstop Parties, and the Requisite Consenting
Creditors.

 

III. The REIT and Equity Securities

 

REIT   

The Company shall restructure itself upon consummation of the Restructuring as a
separate operating company (“OpCo”), and property company (“PropCo”). Pursuant
to the Restructuring a real estate investment trust (the “REIT”) will be formed
to own and control the general partner of PropCo (“PropCo GP”) and to hold
PropCo New LP Interests.

 

The separation of the Company into OpCo, PropCo and the REIT (the “Separation
Structure”) will be accomplished through either (a) the tax free contribution of
PropCo assets to the REIT in a tax-free reorganization qualifying under Section
368(a)(1)(G) of the Internal Revenue Code (the “Code”) (such structure, the
“Spin”), provided however, that in lieu of the Spin, the separation will be
accomplished by (b) a tax-free contribution of PropCo assets to the PropCo
partnership in a transaction qualifying under section 721 of the Code (the
“UPREIT Structure”) if (i) the Company is

 

9

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unable to receive a favorable private letter ruling from the IRS (the “Spin
Ruling”) or a “should” level opinion of counsel (the “Spin Opinion”),
concluding, in either case, based on facts, customary representations (and
certain customary assumptions, in the case of a Spin Opinion) set forth or
described in the Spin Ruling or Spin Opinion, that the Spin qualifies under
Section 368(a)(1)(G) of the Code, (ii) at the election of the Requisite
Consenting Creditors if the Estimated REIT E&P (as defined below) exceeds $1.6
billion or (iii) at the election of the Company and CEC, with the consent of the
Requisite Consenting Creditors, such consent not to be unreasonably withheld. In
either event, (x) the distribution of the new equity and debt will be made in a
manner that will not generate taxable income to the Company other than
cancellation of indebtedness income, and (y) the Company and CEC shall regularly
consult and coordinate with the First Lien Professionals on the Separation
Structure and all decisions that may materially affect the tax consequences
thereof to the First Lien Noteholders.

 

No later than 50 days prior to the deadline for voting on the Plan, the Company
will deliver to the Consenting Creditors its reasonable estimate of the earnings
and profits of the REIT (i) as of, and assuming an effective date of the Plan on
June 30, 2016, (ii) calculated using the implied equity values in this term
sheet and valuing all new debt at par, treating all First Lien Bank Lenders as
electing to be Settling First Lien Bank Lenders (except to the extent, as of the
date of the delivery of the estimate, any First Lien Bank Lenders have elected
otherwise or are no longer eligible to so elect in accordance with the terms of
the RSA), assuming no PropCo Equity Upsize occurs and treating all payments made
to any creditors of the Company in accordance with the RSA (or any other
agreement entered into prior to the delivery of the estimate) as reducing
earnings and profits and (iii) computed as if all of the PropCo New LP Interests
are held through the REIT (the “Estimated REIT E&P”), together with supporting
work papers. The Consenting Creditors shall have 20 days to review the Company’s
calculation of the Estimated REIT E&P and provide any proposed revisions to the
Company, and the Company and the Consenting Creditors agree to negotiate in good
faith such proposed revisions and to attempt to resolve any differences between
the parties within 10 days of the receipt of such proposed revisions. In the
event the parties reach agreement as to the amount of the Estimated REIT E&P
such Estimated REIT E&P shall be final and binding as among the Company and the
Consenting Creditors for purposes of the preceding paragraph. In the event the
parties do not reach agreement on the amount of the Estimated REIT E&P, then the
determination of the Estimated REIT E&P shall be made by an independent
accounting firm mutually acceptable to the Company and the Consenting Creditors.

 

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   The Company, CEC and the Consenting Creditors shall cooperate in good faith
to effectuate the Restructuring in a manner that will (1) minimize the amount of
the earnings and profits of Caesars World, Inc. (and any other subsidiaries of
CEOC with separate return limitation years) that will be included in the
earnings and profits of the REIT and (2) if so requested by the Requisite
Consenting Creditors, use cash otherwise payable to First Lien Noteholders in
respect of their claims to pay a portion of the “purging dividend” payable by
the REIT to such First Lien Noteholders with respect to their REIT New Common
Stock, in both cases consistent with the terms of the RSA. Equity Securities   

The common equity securities to be issued will consist of new shares of common
stock (a) of the REIT (such stock, the “REIT New Common Stock”) and (b) of OpCo
(such stock, the “OpCo New Common Stock”). Such securities will be freely
transferable to the extent provided under Section 1145 of the Bankruptcy Code.

 

The Boards of Directors of CEOC, OpCo and the REIT shall each use its reasonable
best efforts to have the OpCo New Common Stock, if more than 30% of the OpCo New
Common Stock is owned by the First Lien Noteholders and Non-First Lien
Noteholders (the “Non-CEC Holders”), and the REIT New Common Stock,
respectively, (a) registered under US securities laws and (b) listed on a
nationally recognized exchange, as soon as practicable subject to meeting
applicable listing requirements following the effective date of the Plan. A
registration statement covering the REIT Common Stock (and if applicable, a
registration statement covering the OpCo New Common Stock) shall be filed as
soon as practicable following the Effective Date of the Plan and in any event
within 75 days thereafter. The Board of Directors of CEOC shall consult with
First Lien Professionals on the form and substance of the registration
statement(s). The applicable parties shall enter into a customary registration
rights agreement providing for among other things a re-sale registration
statement for any First Lien Noteholder that cannot freely transfer its equity
pursuant to Section 1145 of the Bankruptcy Code and keeping any registration
statements that do not automatically incorporate SEC filings by reference up to
date.

 

In order to meet the requirement that a REIT have at least 100 shareholders, the
REIT will have the right to issue, for cash, up to $125,000 of non-voting
preferred stock (125 shares, $1,000 liquidation preference and approximately 12%
dividend).

Contribution by CEOC of Properties to PropCo    If the UPREIT Structure is used,
at least 5% of the PropCo New LP Interests purchased by CEC under the Put
Options (on a fully diluted basis) shall be deemed as CEOC’s on account of its
contribution of real estate into PropCo. In such case, CEOC shall have the
option to participate in future issuances, or purchase additional equity from
PropCo at FMV if participation is not feasible, to maintain its percentage
ownership interest in PropCo at 5% if it would otherwise decrease below that
threshold.

 

11

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Services JV   

Each of the Company and CEC (including through Caesars Entertainment Resort
Properties LLC and Caesars Growth Properties Holdings, LLC) shall agree to take
those steps that may be necessary or advisable with respect to Caesars
Enterprise Services, LLC and its subsidiaries (collectively “CES”) to ensure
that the chapter 11 cases or a restructuring consummated thereby shall not
impair, modify, or affect in any adverse way under the applicable agreements (i)
the Company’s rights with respect to governance or administration of CES
(including by amending Sections 5.5(b) with respect to any payment defaults
arising from commencement of the chapter 11 cases, 5.6 and 7.12 of that certain
Amended Limited Liability Company Agreement of Caesars Enterprise Services, LLC
dated as of May 20, 2014 (as the same may have been amended from time to time),
(ii) the Company’s rights with respect to that certain Omnibus License and
Enterprise Services Agreement dated as of May 20, 2014 (as the same may have
been amended from time to time) (including by amending Section 16.4 thereof),
(iii) the Company’s rights with respect to any or all intellectual property or
other business arrangements by and among the Company and CES, whether pursuant
to section 365(c) of the Bankruptcy Code, any change of control provisions set
forth in those agreements, or other terms of such agreements and (iv) PropCo’s
and OpCo’s right to use and access intellectual property and other rights in the
same manner that such rights are currently used and accessed across the
enterprise to the extent currently provided under the Omnibus License and
Enterprise Services Agreement.

 

In addition, such agreements shall be modified as necessary or appropriate to
reflect the OpCo/PropCo structure including (i) to provide that Total Rewards
and other enterprise-wide and property specific resources are allocated, and
services provided, in a way that does not discriminate against PropCo, (ii) for
so long as CEC or its affiliates manages the properties, CES shall ensure that,
in the event CEC or its subsidiaries cease to provide the resources and services
provided under such agreements to PropCo, CES shall provide such resources and
services directly to PropCo on equivalent terms to or via an alternative
arrangement reasonably acceptable to PropCo; provided that if CEC or its
affiliates are terminated as manager under the applicable agreements other than
by or with the consent of PropCo, CES shall provide such resources and services
pursuant to a management agreement on substantially the same terms and
conditions, notwithstanding such termination, if so elected by PropCo. In the
event PropCo terminates or consents to the termination of the management
relationship with CEC or its affiliates, for so long as the transition period
under the applicable management agreement(s) continues, PropCo shall continue to
have access to such resources and services on no less favorable terms. The
modified documents shall be in form and substance reasonably satisfactory to the
Requisite Consenting Creditors.

 

12

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   Furthermore, CES shall at the request of the REIT Board of Directors have
meetings or conference calls once a quarter with a designee of the REIT Board of
Directors to discuss, and consult on, the strategic and financial business
plans, budgeting, including proposed capital expenditures and other topics as
reasonably requested by the REIT Board of Directors. The REIT shall also have
audit and information rights.

 

IV. CEC

 

CEC Contribution   

CEC will contribute $406 million plus the Additional Cash Consideration (if
applicable) (together, the “CEC Cash Contribution”) to be used to pay the RSA
Forbearance Fees (on the terms described below), for general corporate purposes
and to fund sources and uses (and capital structure described herein) required
on the Effective Date.

 

In connection with the RSA, CEC shall pay the following cash fees (the “RSA
Forbearance Fees”) in United States dollars to the Forbearance Fee Parties (as
defined in the RSA) in respect of such Forbearance Fee Parties forbearing from
exercising their default-related rights and remedies solely to the extent
required by, and as set forth in, the RSA in an amount equal to (a) 1.625% of
the Forbearance Fee First Lien Bond Claims (as defined in the RSA) held by such
Forbearance Fee Parties paid at the earlier of the date when (i) holders of
66.66% of the First Lien Note Obligations and the First Lien Bank Obligations
(by voting class) sign the RSA (or in respect of the First Lien Bank Obligations
a similar restructuring support and forbearance agreement agreeable to CEOC and
CEC and consistent with terms of the RSA) and (ii) the Bankruptcy Court enters
an order approving the Disclosure Statement and (b) 1.625% of the Forbearance
Fee First Lien Bond Claims held by such Forbearance Fee Parties paid on the
Effective Date. For the avoidance of doubt and without limitation, each
Forbearance Fee Party shall be an express third party beneficiary with respect
to this provision.

 

Except as provided below, if the Effective Date has not occurred on or prior to
February 1, 2016, then CEC shall contribute for the benefit of the First Lien
Noteholders an amount equal to $25 million per month beginning February 1, 2016
until the Effective Date of the Plan (such consideration, the “Additional
Consideration” and together with the CEC Cash Contribution, the “CEC
Consideration”) pro rating for any partial month.

 

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The Additional Consideration shall be payable on the Effective Date to the
Company for the benefit of all First Lien Noteholders, provided however, that,
notwithstanding Section 11 of the RSA, if the RSA is terminated in accordance
with the terms of the RSA, other than a termination as a result of a breach by
Consenting Creditors, an amount equal to the accrued Additional Consideration up
to a maximum of $75 million shall be payable by CEC directly to the relevant
indenture trustees for the benefit of all First Lien Noteholders.

 

The Additional Consideration shall not accrue during any period in which the
Consenting Creditors are not working in good faith towards completion of the
definitive documentation in form and substance consistent with the RSA. For
these purposes, the Consenting Creditors shall be deemed to be working in good
faith towards completion of the definitive documentation at all times unless and
until CEC provides the relevant Consenting Creditors with written notice to the
contrary specifically setting forth the reasons therefor. In the event such
notice is given, all parties’ rights with respect to whether such Consenting
Creditors are working in good faith are fully reserved.

CEC Standby Commitment    $75 million, which shall only be funded if there are
insufficient sources and uses (after giving effect to any Available Cash) to
fund the capital structure described herein on the Effective Date. For the
purpose of determining whether CEC is required to fund the CEC Standby
Commitment, the amount of Available Cash shall be deemed to exclude an amount
equal to $206 million less the amount of the RSA Forbearance Fees paid by CEC.
Bank Guaranty Settlement   

Each First Lien Bank Lender that votes to accept the Plan shall also sell a 100%
assignment of their rights, or to the extent not legally assignable a
participation to the fullest extent possible, in its respective First Lien Bank
Obligations that survive the Effective Date (the “Purchased First Lien Bank
Obligations”) to CEC in exchange for the Purchase Price (defined below) on the
terms and conditions set forth herein (each electing First Lien Bank Lender, a
“Settling First Lien Bank Lender”).

 

The sale of the Purchased First Lien Bank Obligations to CEC hereunder shall
close on the 10th business day following the Effective Date.

 

The sale of the Purchased First Lien Bank Obligations to CEC hereunder shall
also include a consent to the termination and release of the Bank Guaranty
Agreement (defined below) and the termination and release of all CEC’s
obligations thereunder (the “Release and Termination”). The consent of the
Settling First Lien Bank Lenders to the Release and Termination shall become
effective on the Effective Date. The Release and Termination shall be
conditioned on First Lien Bank Lenders holding greater than one-half of the
aggregate principal amount of First Lien Bank Obligations outstanding
immediately prior to the effectiveness of the Effective Date become Settling
First Lien Bank Lenders and shall become effective only upon the payment of the
Purchase Price to each Settling First

 

 

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Lien Bank Lender. For the avoidance of doubt, the sale of the Purchased First
Lien Bank Obligations shall close whether or not First Lien Bank Lenders holding
greater than one-half of the aggregate principal amount of First Lien Bank
Obligations become Settling First Lien Bank Lenders.

 

“Purchase Price” means, with respect to each Settling First Lien Bank Lender, an
amount equal to the Accrued Amount in respect of the aggregate principal amount
of Purchased First Lien Bank Obligations of such Settling First Lien Bank Lender
for the Accrual Period; provided that each such Settling First Lien Bank Lender
shall remain entitled to receive any distributions otherwise arising under the
Plan on account of such Settling First Lien Bank Lender’s Purchased First Lien
Bank Obligations.

 

The “Accrual Period” means the period from the Petition Date until (but not
including) Effective Date.

 

The “Accrued Amount” with respect to each Settling First Lien Bank Lender means
an aggregate amount equal to (i) the aggregate principal amount of Purchased
First Lien Bank Obligations held by such Settling First Lien Bank Lender
multiplied by a rate per annum equal to the Applicable Rate for a period equal
to the Accrual Period, minus (ii) the aggregate amount of Monthly Adequate
Protection Payments (as defined in the Cash Collateral Order) received by such
Settling First Lien Bank Lender during the Accrual Period (so long as the
Monthly Adequate Protection Payments are deemed to have been paid on account of
interest (and not recharacterized as principal or otherwise disallowed)) on
account of such Purchased First Lien Bank Obligations, minus (iii) the amount of
Available Cash paid to such Settling First Lien Bank Lender on account of its
Purchased Lien Bank Obligations upon the Effective Date (so long as such payment
of Available Cash is deemed to have been paid on account of interest (and not
recharacterized as principal or otherwise disallowed)).

 

The “Applicable Rate” means a per annum rate equal to (i) for the period from
the Petition Date until October 1, 2015, 6.5% and (ii) for the period from
October 1, 2015 until the end of the Accrual Period, 6.75% as of October 1, 2015
and increasing 0.25% every 90 days thereafter, up to a maximum of 8.1%.

 

“Bank Guaranty Agreement” means the Guaranty and Pledge Agreement dated as of
July 25, 2014 between CEC and Credit Suisse AG, Cayman Island Branch as
administrative agent and collateral agent for the lenders under the Credit
Agreement.

 

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CEC Put Options Purchases    CEC or an affiliated entity shall, pursuant to the
Put Options, purchase up to (a) $269 million of the PropCo Common Stock at a
price implying a total value of $269 million for 14.8% of the PropCo Common
Stock on a fully diluted basis (excluding dilution from Bank Mezzanine Transfer
Amount and PropCo Preferred Equity, if applicable) and (b) $700 million of OpCo
New Common Stock at a price per share implying a total value of $700 million for
100% of the OpCo New Common Stock. Domestic Acquisitions and New Building
Opportunities   

CEC and its non-debtor subsidiaries shall give PropCo a right of first refusal
to own the real estate, and have CEC or OpCo lease, all non-Las Vegas domestic
(U.S.) real estate acquisitions and new building opportunities with CEC
retaining management rights with respect to such opportunities.

 

PropCo shall give CEC a right of first refusal to operate and manage all non-Las
Vegas properties that PropCo acquires.

 

The material terms of these rights of first refusal are as set forth in the
Lease Term Sheet.

CEC Lease Guaranty

  

CEC, OpCo and PropCo will enter into a Management and Lease Support Agreement
(the “MLSA”) pursuant to which (i) CEC, or a wholly-owned subsidiary, will
manage the properties on behalf of OpCo and (ii) CEC will provide a guaranty in
respect of the OpCo’s operating lease obligations, in each case while such lease
(including any extensions, renewals or replacements) remains in effect. The
material terms of the MLSA are set forth on Annex II.

 

The material terms of the operating leases are set forth on Annex II.

Releases   

The Plan shall provide (subject to completion of the investigation by CEOC’s
governance committee) that CEC’s participation in the Plan through its entry
into the RSA and performance of the terms thereunder in facilitating the
transactions contemplated by the Restructuring shall be a full and complete
settlement under Bankruptcy Rule 9019 of any claims or causes of action, known
or unknown, that the Company and its estates have or could have against CEC, CAC
and their respective direct and indirect sponsors, shareholders, affiliates,
officers, directors, employees, managers, attorneys, professionals, advisors and
representatives (each of the foregoing in their capacity as such) relating to
the Company, other than (a) claims under the RSA and (b) claims arising from
past, existing, and future commercial relationships between any subsidiary of
CEC (other than CEOC and its subsidiaries) and CEOC or any of its subsidiaries.

 

As part of the settlement embodied in the Plan and the RSA (subject to
completion of the investigation by CEOC’s governance committee), effective on
the date the Restructuring is consummated, as consideration for the CEC
Consideration, the CEC Put Options Purchases, the Domestic Acquisitions and New
Building Opportunities, the OpCo Debt Guaranty,

 

16

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entry into the MLSA and other valuable consideration, the Company, its estate
and all of the Company’s creditors shall be deemed to have released CEC, CAC and
their respective direct and indirect sponsors, shareholders, affiliates,
officers, directors, employees, managers, attorneys, professionals, advisors and
representatives (each of the foregoing in their capacities as such, the “CEC
Released Parties”) from any and all claims, obligations, suits, judgments,
damages, rights, causes of action and liabilities whatsoever, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, at law, in
equity or otherwise, relating to or based upon any act or omission relating to
the Company which occurred prior to the effectiveness of the Restructuring
(other than (a) claims under the RSA and (b) claims arising from past, existing,
and future commercial relationships between any subsidiary of CEC (other than
CEOC and its subsidiaries) and CEOC or any of its subsidiaries), including a
release and waiver of any obligations arising under the Bank Guaranty Agreement
(but only to the extent released in connection with the Bank Guaranty
Settlement). The Plan shall also include standard injunction and exculpation
provisions in respect of the CEC Released Parties.

 

As part of the settlement embodied in the Plan and the RSA, effective on the
date the Restructuring is consummated, as consideration for their entry into the
RSA and other valuable consideration, the Company and the CEC Released Parties
shall be deemed to have released the Consenting Creditors and their respective
direct and indirect sponsors, shareholders, affiliates, officers, directors,
employees, managers, attorneys, professionals, advisors and representatives
(each of the foregoing in their capacity as such) from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, at law, in equity or otherwise, relating to or based upon any
act or omission relating to the Company which occurred prior to the
effectiveness of the Restructuring.

 

For the avoidance of doubt, the investigation by CEOC’s governance committee
contemplated herein shall be completed prior to approval of the Disclosure
Statement.

 

V. Caesars Palace Las Vegas (“CPLV”)

 

Transfer to Unrestricted Subsidiary   

CPLV shall be transferred to a newly formed wholly owned unrestricted subsidiary
of PropCo (“CPLV Sub”) and its property shall be leased to OpCo. “CPLV Holding”
will be one or more newly formed holding companies that directly owns 100% of
CPLV Sub.

 

The material terms of the operating lease are set forth on Annex II.

 

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Issuance of CPLV Market Debt   

CPLV Sub and/or CPLV Holding, as applicable, shall each use commercially
reasonable efforts to finance $2,600 million of CPLV Debt with third party
investors for cash proceeds (the “CPLV Market Debt”) on or before consummation
of the Restructuring (with 100% of the net proceeds being used to increase the
cash payments to the First Lien Bank Lenders and the First Lien Noteholders).
Subject to the below, at least $1,800 million of CPLV Market Debt must be
issued.

 

If $1,800 million or more but less than $2,600 million of CPLV Market Debt is
issued, the remainder will be issued to the First Lien Bank Lenders and the
First Lien Noteholders in the form of CPLV Mezzanine Debt (subject, in the event
the amount of CPLV Market Debt is less than $2,000, to the right of the First
Lien Noteholders to have their CPLV Mezz Upsized Amount issued in the form of
Preferred Equity Upsize rather than CPLV Mezzanine Debt, as set forth below).
The principal amount of CPLV Market Debt, CPLV Mezzanine Debt and, if
applicable, the Preferred Equity Upsize shall collectively total $2,600 million.

 

Notwithstanding the above, to the extent PropCo Preferred Equity is issued, the
proceeds thereof (other than in respect of the Preferred Equity Upsize, if
applicable) shall first reduce the principal amount of CPLV Mezzanine Debt (if
any) to be issued to the First Lien Noteholders and second, reduce the principal
amount of New Second Lien PropCo Debt to be issued to the First Lien
Noteholders, and third reduce the principal amount of CPLV Market Debt.

 

The weighted average yield on the CPLV Market Debt and CPLV Mezzanine Debt will
be capped such that the annual debt service shall not exceed $130 million, with
the cap increased by $2 million for every $100 million of Equity Rights Debt.

CPLV Mezzanine Debt   

If CPLV Market Debt is issued in an amount greater than $1,800 million, but less
than $2,600 million (less the proceeds from the PropCo Preferred Equity applied
to reduce the amount of CPLV Mezzanine Debt (if any) to be issued to the First
Lien Noteholders), then CPLV Mezz Holding shall issue secured non-guaranteed
debt (the “CPLV Mezzanine Debt”) in an amount equal to the difference to the
First Lien Bank Lenders and the First Lien Noteholders. Material terms of the
CPLV Market Debt and CPLV Mezzanine Date are annexed hereto as Annex V.

 

“CPLV Mezz Holding” will be a newly formed holding company that directly or
indirectly owns 100% of CPLV Sub.

 

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Receipt of CPLV Mezzanine Debt   

If CPLV Mezzanine Debt is issued, then it shall be distributed as follows:

 

•    The first $300 million of CPLV Mezzanine Debt (before giving effect to any
Mezz Equitized Debt) shall be distributed 1/3 to the First Lien Bank Lenders and
2/3 to the First Lien Noteholders;

 

•    Any CPLV Mezzanine Debt over $300 million and less than $600 million
(before giving effect to any Mezz Equitized Debt) shall be distributed 1/2 to
the First Lien Bank Lenders and 1/2 to the First Lien Noteholders; and

 

•    Any CPLV Mezzanine Debt over $600 million (before giving effect to any Mezz
Equitized Debt) shall be issued 41.7% to the First Lien Bank Lenders and 58.3%
to the First Lien Noteholders; provided, that, in the event that less than
$2,000 million of CPLV Market Debt is issued, then with respect to the amount of
increased CPLV Mezzanine Debt that would otherwise be issued to the First Lien
Noteholders as result of such reduction in the CPLV Market Debt below $2,000
million (such amount, the “CPLV Mezz Upsized Amount”), the First Lien
Noteholders shall receive cash in an amount equal to the CPLV Mezz Upsized
Amount which cash shall be funded by increasing the amount of PropCo Preferred
Equity issued hereunder (such additional amount of PropCo Preferred Equity, the
“Preferred Equity Upsize”).

 

The $2,600 million aggregate total amount of cash proceeds from the CPLV Market
Debt and the principal amount of CPLV Mezzanine Debt (before giving effect to
any Mezz Equitized Debt) will be allocated as follows:

 

•    $1,450 for First Lien Bank Holders and

 

•    $1,150 for First Lien Bondholders,

 

with the amount of CPLV Mezzanine Debt to be issued to each in accordance with
the above.

 

VI. New Capital Structure11

 

New First Lien OpCo Debt   

Up to $1,188 million in principal amount of first lien debt. Material terms of
the New First Lien OpCo Debt are annexed hereto as Annex V.

 

$882 million distributed to First Lien Bank Lenders and $306 million distributed
to First Lien Noteholders, subject to adjustment as set forth herein.

 

11 

All amounts subject to the ability of the First Lien Bank Lenders to make use of
the Bank Mezzanine Transfer Amount.

 

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OpCo will use its commercially reasonable efforts to syndicate the New First
Lien OpCo Debt to the market (none of which shall be guaranteed by CEC) and, to
the extent so syndicated, the cash proceeds will be used to increase the cash
payments to the First Lien Bank Lenders and First Lien Noteholders, ratably
based on the amount of New First Lien OpCo Debt otherwise to be issued to them.
The New First Lien OpCo Debt will be marketed at an interest rate less than or
equal to the rates contemplated above.

 

The New First Lien OpCo Debt distributable to the First Lien Bank Lenders and
First Lien Noteholders must be in the form of bank debt and bond debt,
respectively.

New Second Lien OpCo Debt   

Up to $547 million in principal amount of second lien debt. Material terms of
the New Second Lien OpCo Debt are annexed hereto as Annex V.

 

$406 million distributed to First Lien Bank Lenders and $141 million distributed
to First Lien Noteholders.

New First Lien PropCo Debt   

$2,392 million in principal amount of first lien debt. Material terms of the New
First Lien PropCo Debt are annexed hereto as Annex V.

 

$1,961 million distributed to the First Lien Bank Lenders and $431 million
distributed to First Lien Noteholders.

 

The New First Lien PropCo Debt distributable to First Lien Bank Lenders and
First Lien Noteholders must be in the form of bank debt and bond debt,
respectively.

New Second Lien PropCo Debt   

$1,425 million in principal amount of second lien debt. Material terms of the
New Second Lien PropCo Debt are annexed hereto as Annex V.

 

Distributed to First Lien Noteholders, subject to adjustment as set forth
herein.

 

Notwithstanding the above, the proceeds of PropCo Preferred Equity (other than
the proceeds of the Preferred Equity Upsize), after first reducing the principal
amount of CPLV Mezzanine Debt (if any) to be issued to the First Lien
Noteholders shall be used to reduce the principal amount of New Second Lien
PropCo Debt to be issued to the First Lien Noteholders.

OpCo Debt Guaranty    The New First Lien OpCo Debt and the New Second Lien OpCo
Debt distributed to the First Lien Bank Lenders and First Lien Noteholders shall
be guaranteed in accordance with the form of guaranty as set forth in Annex VI.

 

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PropCo Preferred Equity   

$300 million in principal amount of PropCo Preferred Equity, which amount may be
increased due to the Preferred Equity Upsize on the terms set forth in the
Series A Convertible Preferred Stock Articles annexed hereto as Annex III.

 

Subject to the Purchase Option, all of the PropCo Preferred Equity shall be
purchased by the Preferred Backstop Investors as set forth in the Backstop
Commitment Agreement which shall be substantially in form and substance as that
annexed hereto as Annex IV. At least 50% of the PropCo Preferred Equity
purchased by the Preferred Backstop Investors will be made available to First
Lien Noteholders pursuant to the Purchase Option. Any PropCo Preferred Equity
purchased pursuant to the Purchase Option shall dilute the Backstop Investors’
purchases pro rata.

 

Proceeds of the issue of the PropCo Preferred Equity (other than the Preferred
Equity Upsize) shall be used first to reduce the principal amount of CPLV
Mezzanine Debt (if any) to be issued to the First Lien Noteholders, second to
reduce the principal amount of New Second Lien PropCo Debt to be issued to the
First Lien Noteholders, and third to reduce the principal amount of CPLV Market
Debt.

 

Proceeds of the Preferred Equity Upsize will be distributed to First Lien
Noteholders in lieu of any additional CPLV Mezzanine Debt that would otherwise
be issued to the First Lien Noteholders in the event that less than $2,000
million of CPLV Market Debt is issued.

 

“Mezz Equitized Debt” shall mean all CPLV Mezzanine Debt that is reduced (or not
issued) as a result of the issuance of PropCo Preferred Equity (including the
Preferred Equity Upsize).

 

VII. Charter Documents and By-Laws of the Equity Issuers

 

Corporate Governance   

CEOC, a Delaware corporation will become OpCo and will have charter documents
and by-laws that are acceptable to CEC and the Requisite Consenting Creditors.

 

PropCo will be a limited partnership organized under the laws of Delaware and
will have a limited partnership agreement that is customary for an UPREIT
structure and reasonably acceptable to CEOC, CEC and the Requisite Consenting
Creditors.

 

PropCo GP will be a limited liability company organized under the laws of
Delaware and will have an operating agreement that is reasonably acceptable to
CEOC, CEC and the Requisite Consenting Creditors.

 

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   The REIT will be a corporation organized under the laws of Maryland and will
have charter documents and by-laws that are reasonably acceptable to CEOC, CEC
and the Requisite Consenting Creditors. OpCo Board of Directors   

If CEC owns 90% or more of the OpCo New Common Stock, then the board of
directors of OpCo shall consist of 3 voting members to be designated by CEC,
each to be identified in a plan supplement and one of which shall be independent
and reasonably acceptable to the Requisite Consenting Creditors. The independent
director shall be a member of all committees of the board.

 

If CEC owns less than 90% of the OpCo New Common Stock, then the board of
directors of OpCo shall consist of 3 voting members, 2 designated by CEC and 1
designed by the Requisite Consenting Creditors (which shall be a member of all
committees of the board), each to be identified in a plan supplement.

 

Regardless of CEC’s percentage ownership, there shall be one non-voting
observer, reasonably acceptable to OpCo, to be designated by the Requisite
Consenting Creditors and identified in a plan supplement. The observer shall be
given notice of and an opportunity to attend the portion of all meetings
concerning business and strategy sessions matters and other matters that would
have an adverse material economic impact on PropCo (and receive all materials
given to board members in connection with such matters), subject to appropriate
limitations in respect of privilege issues.

REIT Board of Directors   

If CEC owns less than 10% of the PropCo Common Stock, then the board of
directors of the REIT shall consist of 7 voting members to be designated by the
Requisite Consenting Creditors, each to be identified in a Plan Supplement.

 

If CEC owns 10% or more of the PropCo Common Stock, then the board of directors
of the REIT shall consist of 7 voting members, 6 to be designated by the
Requisite Consenting Creditors and 1 designated by CEC, each to be identified in
a Plan Supplement.

 

At least 3 voting members must be licensed by the required regulatory
authorities by closing. If there are not at closing at least 3 voting members
licensed, then to assist with closing up to 2 of the independent members of CEOC
shall be designated to the REIT board so that there will be 3 voting members at
closing, with such members being removed as the non-voting members are licensed.
Until such time as the CEOC independents and members designated by CEC are a
minority of the board, the REIT shall be prohibited from taking major
transactions without shareholder approval. To the extent any of members are not
so licensed by closing, they shall be non-voting members until so licensed.

PropCo    PropCo will be controlled by its PropCo GP, whose sole shareholder
will be the REIT.

 

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VIII.  Implementation

 

In-Court Restructuring: Use of Cash Collateral    Final Order (i) Authorizing
Use of Cash Collateral, (ii) Granting Adequate Protection, (iii) Modifying the
Automatic Stay to Permit Implementation, and (iv) Granting Related Relief (Dkt.
No. 988) (the “Cash Collateral Order”) Available Cash   

The Available Cash shall be applied at closing first to fund, together with the
CEC Cash Contribution (less the RSA Forbearance Fees), the sources and uses (and
capital structure described herein) on the Effective Date and second, to the
extent of any remaining Available Cash, to fund adequate protection payments, as
applicable.

 

“Available Cash” means (i) the pro forma amount of CEOC balance sheet cash
available after giving effect to the Effective Date, the consummation of the
Plan, all debt reductions and repayments, the payment of all fees, expenses and
related uses of cash on the Effective Date in accordance with the plan over (ii)
$400 million of minimum required CEOC liquidity, which shall be reduced by $0.50
for every dollar raised in revolving credit, provided that such reduction shall
in no instance be greater than $100 million (the minimum cash requirement amount
includes the $100 million of CEC’s cash contribution, and does not include (a)
cash held by Chester Downs and Marina, LLC and Chester Downs Finance Corp., (b)
cash held by the international entities owned by CEOC (e.g. the London Clubs),
and (c) customer cash held in custody by CEOC (i.e. “front money”)).

Plan Structure    Should the First Lien Bank Lenders (beneficially owning or
controlling with the power to vote in favor of the Plan at least 66.66% of the
First Lien Bank Obligations) not sign the RSA (or a similar restructuring
support agreement agreeable to CEOC and CEC and consistent with the terms of the
RSA) by September 15, 2015, CEC, CEOC, and the Requisite Consenting Creditors
will negotiate in good faith to amend the RSA to provide alternative treatment
for the First Lien Bank Lenders, provided that this agreement to negotiate in
good faith shall be without prejudice to any rights of any parties under the RSA
(including, without limitation, the right to terminate).

 

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IX. Other

 

PropCo Call Rights   

Subject to the terms of the CERP debt documents and in no event in a manner that
is dilutive of covenant compliance (provided that CEC and CERP shall use
commercially reasonable efforts to obtain waivers or amendments to permit the
transaction if necessary), PropCo shall have the right, for up to 180 days
following the date the Restructuring is consummated, to enter into a binding
agreement to purchase the real property (and lease it back to CERP) and all
improvements associated with Harrah’s Atlantic City and Harrah’s Laughlin for a
cash purchase price equal to ten times the agreed annual rent for such
properties, and on other customary terms and conditions, with the closing of
such purchase(s) to occur following regulatory approvals, provided that such 180
day period shall be extended for up to 12 months if the call rights are not
exercisable during the initial 180 day period due to CERP covenant issues.

 

The parties shall discuss in good faith whether additional properties should be
subject to the PropCo call rights and other terms applicable to the call rights.

Definitive Agreements    Subject to the terms of the RSA, as soon as reasonably
practicable, the parties will execute Definitive Documentation implementing the
Restructuring in form and substance consistent in all material respects with
this Term Sheet and reasonably acceptable to the Requisite Consenting Creditors,
the Company and CEC. Non Transfer    As set forth in the RSA and subject to its
terms and certain exceptions contained therein, each Restructuring Support Party
will agree, on behalf of itself and its affiliates, not to transfer any First
Lien Bank Obligations or First Lien Note Obligations held by such party and its
affiliates from the date of execution of the RSA through the consummation of the
Restructuring (including without limitation closing all Put Options and Equity
Rights) unless the transferee(s) agree(s) to be bound by all of the terms and
conditions of the RSA and this Term Sheet. Intercreditor Agreements    Plan
distributions shall be made in compliance with and shall, except as explicitly
provided for herein, enforce all applicable intercreditor and subordination
agreements.

 

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Tax Opinions/Private Letter Rulings   

As a condition to effectiveness of the Plan, Counsel to the Company shall
deliver an opinion on which the First Lien Noteholders may rely, or the REIT
shall receive a private letter ruling from the IRS, concluding, based on facts,
customary representations and assumptions set forth or described in such opinion
and/or private letter ruling, that the REIT’s method of operation since its
formation and its proposed method of operation up to and including the end of
the date of the opinion or ruling has enabled and will enable the REIT to meet
the requirements for qualification and taxation as a real estate investment
trust under the Code.

 

Counsel to the Company shall deliver to the Company an opinion, or the Company
shall receive a private letter ruling from the IRS, concluding, based on facts,
customary representations and assumptions set forth or described in such opinion
and/or private letter ruling, that the transfer of assets to PropCo and to the
REIT, and the transfer of consideration to creditors of the Company should not
result in a material amount of U.S. federal income tax to the Company,
determined as if the Company and its subsidiaries were a stand-alone
consolidated group. The Company shall make any such opinion and/or private
letter ruling available to the First Lien Professionals.

Tax Indemnity    CEC, Opco, and Propco will enter into one or more tax matters
agreements reasonably satisfactory to CEC, CEOC and the Requisite Consenting
Creditors, that will, among other things, allocate responsibility for taxes
arising in periods both before and after the Effective Date, including any taxes
generated as a result of the Restructuring and related transactions. The
agreements will also contain standard covenants relating to compliance with the
requirements and/or representations contained in the Spin Ruling, the Spin
Opinion, and/or any other private letter ruling received from the IRS or opinion
received from Counsel to the Company as described in “Tax Opinions/Private
Letter Rulings.” PropCo Distributions    The parties shall discuss what effect
the tax benefits to CEC of the allocations to it pursuant to Section 704(c) of
the Internal Revenue Code will have on the distributions to CEC from PropCo.

 

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Annex I

Backstop Parties

 

Party

   PropCo New LP
Interests / REIT
New Common
Stock    OpCo New
Common Stock    Total Amount

CEC

   $269 million12    $700 million    $969 million13

 

 

 

12  Subject to dilution if other First Lien Noteholders elect to become Backstop
Parties.

13  Subject to dilution if other First Lien Noteholders elect to become Backstop
Parties.

 

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Annex II

Lease & MLSA Term Sheet Summary

 

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LEASE TERM SHEET

Note: It is currently anticipated that the real estate assets of the
subsidiaries of a newly-formed Delaware limited partnership (“Propco”) will be
leased to subsidiaries of Opco (defined below) pursuant to two separate leases.
One lease (the “Non-CPLV Lease”)[1] will include all “Facilities” (defined
below) other than Caesars Palace Las Vegas (“CPLV”). The other lease (the “CPLV
Lease”, and together with the Non-CPLV Lease, collectively, the “Leases”) will
only include CPLV. To the extent that a term below does not differentiate
between the Non-CPLV Lease and the CPLV Lease, such term shall be included in
both Leases.

 

Landlord  

With respect to the Non-CPLV Lease, all of the subsidiaries of Propco that own
the fee or ground leasehold (as applicable) interests in the real property
comprising the Non-CPLV Facilities (as defined below).

 

With respect to the CPLV Lease, a subsidiary of Propco that owns the fee
interest in the real property comprising the CPLV Facility.

Tenant  

With respect to the Non-CPLV Lease, Caesars Entertainment Operating Company
(“CEOC” or “Opco”) and the subsidiaries of CEOC necessary for the operation of
all of the Non-CPLV Facilities, including all license holders with respect
thereto, as reasonably demonstrated to Propco.

 

With respect to the CPLV Lease, CEOC and the subsidiaries of CEOC necessary for
the operation of the CPLV Facility, including all license holders with respect
thereto, as reasonably demonstrated to Propco.

 

For purposes hereof, the term “Tenant” shall be deemed to mean Tenant and all
subsidiaries of Tenant.

MLSA/Guaranty   In addition, Caesars Entertainment Corporation (“CEC”), a
wholly-owned subsidiary of CEC (“Manager”), Opco and Propco will enter into a
Management and Lease Support Agreement with respect to each of the Non-CPLV
Lease and the CPLV Lease (each, an “MLSA/Guaranty”), pursuant to which (i)
Manager will manage the Facilities (as defined below) on behalf of Opco and (ii)
CEC will provide a full guarantee of all payments and performance of Opco’s
monetary obligations under each of the CPLV Lease and the Non-CPLV Lease.[2] The
terms of the MLSA/Guaranty are more particularly set forth in that certain
Summary of Terms with respect to the MLSA/Guaranty.

 

1  Non-CPLV Lease may be structured as two individual cross-defaulted leases, to
accommodate the JV interest for the Joliet asset.

2  Management Agreement and Guaranty will be integrated as one document, subject
to terms of MLSA/Guaranty term sheet.

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Leased Property  

With respect to the Non-CPLV Lease, all of the real property interest in the
facilities (the “Non-CPLV Facilities”) described on Exhibit A attached hereto,
including all buildings and structures located thereon, and all rights
appurtenant thereto. The Non-CPLV Facilities will not include any non-U.S. real
estate assets.

 

With respect to the CPLV Lease, all of the real property interest in CPLV (the
“CPLV Facility” or “CPLV Facilities”), as described on Exhibit B attached
hereto, including all buildings and structures located thereon, and all rights
appurtenant thereto.

 

All U.S. real property owned by CEOC or its wholly-owned subsidiaries that is
not identified on either (x) Exhibit A as part of the Non-CPLV Facilities, or
(y) Exhibit B as part of the CPLV Facilities, to the extent that it is not sold
or abandoned pursuant to the bankruptcy code, in each case with the approval of
the bankruptcy court, will be transferred to the applicable Landlord and leased
to the applicable Tenant under the Non-CPLV Lease (if such property is not
related to the ownership or operation of CPLV) or under the CPLV Lease (if such
property is related to the ownership or operation of CPLV), as applicable.

 

For purposes hereof, the term “Facilities” and “Leased Property” shall each be
deemed to mean the CPLV Facility and the Non-CPLV Facilities, collectively, or
each individually, as the context may require.

Term  

Each of the Leases shall have a 15 year initial term (the “Initial Term”).

 

Each of the Leases shall have four 5-year renewal terms (each, a “Renewal Term”)
to be exercised at Tenant’s option, provided that no Event of Default shall have
occurred and be continuing on the date Landlord receives the Renewal Notice (as
hereinafter defined) or on the last day of the then current Term, by notifying
Landlord (each, a “Renewal Notice”) (i) no earlier than 18 months prior to the
then-current expiration, and (ii) no later than 12 months prior to the
then-current expiration.

 

The Term with respect to any Leased Property shall not exceed 80% of the useful
life of such Leased Property. Any Leased Property not meeting such requirement
shall be subject to a shorter Term than the other Leased Property that satisfies
such requirements.[3]

Rent  

“Rent” means the sum of Base Rent and Percentage Rent. “Percentage Rent” means
the Non-CPLV Initial Percentage Rent, the Non-CPLV Secondary Percentage Rent and
the CPLV Initial Percentage Rent (each as defined below), each as adjusted as
set forth below. Rent shall be paid monthly in advance.

 

Rent not paid when due shall be subject to default interest and late charges
such that if rent is not paid within five days of the due date, a late charge in
the amount of 5% of the unpaid amount will be assessed and if any rent
(including the late charge) is not paid within 10 days of due date, it will
accrue interest based on the overdue rate (5% above prime).

 

Rent under the Non-CPLV Lease and the CPLV Lease shall be as follows for the
Initial Term and each Renewal Term:[4]

 

3  The parties understand that none of the Facilities will run afoul of the 80%
test during the Initial Term. The parties intend for the useful life of each
Facility to be determined at or prior to Lease inception; therefore, the
provisions regarding determination by an expert have been deleted.

4  For tax purposes, portions of each Non-CPLV Facility (e.g., barges and boats)
may be subject to a specific Rent allocation to be set forth in the definitive
documents.

 

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Non-CPLV Lease:

 

(a) For the first 7 Lease years, Rent of $475,000,000 per Lease year.

 

(b) For the 8th Lease year through the 10th Lease year, (i) Base Rent equal to
$332,500,000, subject to the annual Escalator (as hereinafter defined)
commencing in the 8th Lease year as described below, plus (ii) Percentage Rent
equal to the Non-CPLV Initial Percentage Rent (as hereinafter defined).

 

(c) From and after the commencement of the 11th Lease year, (i) Base Rent equal
to 80% of the Rent for the 10th Lease year, subject to the annual Escalator as
described below, plus (ii) Percentage Rent equal to Non-CPLV Secondary
Percentage Rent (as hereinafter defined).

 

Notwithstanding anything to the contrary, in no event shall annual Base Rent for
the Non-CPLV Lease be less than the Base Rent in the 8th Lease year, except in
connection with a Rent Reduction Adjustment.

 

For the 8th through 10th Lease year, Percentage Rent, in each such Lease year,
shall be equal to a fixed annual amount equal to $142,500,000, adjusted as
follows: (i) in the event that the Net Revenue with respect to the Non-CPLV
Facilities for the 7th Lease year has increased versus the Net Revenue for the
12 month period immediately preceding the 1st Lease year (such increase, the
“Year 8 Non-CPLV Increase”), such $142,500,000 shall increase by the product of
(a) the Non-CPLV Factor (as defined below) and (b) the Year 8 Non-CPLV Increase;
and (ii) in the event that the Net Revenue with respect to the Non-CPLV
Facilities for the 7th Lease year has decreased versus the Net Revenue for the
12 month period immediately preceding the 1st Lease year (such decrease, the
“Year 8 Non-CPLV Decrease”), such $142,500,000 shall decrease by the product of
(a) the Non-CPLV Factor and (b) the Year 8 Non-CPLV Decrease (such resulting
amount being referred to herein as the “Non-CPLV Initial Percentage Rent”).

 

For the 11th Lease year through the 15th Lease year, Percentage Rent shall be
equal to a fixed annual amount equal to 20% of the Rent for the 10th Lease year,
adjusted as follows: (i) in the event that the Net Revenue with respect to the
Non-CPLV Facilities for the 10th Lease year has increased versus the Net Revenue
for the 8th Lease year (such increase, the “Year 11 Non-CPLV Increase”),
Percentage Rent shall increase by the product of (a) the Non-CPLV Factor and
(b) the Year 11 Non-CPLV Increase; and (ii) in the event that the Net Revenue
with respect to the Non-CPLV Facilities for the 10th Lease year has decreased
versus the Net Revenue for the 8th Lease year (such decrease, the “Year 11
Non-CPLV Decrease”), Percentage Rent shall decrease by the product of (a) the
Non-CPLV Factor and (b) the Year 11 Non-CPLV Decrease (such resulting amount
being referred to herein as “Non-CPLV Secondary Percentage Rent”).

 

3

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At the commencement of each Renewal Term, (i) the Base Rent under the Lease for
the first year of such Renewal Term shall be adjusted to fair market value rent
(provided that (A) in no event will the Base Rent during the Renewal Term be
less than the Base Rent then payable during the year immediately preceding the
commencement of the Renewal Term, and (B) no such adjustment shall cause Base
Rent to be increased by more than 10% of the prior year’s Base Rent), subject
thereafter to the annual Escalator, and (ii) the Percentage Rent for such
Renewal Term will be equal to the Percentage Rent in effect for the Lease year
immediately preceding the first year of such Renewal Term, adjusted as follows:
(1) in the event that the Net Revenue with respect to the Non-CPLV Facilities
for the Lease year immediately preceding the applicable Renewal Term has
increased versus the Net Revenue for (x) in respect of the first Renewal Term,
the 10th Lease year and (y) for each subsequent Renewal Term, the Lease year
prior to the first Lease year of the immediately preceding Renewal Term (such
increase, the “Renewal Term Non-CPLV Increase”), Percentage Rent shall increase
by the product of (a) the Non-CPLV Factor and (b) the Renewal Term Non-CPLV
Increase; and (ii) in the event that the Net Revenue with respect to the
Non-CPLV Facilities for the Lease year immediately preceding the applicable
Renewal Term has decreased versus the Net Revenue for (x) in respect of the
first Renewal Term, the 10th Lease year and (y) in respect of each subsequent
Renewal Term, the Lease year prior to the first Lease year of the immediately
preceding Renewal Term (such decrease, the “Renewal Term Non-CPLV Decrease”),
Percentage Rent shall decrease by the product of (a) the Non-CPLV Factor and (b)
the Renewal Term Non-CPLV Decrease. The Lease shall contain a customary
mechanism by which Landlord and Tenant shall determine the fair market value
adjustment to Base Rent at least 12 months prior to the commencement of the
applicable Renewal Term. The fair market valuation shall be as of the date of
commencement of the applicable Renewal Term.

 

The “Non-CPLV Factor” shall be equal to: (i) for the 8th Lease year through the
10th Lease year, 19.5%; and (ii) from and after the 11th Lease year, 13%.

 

In no event shall Percentage Rent under the Non-CPLV Lease be less than $0.00.

 

From and after the commencement of the 8th Lease year, Base Rent for the Lease
will be subject to an annual escalator (the “Escalator”) equal to the higher of
2% and the Consumer Price Index (“CPI”) increase with respect to such year,
above the previous lease year’s Base Rent (provided, for purposes of applying
the Escalator so as to calculate the Base Rent payable during the 8th Lease
Year, the Base Rent during the 7th Lease Year shall be deemed to be
$332,500,000, to which sum the Escalator shall be applied in order to derive the
Base Rent payable during the 8th Lease Year).

 

CPLV Lease:

 

(a) For the first 7 Lease years, Rent of $165,000,000 per Lease year, subject to
the annual Escalator.

 

(b) From and after the commencement of the 8th Lease year, (i) Base Rent equal
to 80% of the Rent for the 7th Lease year, subject to the annual Escalator, plus
(ii) Percentage Rent equal to the CPLV Initial Percentage Rent (as hereinafter
defined), as adjusted in the 11th Lease year as described below.

 

4

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Notwithstanding anything to the contrary, in no event shall annual Base Rent for
the CPLV Lease be less than 80% of the Rent for the 7th Lease year.

 

For the 8th Lease year through the 10th Lease year, Percentage Rent shall be
equal to a fixed annual amount equal to 20% of the Rent for the 7th Lease year,
adjusted as follows: (i) in the event that the Net Revenue with respect to the
CPLV Facility for the 7th Lease year has increased versus the Net Revenue for
the 12 month period immediately preceding the 1st Lease year (such increase, the
“Year 8 CPLV Increase”), Percentage Rent shall increase by the product of
(a) 13% (the “CPLV Factor”) and (b) the Year 8 CPLV Increase; and (ii) in the
event that the Net Revenue with respect to the CPLV Facility for the 7th Lease
year has decreased versus the Net Revenue for the 12 month period immediately
preceding the 1st Lease year (such decrease, the “Year 8 CPLV Decrease”),
Percentage Rent shall decrease by the product of (a) the CPLV Factor and (b) the
Year 8 CPLV Decrease (such resulting amount being referred to herein as “CPLV
Initial Percentage Rent”).

 

From and after the commencement of the 11th Lease year, Percentage Rent shall be
equal to a fixed annual amount equal to the CPLV Initial Percentage Rent,
adjusted as follows: (i) in the event that the Net Revenue with respect to the
CPLV Facility for the 10th Lease year has increased versus the Net Revenue for
the 7th Lease year (such increase, the “Year 11 CPLV Increase”), Percentage Rent
shall increase by the product of (a) the CPLV Factor and (b) the Year 11 CPLV
Increase and (ii) in the event that the Net Revenue with respect to the CPLV
Facility for the 10th Lease year has decreased versus the Net Revenue for the
7th Lease year (such decrease, the “Year 11 CPLV Decrease”), Percentage Rent
shall decrease by the product of (a) the CPLV Factor and (b) the Year 11 CPLV
Decrease.

 

At the commencement of each Renewal Term, (i) the Base Rent under the CPLV Lease
for the first year of such Renewal Term shall be adjusted to fair market value
rent (provided that (A) in no event will the Base Rent during the Renewal Term
be less than the Base Rent then payable during the year immediately preceding
the commencement of the Renewal Term, and (B) no such adjustment shall cause
Base Rent to be increased by more than 10% of the prior year’s Base Rent),
subject thereafter to the annual Escalator, and (ii) the Percentage Rent for
such Renewal Term will be equal to the Percentage Rent in effect for the Lease
year immediately preceding the first year of such Renewal Term, adjusted as
follows: (1) in the event that the Net Revenue with respect to the CPLV Facility
for the Lease year immediately preceding the applicable Renewal Term has
increased versus the Net Revenue for (x) in respect of the first Renewal Term,
the 10th Lease year and (y) for each subsequent Renewal Term, the Lease year
prior to the first Lease year of the immediately preceding Renewal Term (such
increase, the “Renewal Term CPLV Increase”), Percentage Rent shall increase by
the product of (a) the CPLV Factor and (b) the Renewal Term CPLV Increase; and
(ii) in the event that the Net Revenue with respect to the CPLV Facility for the
Lease year immediately preceding the applicable Renewal Term has decreased
versus

 

5

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the Net Revenue for (x) in respect of the first Renewal Term, the 10th Lease
year and (y) in respect of each subsequent Renewal Term, the Lease year prior to
the first Lease year of the immediately preceding Renewal Term (such decrease,
the “Renewal Term CPLV Decrease”), Percentage Rent shall decrease by the product
of (a) the CPLV Factor and (b) the Renewal Term CPLV Decrease. The CPLV Lease
shall contain a customary mechanism by which Landlord and Tenant shall determine
the fair market value adjustment to Base Rent at least 12 months prior to the
commencement of the applicable Renewal Term. The fair market valuation shall be
as of the date of commencement of the applicable Renewal Term.

 

In no event shall Percentage Rent under the CPLV Lease be less than $0.00.

 

“Net Revenue” means: the sum of, without duplication, (i) the amount received by
Tenant from patrons at the CPLV Facility or any Non-CPLV Facility for gaming,
less refunds and free promotional play provided pursuant to a rewards, marketing
and/or frequent users program (including rewards granted by affiliates of
Tenant), and less amounts returned to patrons through winnings at the CPLV
Facility or any Non-CPLV Facility (the amounts described in this clause (i),
“Gaming Revenue”); and (ii) the gross receipts of Tenant for all goods and
merchandise sold, the charges for all services performed, or any other revenues
generated or otherwise payable to Tenant (including, without limitation, use
fees, retail and commercial rent, revenue from rooms, accommodations, food and
beverage, and the proceeds of business interruption insurance) in, at, or from
the Leased Property for cash, credit, or otherwise (without reserve or deduction
for uncollected amounts), but excluding pass-through revenues collected by
Tenant to the extent such amounts are remitted to the applicable third party
entitled thereto (the amounts described in this clause (ii), “Retail Sales”);
less (iii) the retail value of accommodations, merchandise, food and beverage,
and other services furnished to guests of Tenant without charge or at a reduced
charge (and, with respect to a reduced charge, such reduction in Net Revenue
shall be in proportion to the reduced charge) (the amounts described in this
clause (iii), “Promotional Allowances”). For purposes of clarification, (i)
subject to clause 3(y) of the section of this Lease Term Sheet titled
“Assignment by Tenant”, with respect to any sublease from Tenant to a party that
is not a subsidiary of Tenant, Net Revenue shall not include Gaming Revenues,
Retail Sales or Promotional Allowances received by such subtenant but shall
include the rent received by Tenant under such sublease, and (ii) if Gaming
Revenue, Retail Sales or Promotional Allowances of a subsidiary of Tenant are
taken into account for purposes of calculating Net Revenue, any rent received by
Tenant from such subsidiary shall not also be taken into account in determining
Net Revenue. For the avoidance of doubt, gaming taxes and casino operating
expenses (such as salaries, income taxes, employment taxes, supplies, equipment,
cost of goods and inventory, rent, office overhead, marketing and advertising
and other general administrative costs) will not be deducted in arriving at Net
Revenue. Net Revenue will be calculated on an accrual basis for these purposes,
as required under GAAP. Net Revenue shall be determined separately for each
Lease, with respect to the applicable Facilities subject to each such Lease.

 

6

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Rent Allocation   Rent will be allocated under section 467 of the Code and
regulations thereunder on a declining basis within the 115/85 safe harbor,
adjusted as necessary such that the REIT’s pro rata share of Landlord’s
anticipated free cash flow from operations, after payment by Landlord (and its
subsidiaries) of all required debt service and operating expenses, is no less
than 100% of the REIT’s anticipated taxable income assuming annual CapEx
Reimbursements of $78.0 million. Triple Net Lease   Subject to the provision
below regarding Landlord’s reimbursement to Tenant of Capital Expenditures (the
“CapEx Reimbursement”), the Leases will be absolute, traditional triple net
leases. Tenant shall pay all Rent absolutely net to Landlord, without abatement,
and unaffected by any circumstance (except as expressly provided below in the
cases of casualty and condemnation and the CapEx Reimbursement). Subject to the
CapEx Reimbursement, Tenant will assume complete responsibility for the
condition, operation, repair, alteration and improvement of the Facilities, for
compliance with all legal requirements (whether now or hereafter in effect),
including, without limitation, all environmental requirements (whether arising
before or after the effective date of the Leases), and for payment of all costs
and liabilities of any nature associated with the Facilities, including, without
limitation, all impositions, taxes, insurance and utilities, and all costs and
expenses relating to the use, operation, maintenance, repair, alteration and
management thereof. Opco and Tenant will, jointly and severally, provide a
customary environmental indemnity to Landlord. Expenses, Maintenance, Repairs
and Maintenance Capital Expenditures, Minor Alterations  

Tenant shall be responsible for the maintenance and repair of the Leased
Properties (including Capital Expenditures with respect thereto, but subject to,
and in accordance with, the provisions of the immediately following eight
paragraphs). For purposes hereof, the term “Capital Expenditures” shall mean all
expenditures of Tenant relating to physical improvements at the Facilities
capitalized in accordance with GAAP and in a manner consistent with Tenant’s
audited financial statements.

 

Under the Leases, Landlord shall reimburse to Tenant an annual amount in respect
of Capital Expenditures incurred by Tenant with respect to the Leased Properties
under the Non-CPLV Lease and CPLV Lease in the amount equal to the lesser of (1)
$78.0 million per Lease year in the aggregate (decreasing proportionately upon
any Facility ceasing to be Leased Properties pursuant to the terms of the
Non-CPLV Lease or CPLV Lease in proportion with the Rent Reduction Adjustment
(as defined below in the section titled “Casualty”)), and (2) 42.5% of all
Capital Expenditures (other than any Capital Expenditures that are otherwise
excluded from the Minimum CapEx Amount) (such lesser amount, the “CapEx
Reimbursement Amount”). The CapEx Reimbursement Amount shall be applied 75% to
the Non-CPLV Lease and 25% to the CPLV Lease, subject to adjustment as agreed
upon by Propco to the extent required by (or to improve the terms of) any CPLV
financing. The portion of the CapEx Reimbursement Amount applied to the Non-CPLV
Lease shall be allocated among the Tenants under the Non-CPLV Lease as
determined by Tenant. Such CapEx Reimbursement Amount shall be decreased (but
not below $0.00) each Lease year, for such Lease year only, by an amount equal
to 50% of excess cash flow (to be defined in a manner consistent with Tenant’s
financing documentation) in excess of $10 million generated by Tenant from the
Facilities during the prior year. Such decrease will be structured in a manner
to comply with REIT requirements. Landlord and Tenant shall cooperate in good
faith to ensure that the portion of any improvements to which Landlord’s CapEx
Reimbursement Amount relates will be treated as Landlord’s capital expenditures
for Landlord’s financial reporting purposes.

 

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Within 30 days after the end of each month, Tenant shall provide to Landlord a
report setting forth all revenues and Capital Expenditures for the preceding
month for the Non-CPLV Facilities (in the aggregate), on the one hand, and the
CPLV Facility, on the other hand, and include Tenant’s request identifying the
portion of the CapEx Reimbursement Amount it is requesting to be paid. Within 15
days after Landlord’s receipt of such report, Landlord shall pay Tenant an
amount equal to the lesser of (i) an estimated one-twelfth portion of the
applicable CapEx Reimbursement Amount payable (as reasonably estimated in
accordance with the applicable budget preparation process) in respect of each
Lease year, or (ii) the actual amount of Capital Expenditures incurred by Tenant
during such month, multiplied by a fraction, the numerator of which is the
estimated CapEx Reimbursement Amount for that year, and the denominator of which
is the Minimum CapEx Amount. Payment of the CapEx Reimbursement Amount shall be
reconciled on a quarterly and year-end cumulative basis such that, (a) within
the later of (x) 15 days after Tenant’s delivery of the required quarterly
reporting or (y) 45 days after the end of each quarter and (b) within 30 days
after the delivery of audited year-end financial statements (as applicable),
quarterly and at year end Landlord will have paid to Tenant an amount equal to
the ratio of the CapEx Reimbursement Amount to the Minimum CapEx Amount (in each
case, as the same may be adjusted as provided herein), multiplied by the actual
amount of Capital Expenditures paid by Tenant for such period, provided, in no
event will Landlord pay to Tenant more than its applicable CapEx Reimbursement
Amount for such year. In the event that Landlord does not reimburse Tenant for
such costs within the time periods set forth above and after Tenant’s 15-day (or
30-day, as applicable) written request therefor, Tenant shall have the right to
deduct such sums from subsequent installments of Rent payable under the Non-CPLV
Lease or CPLV Lease, as applicable. In the event that Tenant fails to pay Rent
as and when due under the Non-CPLV Lease or CPLV Lease beyond all applicable
notice and cure periods, Landlord shall have the right to deduct such unpaid
Rent amounts from subsequent installments of the CapEx Reimbursement Amount
payable under the Non-CPLV Lease or CPLV Lease, as applicable.

 

In each calendar year during the Term, Tenant must expend sums for Capital
Expenditures (other than with respect to the limitations set forth in the final
paragraph of this section) in an annual amount at least equal to $165,000,000
(such amount being a gross amount toward which the CapEx Reimbursement Amount
may be applied), which annual amount shall be increased or decreased with the
inclusion or removal of Leased Properties from the Leases, in proportion with
the EBITDAR (as defined below) of any new or sold Leased Property versus the
EBITDAR of all the Leased Properties (such amount, as adjusted, the “Minimum
CapEx Amount”), which EBITDAR calculation shall be determined based on the prior
12 month period. The Minimum CapEx Amount requirement shall be allocated as
follows (subject to adjustment as agreed upon by Landlord to the extent required
by (or to

 

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improve the terms of) any CPLV financing): (i) $28,000,000 to the CPLV Lease;
(ii) $85,000,000 to the Non-CPLV Lease; and (iii) the balance to the CPLV Lease
and/or the Non-CPLV Lease in such proportion as Tenant may elect. Either
Tenant’s failure to expend its share of the Minimum CapEx Amount shall be deemed
a default under the applicable Lease, and if such Tenant fails to expend its
share of the Minimum CapEx Amount for 60 days after written notice to such
Tenant, such failure shall be deemed an Event of Default under the applicable
Lease. In addition, if such Tenant does not spend the full amount of its share
of the Minimum CapEx Amount as required under the applicable Lease, Landlord
shall have the right to seek the remedy of specific performance to require such
Tenant to spend any such unspent amount. For the avoidance of doubt, Tenants’
obligations to spend the Minimum CapEx Amount shall constitute monetary
obligations included in the Lease guarantor’s obligations with respect to the
Leases.

 

The sum of the Capex expenditures made by Tenant shall be determined in
accordance with GAAP.

 

“EBITDAR” means, for any applicable period, the net income or loss of a Person,
determined in accordance with GAAP, adjusted by excluding (1) income tax
expense, (2) consolidated interest expense (net of interest income), (3)
depreciation and amortization expense, (4) any income, gains or losses
attributable to the early extinguishment or conversion of indebtedness or
cancellation of indebtedness, (5) gains or losses on discontinued operations and
asset sales, disposals or abandonments, (6) impairment charges or asset
write-offs, including, without limitation, those related to goodwill or
intangible assets, long-lived assets, and investments in debt and equity
securities, in each case, in accordance with GAAP, (7) any non-cash items of
expense (other than to the extent such non-cash items of expense require or
result in an accrual or reserve for future cash expenses), (8) extraordinary
gains or losses (9) unusual or non-recurring gains or items of income or loss
and (10) rent expense with respect to the applicable Leased Property. In
connection with any EBITDAR calculation made pursuant to the Leases, (i) Tenant
shall provide Landlord all supporting documentation and backup information with
respect thereto as may be reasonably requested by Landlord, and (ii) such
calculation shall be as reasonably agreed between Landlord and Tenant.

 

Propco shall have the right to designate an observer on the Opco Board in
accordance with the Summary Term Sheet for Proposed Restructuring, which
observer shall have the opportunity to participate in all discussions and
meetings of the Board and applicable committee regarding Capital Expenditures,
budgeting, planning and construction of capital improvements for the (existing
and new) Facilities and to receive all materials given to committee members in
connection with such matters.

 

Tenant shall be permitted to make any alterations and improvements (including
Material Alterations (defined below)) to the Facilities in its reasonable
discretion; provided, however, that (i) all alterations must be of equal or
better quality than the applicable existing Facility, as applicable, (ii) any
such alterations do not have an adverse effect on the structural integrity

 

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of any portion of the Leased Properties, and (iii) any such alterations would
not otherwise result in a diminution of value to any Leased Properties. If any
alteration does not meet the standards of (i), (ii) and (iii) above, then such
alteration shall be subject to Landlord’s approval, which approval shall not be
unreasonably withheld, conditioned or delayed. “Material Alteration” shall mean
Tenant elects to (i) materially alter a Facility, (ii) expand a Facility, or
(iii) develop the undeveloped land leased pursuant to the Lease, and, in each
case, the cost of such activity exceeds $50,000,000.

 

For the avoidance of doubt, Capital Expenditures in respect of after-acquired
property that is not part of the Leased Property will not be credited toward the
Minimum CapEx Amount. In addition, 50% of all Capital Expenditures constituting
Material Alterations will be credited toward the Minimum CapEx Amount, and the
other 50% of such Capital Expenditures constituting Material Alterations will
not be credited toward the Minimum CapEx Amount.

Material Alterations;

Growth Capex;

Development of Undeveloped Land

 

In the event Tenant is going to perform any Material Alteration, Tenant shall
notify Landlord of such Material Alteration. Within 30 days of receipt of a
notification of a Material Alteration, Landlord shall notify Tenant as to
whether Landlord will provide financing for such proposed Material Alteration
and, if so, the terms and conditions upon which it would do so. Tenant shall
have 10 days to accept or reject Landlord’s financing proposal. If Landlord
declines to finance a proposed Material Alteration, Tenant shall be permitted to
secure outside financing or utilize then existing available financing for a
9-month period, after which 9-month period, if Tenant has not secured outside or
then-existing available financing, Tenant shall again be required to first seek
financing from Landlord.

 

If Landlord agrees to finance the Material Alteration and Tenant rejects the
terms thereof, Tenant shall be permitted to either use then existing available
financing or seek outside financing for a 9-month period for such Material
Alteration, in each case on terms that are economically more advantageous to
Tenant than offered under Landlord’s financing proposal, and if Tenant elects to
utilize economically more advantageous financing it shall provide Landlord with
reasonable evidence of the terms of such financing. Prior to any advance of
funds (if applicable), Tenant and Landlord shall enter into the agreements
necessary to effectuate the applicable terms of Landlord financing (including,
without limitation, an amendment to each of the applicable Leases if financing
is structured as a Rent increase).

 

If Tenant constructs a Material Alteration with its then existing available
financing or outside financing, (i) during the Term, such Material Alteration
shall be deemed part of the Leased Property solely for the purpose of
calculating Percentage Rent and shall for all other purposes be Tenant’s
property and (ii) following expiration or termination of the Term, such Material
Alteration shall be Tenant’s property but Landlord shall have the option to
purchase such property for fair market value. If Landlord does not elect to
purchase such Material Alteration, Tenant shall, at its option, either remove
the Material Alteration from the Leased Property and restore the Leased Property
to the condition existing prior to such Material Alteration

 

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  being constructed, at Tenant’s own cost and expense and prior to expiration or
earlier termination of the Term, or leave the Material Alteration at the Leased
Property at the expiration or earlier termination of the Term, at no cost to
Landlord. If Landlord elects to purchase the Material Alteration, any amount due
to Tenant for the purchase shall be credited against any amounts owed by Tenant
to Landlord under the applicable Lease (including damages, if any, in connection
with the termination of such Lease). If Landlord agrees to finance a proposed
Material Alteration and Tenant accepts the terms thereof, such Material
Alteration shall be deemed part of the Leased Property for all purposes. Right
of First Refusal  

Tenant’s Right of First Refusal:

 

Prior to consummating a transaction whereby Landlord or any of its affiliates
(provided, however, that this provision will not apply if the MLSA/Guaranty has
been terminated by Landlord or CEC (or an affiliate thereof) is otherwise no
longer responsible for management of the Facilities with the written consent of
Landlord ) will own, operate or develop a domestic (U.S.) gaming facility
outside of Las Vegas, Nevada (either existing prior to such date or to be
developed) that is not then subject to a pre-existing lease or management
agreement in favor a third-party operator that was not entered into in
contemplation of such acquisition or development, Landlord shall notify Tenant
and CEC of the subject opportunity. CEC (or its designee) shall have the right
to lease (and Manager manage) such facility, and if such right is exercised
Landlord and CEC (or its designee) will structure such transaction in a manner
that allows the subject property to be owned by Landlord and leased to CEC (or
its designee). In such event, CEC (or its designee) shall enter into a lease
with respect to the additional property whereby (i) rent thereunder shall be
established based on formulas consistent with the EBITDAR coverage ratio
(determined based on the prior 12 month period) with respect to the Lease then
in effect (the “Allocated Rent Amount”) and (ii) such other terms that CEC (or
its designee) and Landlord agree upon shall be incorporated. In the event that
the foregoing right is not exercised by CEC (or its designee), Landlord (or an
affiliate thereof) shall have the right to consummate the subject transaction
without Tenant’s and/or CEC’s involvement, provided the same is on terms no more
favorable to the counterparty than those presented to Tenant for consummating
such transaction.

 

The mechanics and timing of applicable notices in respect of, and the exercise
of, Tenant’s ROFR will be more particularly set forth in the Lease.

 

Landlord’s Right of First Refusal:

 

Prior to consummating a transaction whereby Tenant or any of its affiliates
(including CEC or any of its affiliates) (provided, however, that this provision
will not apply if the MLSA/Guaranty has been terminated by Propco or, with
Propco’s consent, CEC (or an affiliate thereof) is otherwise no longer managing
the Facilities) will own, operate or develop a domestic (U.S.) gaming facility
outside of Las Vegas, Nevada (either existing prior to

 

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such date or to be developed) that is not subject to a lease or management
agreement in favor a third-party operator that was not entered into in
contemplation of such acquisition or development, Tenant shall notify Landlord
of the subject opportunity. Landlord shall have the right to own such facility
and lease it to Tenant, and if Landlord exercises such right then Tenant and
Landlord will structure such transaction in a manner that allows the subject
property to be owned by Landlord and leased to Tenant (and be managed by
Manager). In such event, Tenant and Landlord shall amend the Lease by (i) adding
the additional property as Leased Property, (ii) increasing Rent by the
Allocated Rent Amount with respect to such property and (iii) incorporating such
other terms that Tenant and Landlord have agreed to. In the event that Landlord
declines its right to own the facility, Tenant (or an affiliate thereof) shall
have the right to consummate the subject transaction without Landlord’s
involvement, provided the same is on terms no more favorable to the counterparty
than those presented to Landlord for consummating such transaction. Further, in
the event Landlord declines its right to own such facility, the Lease shall
provide for similar terms as those provided in the Penn Gaming lease with
respect to any such facilities which are located outside of Las Vegas, Nevada
and within the restricted area (as defined in the Penn Gaming lease but reduced
to 30 miles) of any existing Non-CPLV Facilities.

 

The mechanics and timing of applicable notices in respect of, and the exercise
of, Landlord’s ROFR will be more particularly set forth in the Lease.

Permitted Use   Tenant shall use the Leased Property for hotel, gaming,
entertainment, conference, retail and other uses consistent with its current
use, or with prevailing industry use.

Landlord Sale of

Properties

 

Landlord may sell, without Tenant consent in each instance, any or all of the
Facilities, upon the following terms: (i) the purchaser shall enter into a
severance lease with Tenant for the sold Facility(ies) on substantially the same
terms as contained in the applicable Lease, with an appropriate rent adjustment;
(ii) the applicable Lease shall be modified as necessary to reflect the removal
of the applicable Facility(ies), including, without limitation, an adjustment to
the Rent thereunder so as to preserve the same economics following the entry
into such severance lease; and (iii) CEC and Manager shall enter into a new
MLSA/Guaranty with respect to the severance lease on terms substantially similar
to CEC’s obligations with respect to the MLSA/Guaranty with respect to the
Leases. The Leases shall not be cross-defaulted with any such severance lease.

 

Each Lease shall survive any such assignment or transfer by Landlord and the
successor Landlord shall become a party thereto.

 

If the partnership (as opposed to the spin-off) structure is used, Landlord’s
right to sell the Facilities as described above shall be subject to compliance
with a customary Tax Protection Agreement protecting CEOC from adverse tax
consequences resulting from asset sales or repayment of debt below certain
thresholds.

 

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Assignment by Tenant  

Tenant will not have the right to assign portions of the Leases, however, the
following direct or indirect assignments will be permitted, as well as others of
a similar nature:

 

1) An assignment of the entire (i.e., including all Facilities thereunder)
Non-CPLV Lease and/or CPLV Lease, as the case may be, to a permitted lender
(described in further detail below) for collateral purposes, any assignment to
such permitted lender or any other purchaser upon a foreclosure or transaction
in lieu of foreclosure, and any assignment to any subsequent purchaser
thereafter each shall be permitted; provided, however, that in all such
transfers, CEC is not released from any of its obligations under the applicable
MLSA/Guaranty, and the foreclosing lender or any purchaser or successor
purchaser must keep the MLSA/Guaranty in place unless Landlord has consented (in
its sole discretion) to the termination of the MLSA/Guaranty, as more
particularly provided in the MLSA/Guaranty term sheet, and if Landlord has so
consented to an MLSA/Guaranty termination, the foreclosing lender or any
purchaser or successor purchaser shall engage an “acceptable operator”
(satisfying parameters to be set forth in each of the Leases with respect to,
among other things, gaming and other appropriate operational experience and
qualification) to operate the Non-CPLV Facilities and/or the CPLV Facility (as
applicable).

 

2) An assignment to an affiliate of Tenant, to CEC or an affiliate of CEC.

 

3) Any sublease of any portion of the premises, pursuant to a bona-fide third
party transaction, so long as (i) Tenant is not released from any of its
obligations under the applicable Lease, and (ii) such transaction will not
result in a violation of any licensing requirements (e.g., gaming, liquor,
etc.), and (x) provided all covenants with respect to CEC management continue to
be satisfied, and (y) subject to restrictions against transactions designed to
avoid payment of Percentage Rent or otherwise to negate requirements or
provisions in the CPLV Lease or the Non-CPLV Lease; provided, however, the
following shall be permitted: (A) any subleases existing as of the effective
date of the Non-CPLV Lease or CPLV Lease, as applicable, consistent with
currently existing arrangements and (B) any affiliate subleases necessary or
appropriate for the operation of the Facilities in connection with licensing
requirements (e.g., gaming, liquor, etc.).

 

Additionally, the following transfers of direct and indirect interests in Tenant
will be permitted:

 

1) Transfers of stock in Tenant or its parent(s) on a nationally-recognized
exchange; provided, however, in order to be a permitted transfer, in the event
of a change of control of CEC, the quality of management must be generally
consistent or superior to that which existed immediately prior to the transfer.

 

2) Reconfiguration of the Board of Directors of Tenant’s parent(s) that does not
result from a change of control.

 

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3) Transfers of interests in Tenant that do not cause a change in control of
Tenant.

 

In all events, except as expressly provided in the MLSA/Guaranty term sheet,
neither Tenant nor CEC under the MLSA/Guaranty will be released in connection
with any such transfer, assignment, sublet or other disposition, whether
permitted or restricted.

 

Notwithstanding anything to the contrary, there shall be no restrictions on
direct or indirect transfers in CEC; provided, however, in order to be a
permitted transfer, in the event of a change of control of CEC, the quality of
management must be generally consistent or superior to that which existed
immediately prior to the transfer.

 

For purposes hereof, the term “change of control” shall be defined in a manner
consistent with Opco debt financing documents.

Landlord Financing   Landlord may finance or refinance its interest in any of
the Non-CPLV Facilities and CPLV Facility, as applicable (“Landlord Financing”),
in its discretion. Tenant will reasonably cooperate in all Landlord Financings.
Tenant will operate (or cause to be operated) the Facilities in compliance with
the customary terms of the Landlord Financing documents (including, without
limitation, all covenants pertaining to the maintenance of the Facilities, as
applicable, funding and maintaining lender required reserves, complying with all
cash management requirements of the lender, procuring insurance and providing
reporting), pertaining to the Facilities, as applicable, as existing as of the
effective date of the Leases and any new or additional terms of any new or
modified Landlord Financing made following the effective date of the Leases, in
each case provided that such terms are customary and do not (x) materially
increase Tenant’s obligations under the Leases, or (y) materially diminish
Tenant’s rights under the Leases (it being acknowledged that any requirement to
make Rent payments into “lockboxes” and/or Tenant’s obligation to fund and
maintain customary and reasonable reserves as required by Landlord’s lender does
not materially increase Tenant’s obligations or materially diminish Tenant’s
rights under the Leases). The Leases shall be subordinate to all Landlord
Financing, provided Landlord shall obtain commercially reasonable
non-disturbance agreements from its lenders. Tenant Financing   Tenant shall be
permitted to obtain the financing contemplated by the Restructuring Support
Agreement, and any refinancing/replacements thereof, subject to parameters on
any financing/refinancing (such as lender qualifications for entitlement to
leasehold mortgagee protections) to be set forth in the Leases. The lender (with
appropriate qualifications) under such Tenant financing (i) shall be given
notice of a default under either of the Leases, (ii) shall be afforded a right
to cure any applicable Tenant default, (iii) shall, upon an early termination or
rejection of either of the Leases, be given the opportunity to enter into a
replacement lease (on terms consistent with the applicable lease) and (iv) shall
be afforded other customary leasehold mortgagee protections.

 

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Such mortgagee protections shall provide that the Leases shall survive any debt
default by Tenant under such financing and any foreclosure by such lender on
Tenant’s leasehold interest (provided all curable defaults have been, or upon
foreclosure will be, cured), and neither Landlord nor Tenant nor its lenders or
assignees shall have termination rights under the Leases in respect thereof
(absent an Event of Default under the applicable Lease).

 

Upon foreclosure, the foreclosing lender must keep the MLSA/Guaranty in place
unless Landlord has consented (in its sole discretion) to the termination of the
MLSA/Guaranty, as more particularly provided in the MLSA/Guaranty term sheet,
and if Landlord has so consented to an MLSA/Guaranty termination, the
foreclosing lender shall engage an “acceptable operator” (satisfying parameters
to be set forth in the Leases with respect to, among other things, gaming and
other appropriate operational experience and qualification) to operate the CPLV
Facility and/or the Non-CPLV Facilities (as the case may be).

Financial Statements of Tenant  

Tenant shall provide to Landlord quarterly and audited annual financial
statements (prepared in accordance with applicable securities law requirements,
including as to format and timing, and shall consent to the inclusion of such
financial statements in all public or private disclosure and offering documents
of Propco and the REIT required by applicable law) (such financial statements,
the “Tenant Financial Statements”), which financials shall separate out CPLV and
Non-CPLV performance. In addition, the Tenant under the CPLV Lease shall provide
to Landlord such additional customary and reasonable financial information
related to CPLV as may be required for the Landlord Financing pertaining to
CPLV.

 

In addition, Tenant shall provide revenue and Capital Expenditure reports to
Landlord to the extent set forth in the section above titled “Expenses,
Maintenance, Repairs and Maintenance Capital Expenditures, Minor Alterations”.

Casualty   In the event of any casualty with respect to any portion of a
Facility, Tenant shall be obligated to rebuild/restore such Facility to
substantially the same condition as existed immediately before the occurrence of
such casualty and shall have no right to terminate the CPLV Lease or the
Non-CPLV Lease (as applicable), except that, (i) for the CPLV Lease, during the
final two years of the Term, in connection with a casualty which costs in excess
of 25% of total property fair market value as determined by mutually acceptable
architect or contractor, either Landlord or Tenant may terminate the CPLV Lease,
except in the event that a renewal option is or shall be available to Tenant
under the CPLV Lease, and Tenant has or shall elect to exercise the same, in
which case neither Landlord nor Tenant may terminate the CPLV Lease under this
clause (i), (ii) for the Non-CPLV Lease, during final two years of the Term, in
connection with a casualty for any individual Facility which costs in excess of
25% of total fair market value for such individual Facility as determined by
mutually acceptable architect or contractor, either Landlord or Tenant may
terminate the Non-CPLV Lease as to such individual Facility (in which event the
Rent obligations under the Non-CPLV Lease in respect of the remaining Facilities
shall be proportionately adjusted, based on the Rent Reduction Adjustment),
except in the event that a renewal option is or shall be available to Tenant
under the Non-CPLV Lease, and Tenant has or shall

 

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elect to exercise the same, in which case neither Landlord nor Tenant may
terminate the Non-CPLV Lease under this clause (ii), and (iii) Tenant shall not
have an obligation to rebuild/restore solely to the extent the casualty was
uninsured under the insurance policies Tenant is required to keep in place under
the Lease or CPLV lease, as applicable.

 

The “Rent Reduction Adjustment” with respect to a Non-CPLV Facility shall mean
(i) with respect to the Base Rent, a proportionate reduction of the Base Rent
based on the EBITDAR of such Facility versus the EBITDAR of all the Non-CPLV
Facilities, which EBITDAR calculation shall be determined based on the prior 12
month period and (ii) with respect to Percentage Rent, a reduction of the then
current dollar amount based on excluding the Net Revenue of the applicable
Facility from the Percentage Rent formula on a pro forma basis.

Condemnation  

If all of the CPLV Facility is permanently taken, or if a substantial portion of
the CPLV Facility is taken such that the CPLV Facility is rendered Unsuitable
for its Primary Intended Use (as hereinafter defined), then the CPLV Lease will
terminate. If all of any individual Non-CPLV Facility under the Non-CPLV Lease
is permanently taken, or if a substantial portion of such Non-CPLV Facility is
taken such that the same is rendered Unsuitable for its Primary Intended Use,
then the Non-CPLV Lease will terminate as to such individual Non-CPLV Facility,
and the Rent shall be reduced by the Rent Reduction Amount with respect to the
applicable Non-CPLV Facility. In any such case (when the applicable Lease is
terminated in whole or in part), the applicable award will be distributed, first
to Landlord in payment of the fair market value of Landlord’s interest in the
applicable Leased Property, then to Tenant in payment of the fair market value
of the Tenant’s property which was so taken, and the balance of the award if
any, to Landlord. In the case of a partial or non-permanent condemnation in
which the applicable Leased Property is not rendered Unsuitable for its Primary
Intended Use, the applicable Lease will continue unabated except that Rent shall
be adjusted in proportion to the portion of the Leased Property that was taken
(based on a mechanic to be set forth in the Leases, and, with respect to the
Non-CPLV Facilities only, the Rent Reduction Adjustment).

 

For purposes hereof, “Unsuitable for Its Primary Intended Use” shall mean a
state or condition of the CPLV Facility or any Non-CPLV Facility such that by
reason of a partial taking by condemnation, the same cannot, following
restoration thereof (to the extent commercially practical), be operated on a
commercially practicable basis for its primary Permitted Use (or the use to
which it was primarily being used immediately preceding the taking), taking into
account, among other relevant economic factors, the amount of square footage and
the estimated revenue affected by such taking.

Events of Default   Standard events of default including failure to pay monetary
sums and/or failure to comply with the covenants set forth in the Leases. With
respect to monetary defaults, Tenant shall be entitled to notice and a 10 day
cure period. With respect to non-monetary defaults, (unless such default is an
automatic event of default as shall be provided in the Leases (e.g., bankruptcy
of the Tenant or Guarantor)) Tenant shall be entitled to notice

 

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and, to the extent the Leases do not otherwise specify a cure period, so long as
Tenant (i) commences to cure within 30 days after receipt of notice and (ii)
continues to diligently attempt to cure the applicable non-monetary default,
such non-monetary default shall not become an Event of Default unless it is not
cured within 180 days, provided, however, such 180-day outside date shall not
apply during the first five (5) years of the term of the Leases. Each of the
Leases shall require Landlord to deliver all notices of default to CEC and
Tenant concurrently. Landlord will refrain from exercising remedies under the
Lease in respect of an Event of Default for the duration of the cure periods
furnished to CEC as specifically provided in the MLSA/Guaranty term sheet.

 

A default under the Non-CPLV Lease shall not be a default under the CPLV Lease.
With respect to the Non-CPLV Lease, (a) during the term of the initial Landlord
financing with respect to the Non-CPLV Facilities, a default under the CPLV
Lease shall be a default under the Non-CPLV Lease, and (b) from and after the
replacement of the initial Landlord financing with respect to the Non-CPLV
Facilities with replacement financing, a default under the CPLV Lease shall not
be a default under the Non-CPLV Lease.

 

Any default by Tenant with respect to a Tenant Financing or Landlord with
respect to a Landlord Financing shall not be considered a default under the
leases.

Remedies upon Event of Default   If Landlord elects to terminate the Non-CPLV
Lease or CPLV Lease upon an Event of Default by Tenant during the Term
(including any Renewal Terms for which Tenant has exercised its renewal option),
then Landlord shall be entitled to seek damages from Tenant and any guarantor
with respect to an acceleration of future rents in accordance with applicable
law, but in no event shall such damages exceed the difference between (i) the
net present value of the Rent for the applicable Leased Properties for the
balance of the Initial Term and/or such Renewal Term if exercised (as
applicable), minus (ii) the net present value of the fair market rental for the
applicable Leased Properties for the balance of the Initial Term and/or such
Renewal Term if exercised (as applicable). Alternative Dispute Resolution   The
parties will reasonably consider an alternative dispute resolution process as
part of the negotiation of the definitive documentation.

Effect of Lease

Termination:

  If the Non-CPLV Lease or CPLV Lease is terminated for any reason, at
Landlord’s option (1) Tenant will cooperate (and shall cause Manager to
cooperate) to transfer to a designated successor at fair market value all
tangible personal property located at each Facility (as applicable) and used
exclusively at such Facility (as applicable); and/or (2) Tenant shall stay in
possession and continue to operate the business in the same manner as prior
practice (for a period not to exceed 2-years) while the identity of a successor
tenant is determined. Any amount due to Tenant hereunder for the purchase of the
personal property shall be credited by Landlord against any amounts owed by
Tenant to Landlord under the applicable Lease (including damages, if any, in
connection with the termination of such Lease).

 

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  The foregoing is subject to the express terms of the MLSA/Guaranty in the
event of a Non-Consented Lease Termination (as defined in the MLSA/Guaranty term
sheet) of the Non-CPLV Lease or CPLV Lease. REIT Provisions  

Each Lease shall contain certain provisions required to satisfy REIT-related
requirements applicable to Landlord, including:

 

- Tenant shall not sublet, assign or enter into any management arrangements for
the Leased Property pursuant to which subtenant rent would be based on net
income or profits of the subtenant in any manner which could reasonably be
expected to cause any portion of the amounts received by Landlord pursuant to
the applicable Lease to fail to qualify as “rents received from real property”
within the meaning of Section 856(d) of the Code (or any similar or successor
provision thereto), or which could reasonably be expected to cause any other
income of Landlord to fail to qualify as income described in Section 856(c)(2)
of the Code.

 

- Landlord shall have the right to assign the Leases to another person (e.g., a
taxable REIT subsidiary) in order to maintain landlord’s REIT status.

 

- Tenant shall be obligated to provide information to Landlord necessary to
verify REIT compliance.

Regulatory   Landlord and Tenant shall comply with all applicable regulatory
requirements. The Non-CPLV Facilities intended to be demised under the Non-CPLV
Lease shall be severable into separate leases with respect to any Facility in
the event necessary to comply with any applicable licensing or regulatory
requirements, pursuant to a mechanism to be set forth in the Non-CPLV Lease as
agreed between Landlord and Tenant. The resulting severed leases shall be
cross-defaulted. If a Facility is so severed, Rent under the initial Lease shall
be reduced by the Rent Reduction Adjustment with respect to such Facility, and
the Rent under a lease for any such severed Facility shall be equal to such
deducted amount. Governing Law   New York, except that the provisions relating
to the creation of the leasehold estate and remedies concerning recovery of
possession of the Leased Property shall be governed by the law of the state
where the Facility is located.

 

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EXHIBIT A

Non-CPLV Facilities

 

1. Horseshoe Council Bluffs   Council Bluffs   IA    HBR Realty Company, Inc. 2.
Harrah’s Council Bluffs   Council Bluffs   IA   

Harvey’s Iowa Management Company, Inc.

 

Caesars Entertainment Operating Company, Inc. (parking lot)

3. Harrah’s Metropolis   Metropolis   IL   

Players Development, Inc.

 

Southern Illinois Riverboat/Casino Cruises, Inc.

4. Horseshoe Southern Indiana—Vessel   New Albany and Elizabeth   IN    Caesars
Riverboat Casino, LLC 5. Horseshoe Hammond   Hammond   IN   

Horseshoe Hammond, LLC

 

With Harrah’s Entertainment, Inc. for west parking structure, walkway and
pavilion

6. Horseshoe Bossier City   Bossier City   LA   

Horseshoe Entertainment

 

Bossier City Land Corporation

 

Bonomo Investment Co LLC

 

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7. Harrah’s Bossier City (Louisiana Downs)   Bossier City   LA   

Harrah’s Bossier City

 

Harrah’s Bossier City Investment Company, LLC

8. Harrah’s North Kansas City   North Kansas City and Randolph   MO   

Harrah’s North Kansas City, LLC

 

Caesars Entertainment Operating Company

9. Grand Biloxi Casino Hotel (f/k/a Harrah’s Gulf Coast) and Biloxi Land
Assemblage   Biloxi   MS   

Biloxi Casino Corp

 

Grand Casino of Mississippi, Inc.

 

Grand Casinos of Biloxi, LLC

 

East Beach Development Corp

 

Grand Casinos Inc.

10. Horseshoe Tunica   Robinsonville   MS   

Robinson Property Group LP

 

Sheraton Tunica Corporation (50%)

 

Tunica Partnership LP

11. Tunica Roadhouse   Robinsonville   MS    Tunica Roadhouse Corporation 12.
Caesars Atlantic City   Atlantic City and Pleasantville   NJ   

Boardwalk Regency Corporation

 

Caesars New Jersey Inc

 

20

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13. Bally’s Atlantic City and Schiff Parcel   Atlantic City   NJ    Bally’s Park
Place, Inc. 14. Harrah’s Lake Tahoe   Stateline   NV    Harvey’s Tahoe
Management Company, Inc. 15. Harvey’s Lake Tahoe   Stateline   NV   

Harvey’s Tahoe Management Company, Inc.

 

Reno Projects Inc.

 

Caesars Entertainment Operating Company

16. Harrah’s Reno   Reno   NV   

Reno Crossroads LLC

 

Caesars Entertainment Operating Company, Inc.

17. Harrah’s Joliet

(subject to the rights of

Des Plaines

Development

Corporation/ John Q.

Hammons)

  Joliet   IL    Des Plaines Development Limited Partnership Racetracks       
18. Bluegrass Downs   Paducah   KY   

Bluegrass Downs of Paducah, Inc.

 

Players Bluegrass Downs Inc.

 

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Miscellaneous        19. Las Vegas Land Assemblage   Las Vegas   NV   

TRB Flamingo LLC

 

Winnick Holdings LLC

 

Koval Investment Company LLC

 

DCH Exchange LLC

 

Las Vegas Resort Development Inc.

 

190 Flamingo LLC

 

Hole in the Wall LLC

20. Harrah’s Airplane Hangar   Las Vegas   NV    Caesars Entertainment Operating
Company, Inc.

 

22

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EXHIBIT B

CPLV Facilities

 

1. Caesars Palace

(excluding Octavius Tower)

   Las Vegas    NV    Caesars Palace Realty Corp

 

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SUMMARY OF TERMS

Management and Lease Support Agreement (“MLSA”)1

between CEC, Manager, Landlord and Tenant

in connection with the Leases

(all as hereinafter defined)

 

CEC:   Caesars Entertainment Corporation, a Delaware corporation Manager:   A
wholly-owned subsidiary of CEC, as manager of the Facilities under the MLSA2
Landlord:   [Propco] collectively together with its subsidiaries that own the
Facilities (as defined in the Leases), as landlord under the Leases, as more
particularly described in the “Lease Term Sheet” Tenant:   [Opco/CEOC]
collectively together with certain of its subsidiaries, as joint and several
tenants under the Leases, as more particularly described in the “Lease Term
Sheet”. If CEOC is not a joint and several tenant, CEOC shall deliver a full and
unconditional guaranty of payment and performance of all of the Tenant’s
obligations under the Leases. Leases:   (1) A certain lease of various
facilities (other than Caesars Palace Las Vegas) between Landlord and Tenant and
(2) a certain lease of Caesars Palace Las Vegas between Landlord and Tenant, as
more particularly described in the “Lease Term Sheet”

 

1  MLSA to consist of the two separate agreements on same terms to correspond to
the two separate leases. Agreements to have same terms other than as specified
herein. In connection with the incorporation of the CEC guaranty into the MLSA
rather than its being a stand-alone instrument, the definitive deal
documentation will provide that a termination of the MLSA by Tenant or Manager
(including in the case of a rejection in bankruptcy) will not, subject to the
4th and 6th Bullet Points of “CEC Guaranty” and subject to footnote 5 below,
result in termination of CEC’s guaranty obligations under the MLSA.

2  Notwithstanding anything set forth in this MLSA Term Sheet or in the RSA Term
Sheet, the Lease Term Sheet or the Debt Term Sheets, it is understood and agreed
that all assets (other than the real property transferred to Propco upon the
formation of the REIT structure) required to operate the properties consistent
with current practice (the “Facility Management Assets”), shall be transferred
to an entity (the “Facility Management Assets Owner”) so as to be made
continuously available to Manager through a bankruptcy remote structure mutually
agreeable to CEC and the Requisite Consenting Creditors that shall remove the
risk of lack of access in all events (it being understood that the structures to
be considered include the Facility Management Assets Owner being owned by
Manager and/or Landlord).

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Term:  

The MLSA commences on the date the Leases commence. The MLSA automatically
terminates, but may be replaced in accordance with the provisions described
below, with respect to any Facility if such Facility is no longer demised under
a Lease. The Term of the MLSA expires with respect to each Lease upon the
earlier to occur of (1) the date that none of the Facilities are demised under
such Lease, (2) (subject to clause (iii) of the first paragraph of the 4th
Bullet Point of “CEC Guaranty”), Tenant and Landlord terminate the MLSA with
respect to such Lease, (3) termination in connection with a Tenant Foreclosure
(pursuant to option 1 in the following section entitled “Tenant Foreclosure”)
and (4) the termination of such Lease (subject to and in accordance with the 4th
Bullet Point in “CEC Guaranty” below).

 

Notwithstanding any such termination of the MLSA, in the event of a
Non-Consented Lease Termination (as defined below), the following shall occur
(unless expressly elected not to occur by Landlord in accordance with the 6th
Bullet Point of “CEC Guaranty”): (i) the Lease and the MLSA shall be replaced on
the same terms as previously existed and (ii) the management rights and
obligations of Manager shall continue thereunder subject to and on the terms
contemplated below in the fourth Bullet Point of “CEC Guaranty” and the guaranty
obligations of CEC shall continue thereunder subject to and on the terms
contemplated below in the fourth Bullet Point of “CEC Guaranty.”3

Tenant Foreclosure:   If Tenant’s lender (or any lender, if more than one) has a
valid lien on the leasehold estate under the Leases or on the direct or indirect
equity in the Tenant, whether by mortgage, equity pledge or otherwise, and duly
forecloses on such lien following an Event of Default under Tenant’s financing
(and/or in connection with any pursuit of remedies in a bankruptcy proceeding),
such lender (the “OpCo Lenders”) shall, in connection with and as a condition to
effectuating such Tenant Foreclosure (and/or pursuit of remedies in any
proceeding), irrevocably elect one of the following: (1) with the consent of

 

3 

Notwithstanding anything contained in the section titled “Term” or otherwise in
this MLSA Term Sheet, unless the Landlord shall have terminated the Lease or
(subject to clause (iii) of the 4th Bullet Point of “CEC Guaranty”) the MLSA
expressly in writing (or expressly consented in writing to such termination),
the CEC guaranty obligations shall, subject to the 4th and 6th Bullet Points of
“CEC Guaranty” and subject to footnote 5 below, continue in effect. Each of the
Lease and the MLSA shall contain a provision stating that each document is being
entered into as part of an overall integrated transaction and that the parties
would not be entering into one document without the other. Further, the parties
will acknowledge that in a chapter 11 case, they would not reject one agreement
without rejecting the other as if they were one agreement and not separable.

 

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Landlord (in its sole and absolute discretion) and Manager, to terminate the
MLSA and, in connection with such termination, directly operate the Facilities
pursuant to the terms of the Leases, or obtain a replacement operator to operate
the Facilities or (2) to retain Manager as operator of the Facilities pursuant
to the terms of the MLSA and keep the MLSA in full force and effect in
accordance with its terms. The Opco Lenders will enter into an agreement (the
“Consent Agreement”) with Landlord, CEC and Manager to effect the consent rights
hereunder (with it being understood that any rejection of a Lease in bankruptcy
will be treated as a Non-Consented Lease Termination unless in connection
therewith (x) Landlord terminates the Manager under the MLSA or (y) Landlord
consents to the termination of the MLSA (in its sole and absolute discretion)).

 

In the event of a Non-Consented Lease Termination, the following shall occur
(unless expressly elected not to occur by Landlord in accordance with the 6th
Bullet Point of “CEC Guaranty”): (i) the Lease and the MLSA shall be replaced on
the same terms as previously existed and (ii) the management rights and
obligations of Manager shall continue thereunder subject to and on the terms
contemplated below in the 6th Bullet Point of “CEC Guaranty” and the guaranty
obligations of CEC shall continue thereunder subject to and on the terms
contemplated below in the 6th Bullet Point of “CEC Guaranty”.

REIT Management:  

The terms of the MLSA shall be reasonably acceptable to the parties thereto and
shall include, inter alia, the following terms:

 

•    Operations management provisions pursuant to which Manager will manage the
Facilities in its reasonable business judgment, on reasonable and customary
terms to be more fully set forth in the MLSA and, in any event, on terms or in a
manner not materially less favorable or detrimental to Tenant, taken as a whole,
when compared to all other properties, facilities or similar operations owned,
managed and/or operated (whether now or in the future) by Manager, taken as a
whole (but in any case no less favorable to Tenant than current practice).

 

•    All direct expenses for operating the Facilities will be reimbursed by
Tenant (including, without limitation, fees and expenses allocated to Manager
and/or Tenant for the Facilities under arrangements with Caesars Enterprise
Services, LLC (“CES”)). Manager will enter into separate shared services
arrangements with CES (and, if necessary, any other applicable affiliates) for
access to all of its services (including without limitation use of the Total
Rewards® program) for the benefit of the Facilities so that the Facilities can
be run consistent with, and on no less favorable terms and conditions

 

3

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agreed to with, any other CEC (or CEC affiliates’) directly or indirectly owned,
operated or managed facilities, without discrimination against the Facilities
(and in any case on no less favorable terms and conditions than those in current
practice).4

 

•    All expenses associated with owning and maintaining the Facility Management
Assets will be reimbursed by Tenant.

 

•    Manager may delegate duties under the MLSA to one or more affiliates on
customary terms so long as neither Landlord nor Tenant is prejudiced thereby.

CEC Guaranty:  

Pursuant to the MLSA, CEC will guaranty the payment and performance of all
monetary obligations of Tenant under the Leases, subject to the following terms:

 

•    CEC will be liable for the full amounts of the monetary obligations owed
and to be owed by Tenant in respect of the Leases (not merely for any deficiency
amount), unless and until irrevocably paid in full.

 

•    CEC will have no obligation to make a payment with respect to the Leases
unless an “Event of Default” is continuing under the Leases.

 

•    If an “Event of Default” under either of the Leases occurs, CEC shall have
no obligation to make a payment with respect to the Leases, unless CEC was given
notice of the applicable default of Tenant under the Lease or CPLV Lease, as
applicable, and (A) with respect to a monetary default, CEC failed to cure such
default on or prior to five (5) business days after Tenant’s deadline under the
applicable Lease (or, if later, after CEC’s receipt of such notice from
Landlord) and (B) with respect to a non-monetary default, CEC failed to cure
such default on or prior to Tenant’s deadline to cure such default under the
applicable Lease (or, if later, after CEC’s receipt of such notice from
Landlord).

 

•    CEC’s and Manager’s obligations with respect to each MLSA (including,
without limitation, CEC’s guaranty obligations with respect to the Lease or the
CPLV Lease, as applicable) shall terminate in the event the Lease or CPLV Lease
(as applicable) is terminated by Landlord expressly in writing (or with
Landlord’s express written consent), except to the extent of any accrued and
unpaid guaranty obligations through the date of such termination and such
damages to which Landlord is entitled due to such termination pursuant to the
Lease or CPLV Lease, as applicable (all of which shall be immediately due and
payable upon demand) (collectively, “Termination Obligations”). In addition,
CEC’s obligations with respect to each MLSA (including, without limitation,
CEC’s guaranty obligations with respect to the Lease or the CPLV Lease, as
applicable) shall terminate in the event that Manager is

 

4  In connection with the implementation of definitive transaction
documentation, Landlord must understand and approve any fee and expense
structure to the extent it impacts Landlord or any of the Facilities.

 

4

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terminated by Landlord expressly in writing (or by Tenant’s lender with
Landlord’s express written consent, in its sole and absolute discretion) as
manager of the Facilities or the CPLV Facility (as applicable)5; provided,
however, CEC’s guaranty obligations shall continue (i) to the extent of any
Termination Obligations, as applicable (all of which shall be immediately due
and payable upon demand), (ii) to cover any post-termination management
transition period during which Manager continues to act as manager and (iii) in
all respects if Manager is Terminated for Cause (as defined below). Except as
provided in this Bullet Point, CEC’s guaranty obligations under the MLSA shall
not terminate for any reason.

 

“Terminated for Cause” means either of the foregoing, which may be elected by
Landlord at its option:

 

                (1) (i) the Landlord has expressly elected to (and does)
terminate the Manager as manager and notified Manager, (ii) Landlord has
determined in good faith that such termination is for Cause (as defined below)
and (iii) an arbitrator shall have made a finding that Cause existed to
terminate the Manager in accordance with the following sentence. Manager,
Tenant, CEC and Landlord agree that the determination of whether Cause existed
to terminate Manager will be decided by binding arbitration, on an expedited
basis, pursuant to the [Commercial Arbitration Rules promulgated by the American
Arbitration Association] before a single arbitrator who shall be mutually
acceptable to Manager and Landlord and who shall conduct the arbitration in New
York, New York and

 

5  Each Lease shall provide that Manager may only be terminated as manager of
the Facilities or the CPLV Facility by Landlord (or by Tenant’s lender with
Landlord’s express written consent in its sole and absolute discretion) and, in
the event of any such termination or otherwise (including in the case of a
rejection in bankruptcy), Landlord shall have the sole right to elect to appoint
a replacement Manager (and if so elected by Landlord, Tenant (and its successor
and assigns, including under the Consent Agreement) shall be deemed to have
accepted such appointment and no other right or approval shall be necessary for
such appointment to be effective). If Landlord does not elect to appoint Manager
(or another CEC affiliate, to be made available by CEC, under the same terms as
the MLSA as provided herein) as replacement Manager (unless prevented from
making such election by order of a court or other governmental entity, automatic
stay or other legal prohibition), Landlord shall be deemed to have terminated
Manager with its express written consent. If Landlord is prevented from making
such election by order of a court or other governmental entity, automatic stay
or other legal prohibition, then Landlord and Tenant (and its successor and
assigns, including under the Consent Agreement) shall be deemed to have
consented to Manager’s continued management of the Facilities notwithstanding
the termination of the MLSA until Landlord is no longer prevented from making
such election. Each Lease shall further provide that if Manager is terminated as
manager of the Facilities or the CPLV Facility other than by Landlord (or by
Tenant’s lender with Landlord’s express written consent in its sole and absolute
discretion), then such Lease shall automatically terminate (and such termination
shall constitute a Non-Consented Lease Termination).

 

5

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who shall apply New York law (collectively, a “Cause Arbitration”). In the event
of a termination by Landlord of Manager under this clause (1), CEC’s guaranty
obligations shall continue throughout the pendency of the Cause Arbitration, and
in the event the arbitrator determines that “Cause” did not exist, (a) CEC’s
guaranty obligations shall terminate and be deemed to have terminated as of such
date of management termination and (b) Landlord shall reimburse CEC for (i) any
amounts actually received by Landlord pursuant to CEC’s guaranty obligations
under the MLSA in respect of any period following such termination during which
Manager was actually not acting as manager of the Facilities and (ii) any
reasonable and customary legal expenses actually incurred by CEC in connection
with the arbitration. In the event the arbitrator determines that “Cause” did
exist, CEC shall reimburse Landlord for any reasonable and customary legal
expenses actually incurred by Landlord in connection with the arbitration.

 

                (2) (i) Landlord has determined in good faith that Cause exists
to terminate Manager as manager, (ii) Landlord has delivered written notice to
Manager that it has determined in good faith that Cause exists to terminate the
Manager as manager, and that Landlord shall commence a Cause Arbitration to
determine whether or not Cause exists, and (iii) the arbitrator in a Cause
Arbitration determines that Cause exists to terminate the Manager, and Landlord
thereafter terminates Manager as manager. For the avoidance of doubt, if the
arbitrator determines that Cause did not exist to terminate the Manager, then
the Manager shall not be terminated and shall continue to manage the Facilities
and all guaranty obligations of CEC shall remain in place, all in accordance
with the MLSA. Further, in the event the arbitrator determines (x) that “Cause”
did not exist, Landlord shall reimburse CEC for any reasonable and customary
legal expenses actually incurred by CEC in connection with the arbitration, or
(y) that “Cause” did exist, CEC shall reimburse Landlord for any reasonable and
customary legal expenses actually incurred by Landlord in connection with the
arbitration.

 

For purposes of the foregoing, “Cause” shall mean: (i) intentional acts or
intentional omissions of Manager to the detriment of assets leased by Tenant or
owned by Landlord for the benefit of other assets managed, owned or operated by
Manager (or any other CEC affiliate), (ii) fraud, (iii) gross negligence, or
(iv) willful misconduct.

 

6

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•    Notwithstanding anything contained herein to the contrary, no termination
or consent to termination by Landlord of CEC’s or Manager’s obligations under
the MLSA shall be effective or binding without the prior written approval by the
agents or trustees under the Landlord’s secured debt facilities.

 

•    Notwithstanding anything contained herein to the contrary, in the event a
Lease is terminated without the express written consent of Landlord including,
without limitation, by a rejection in bankruptcy (a “Non-Consented Lease
Termination”), then, unless Landlord (or, during the continuation of an event of
default under Landlord’s financing, any agent or trustee under the Landlord’s
secured debt facilities) shall expressly elect otherwise in writing and
expressly consents in writing to the Lease termination, the following shall
occur without expense or loss of economic benefit to Landlord or any lender
under Landlord’s secured debt facilities: (i) Tenant (or its successors and
assigns, including under the Consent Agreement) shall transfer all of its assets
(including, without limitation, rights under licenses and with respect to
intellectual property) to a replacement entity directly or indirectly owned by
CEC or Tenant (or its successors and assigns, including under the Consent
Agreement) that will assume the rights and obligations of Tenant under the Lease
(the “Replacement Tenant”), (ii) a new lease (the “Replacement Lease”) on terms
identical to the Lease so terminated shall be entered into by Landlord with the
Replacement Tenant and (iii) to the extent not transferred pursuant to clause
(i) above or otherwise provided by Manager, CEC and CES shall replicate all
prior arrangements with respect to management, sub-management, licensing,
intellectual property and otherwise as necessary to provide for the continued
management and operation of the Facilities as existed prior to such termination,
and, upon such occurrence (x) CEC, Manager, Replacement Tenant and Landlord
shall enter into a new management and lease support agreement on terms identical
to the MLSA (and CEC, Manager and its applicable affiliates shall enter into any
necessary associated sub-management, licensing and other applicable
arrangements) and (y) the management rights and obligations of Manager and
guaranty obligations of CEC shall continue with respect to such Replacement
Lease as set forth in the MLSA. The Consent Agreement will provide that Tenant
and the OpCo Lenders will act in support of this right. If (1) the Landlord (or,
during the continuation of an event of default under Landlord’s financing, any
agent or trustee under such secured financing of Landlord) has not expressly
elected in writing that the foregoing shall not occur and (2) clauses (i), (ii)
and (iii) do not occur other than as a direct and proximate result of Landlord’s
acts or failure to act in accordance with this Bullet

 

7

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Point, then CEC’s guaranty shall not terminate. If Landlord (or, during the
continuation of an event of default under Landlord’s financing, any agent or
trustee under such Landlord financing) elects in writing that the foregoing
shall not occur and/or clauses (i), (ii) or (iii) do not occur as a direct and
proximate result of Landlord’s acts or failure to act in accordance with this
Bullet Point, then Landlord and its lenders shall have been deemed to expressly
consent to the termination of the Lease in writing (and CEC’s guaranty shall
terminate, subject to CEC’s continuing liability for the Termination
Obligations). Landlord shall have the right of specific performance to compel
CEC and/or its affiliates to comply with the foregoing. In addition, CEC,
Manager and Landlord shall have the right of specific performance to compel
Tenant (or its successors and assigns, including under the Consent Agreement
(which shall contain such remedy)) to comply with the foregoing. If Tenant (or
its successors and assigns, including under the Consent Agreement) do not
cooperate with the foregoing, CEC and Manager shall have the right to replicate
the structure, including determining the ownership and identity of the
Replacement Tenant, without regard to the interests of Tenant or its successors
(including the OpCo Lenders).

CEC Covenants:  

The MLSA shall contain customary terms and waivers of all suretyship and other
defenses by CEC and will include a covenant by CEC requiring that (a) the sale
of assets by CEC be for fair market value consideration, on arm’s-length terms
and, in the event of sales to affiliates, be subject to (i) confirmation of fair
market value by the approval of an independent group of CEC’s board of directors
and by a fairness opinion from an investment bank reasonably acceptable to
Landlord (with an approved list of investment banks to be agreed in the MLSA)
and (ii) a right of first refusal in favor of Landlord or its designee and (b)
non-cash dividends by CEC be permitted only to the extent such dividends would
not reasonably be expected to result in CEC’s inability to perform its guaranty
obligations under the MLSA.

 

The parties acknowledge that the CEC guaranty of Tenant’s first lien debt as of
the effective date will contain certain covenants of CEC and its subsidiaries in
respect of the transfer or other disposition of assets, as well as other
matters, all as more particularly outlined in the CEC Guaranty and Pledge
Agreement Covenants term sheet (such covenants or any similar or other covenants
in respect of the Opco first lien debt or any subsequent refinancing thereof,
the “Opco Debt Guaranty Covenants”). The MLSA shall contain provisions to the
effect that, if, during the

 

8

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  term of the MLSA, Tenant’s first lien debt or any subsequent refinancing
thereof is refinanced as part of a Non-Third Party Financing (as defined below),
then the Opco Debt Guaranty Covenants shall immediately spring into effect and
become effective covenants under the MLSA. “Non-Third Party Financing” means any
financing in which the Sponsors and/or any of their Affiliates (each as defined
in the CEC Guaranty and Pledge Agreement Covenants term sheet) (1) act as a
lender, trustee, agent or otherwise provides financing, or (2) holds either (x)
a controlling direct or indirect interest or (y) a direct or indirect ownership
interest of at least 10% in any such lender, trustee, agent or other provider
(any lender, trustee, agent or other provider under clause 2(x) or clause
(2)(y), a “Sponsor Lender Entity”), and in each case the amount of such
financing provided by any Sponsor and/or its Affiliate(s) and/or any Sponsor
Lender Entity either (A) exceeds 10% of such financing, or (B) is not a strictly
“passive” investment (i.e., having no vestiges of control or any ability to
exercise any decision making in respect of the overall financing other than, for
the avoidance of doubt, customary voting rights attributable to the loans that
extend to all other lenders under such financing). Collateral:   CEC’s guaranty
obligations under the Leases will be included as additional pari passu secured
obligations secured under the security agreement and any other related
instruments securing the CEC guaranty in respect of the Opco first lien debt (or
any CEC guaranty in respect of any refinancing thereof) in order to provide a
security interest in all collateral thereunder to secure such Lease obligations.
Such security interest will be a “silent” security interest that provides the
Landlord with a secured claim against CEC while any such CEC debt guaranty
remains in effect, and the Landlord shall have no voting, enforcement or default
related rights with respect to such debt guaranty or collateral, unless and
until the earlier of (x) the occurrence of a default in respect of any of CEC’s
guaranty obligations with respect to the Leases, or (y) the occurrence of a
Holdco Guaranty Breach and the Exhaustion of Remedies Date (as each such term is
defined in the form of CEC Guaranty and Pledge Agreement), in which case
Landlord shall have all rights afforded to the beneficiary of such Opco debt
guaranty and/or the Opco lender. Landlord shall be a party to such security
agreement and all related instruments that provide for such rights, subject to
the foregoing and to the following paragraph.

 

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  The collateral that secures the CEC Lease guaranty obligations shall be the
same collateral that secures any such CEC debt guaranty obligations at any time,
and the CEC Lease guaranty obligations shall be secured by such collateral on a
pari passu basis with such CEC debt guaranty obligations for so long as such
debt guaranty obligations are secured. CEC will cause the lenders benefitting
from the CEC debt guaranty to enter into an intercreditor agreement reasonably
acceptable to CEC and the Requisite Consenting Creditors containing, among other
things, provisions governing the pari passu coverage of such collateral
provisions and the “waterfall” by which any proceeds of, or collections on, the
collateral will be distributed as between the CEC debt guaranty and the Lease
guaranty obligations and such other arrangements as are consistent with this
section.

Integrated

Agreement:

  For the avoidance of doubt, each of the provisions constituting the MLSA,
including the management obligations of Manager and the guaranty obligations of
CEC, are and are intended to be part of a single integrated agreement and shall
not be deemed to be separate or severable agreements.

 

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Annex III

Terms of the PropCo Preferred Equity

 

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[REIT]

ARTICLES SUPPLEMENTARY1

SERIES A CONVERTIBLE PREFERRED STOCK2

[REIT], a Maryland corporation (the “Corporation”), hereby certifies to the
State Department of Assessments and Taxation of Maryland (the “Department”)
that:

FIRST: Pursuant to the authority expressly vested in the Board of Directors of
the Corporation (the “Board”) by Article [            ] of the charter of the
Corporation (the “Charter”) and Section 2-105 of the Maryland General
Corporation Law, the Board, by resolutions duly adopted on [            ],
201[    ], has unanimously adopted resolutions classifying and designating a
separate class of Preferred Stock (as defined herein) to be known as the “Series
A Convertible Preferred Stock” setting the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, terms and conditions of redemption and other
terms and conditions of such Series A Convertible Preferred Stock, and
authorizing the issuance of up to [                ] shares of Series A
Convertible Preferred Stock.3

SECOND: The designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, terms and conditions of redemption and other
terms and conditions of the separate class of Preferred Stock of the Corporation
designated as Series A Convertible Preferred Stock are as follows, which upon
any restatement of the Charter shall be made a part of or incorporated by
reference into the Charter with any necessary or appropriate changes to the
enumeration or lettering of Sections or subsections thereof:

Section 1. Designation and Amount. The shares of such series shall be designated
as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) and
the number of shares constituting such series shall be [            ] ([    ]).

Section 2. Maturity. The Series A Preferred Stock shall have no stated maturity
and will not be subject to any sinking fund or mandatory redemption.

 

1  NTD. Articles Supplementary subject to Maryland counsel compliance review
prior to filing with the State of Maryland, which changes shall be solely to
comply with the requirements of Maryland law.

2  NTD. As not all holders of preferred equity may elect to enter into the
Ownership Limit Waiver Agreement, provision will also be made for Series A
Preferred Units of the Operating Partnership.

3  NTD: This amount may be increased as required by the Plan in connection with
the CPLV Mezzanine Debt.

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Section 3. Rank. The Series A Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding-up of the affairs of
the Corporation, rank senior to all classes of the Common Stock (as defined
herein) and each other class of the Corporation’s stock and any other class or
series of Preferred Stock established after the original issue date of the
Series A Preferred Stock (the original issue date of Series A Preferred Stock,
the “Issue Date”) (all such shares, collectively, the “Junior Stock”), except
any such class or series of preferred stock as is designated as senior or pari
passu to the Series A Preferred Stock and approved pursuant to Section 10 below.

Section 4. Definitions. As used herein, the following terms shall have the
following meanings:

(A) “Accrued Dividends” shall mean, with respect to any share of Series A
Preferred Stock, as of any date, the accrued and unpaid dividends on such share
(whether or not declared) from, and including, the most recent Dividend Payment
Date (or the Issue Date, if such date is prior to the first Dividend Payment
Date) to, but not including, such date.

(B) “Accumulated Dividends” means, with respect to any share of the Series A
Preferred Stock, as of any date, the aggregate accumulated and unpaid dividends,
if any, on such share (whether or not declared) from the Issue Date to the most
recent Dividend Payment Date, and all unpaid Additional Payment and any
additional amounts in respect of Breaches as set forth in Section 5(A), if any,
on such share.

(C) “Additional Payment” with respect to any shares of Series A Preferred Stock
that were requested to be redeemed in the Redemption Request and were not so
redeemed on the Redemption Date, an amount equal to 5% per annum of the
Redemption Price of the shares of Series A Preferred Stock not so redeemed,
compounding quarterly and cumulating and accruing on a daily basis during the
period from the original Redemption Date through and including the actual
redemption date of such shares of Series A Preferred Stock, payable only in U.S.
dollars.

(D) “Articles Supplementary” means these Articles Supplementary for the Series A
Preferred Stock, as such may be amended from time to time.

(E) “Average VWAP” means the average of the VWAPs for each Trading Day in the
relevant period.

(F) “Breach” means any of the following events: (i) the Corporation’s failure to
pay dividends when due to the holders of the Series A Preferred Stock as
contemplated in these Articles Supplementary, (ii) the Corporation’s failure to
make any redemption payment pursuant to Section 9, (iii) the Corporation’s
failure to make any payment pursuant to Section 6, (iv) the Corporation’s
failure to convert Series A Preferred Stock pursuant to Section 7, (v) any
action undertaken by the Corporation in violation of Section 10, (vi) to the
extent not set forth in clauses (i) through (v) of this definition, the
Corporation’s failure to satisfy any its obligations and covenants set forth
herein, and (vii) the Corporation becoming the subject of a petition in
bankruptcy or any proceeding related to insolvency, receivership, liquidation or
comparable proceeding or any assignment for the benefit of creditors.

(G) “Board” has the meaning given to such term in Article First.

(H) “Business Day” means any day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
or executive order to close.

(I) “Bylaws” shall mean the Bylaws of the Corporation, as amended from time to
time.

(J) “Capital Gains Amount” has the meaning given to such term in Section 5(E).

(K) “Certificated Series A Preferred Stock” has the meaning given to such term
in Section 15(A)(iv).

(L) “Charter” has the meaning given to such term in Article First.

(M) “Code” has the meaning given to such term in Section 5(E).

 

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(N) “Common Stock” means the shares of common stock, par value $[    ] per
share, of the Corporation.

(O) “Continuing Directors” means (i) individuals who on the Issue Date
constituted the Board or (ii) any new directors whose election or nomination was
approved by at least a majority of the directors then still in office who were
either directors on the Issue Date or whose election or nomination was
previously so approved by holders of the Common Stock and Series A Preferred
Stock.

(P) “Conversion Date” means, with respect to a conversion, the date on which a
holder has complied with all of the procedures set forth in Section 7(B) to
effect such conversion, provided that a holder may specify a date upon which
such conversion must occur, and in the event such conversion does not occur by
such date, the conversion shall no longer be effective and shall be deemed to
have been withdrawn, rescinded and null and void, and the Corporation shall use
its reasonable best efforts to take all actions or make all omissions to reflect
the foregoing.

(Q) “Conversion Price” means, at any particular time, the Liquidation Preference
for a share of the Series A Preferred Stock divided by the Conversion Rate in
effect at such time.

(R) “Conversion Rate” means [                ] shares of Common Stock per share
of Series A Preferred Stock4, subject to adjustment as set forth in Section 7.

(S) “Corporation” has the meaning given to such term in Article First.

(T) “Current Market Price” per share of Common Stock (or, in the case of
Section 7(D)(iv), per share of Common Stock, capital stock or equity interests,
as applicable) on any date means for the purposes of determining an adjustment
to the Conversion Rate:

(i) for purposes of any adjustment pursuant to Section 7(D)(ii),
Section 7(D)(iv) (but only in the event of an adjustment thereunder not relating
to a Spin-Off), or Section 7(D)(v), the Average VWAP per share of Common Stock
over the five consecutive Trading Day period ending on the Trading Day
immediately preceding the Ex-Date with respect to the issuance or distribution
requiring such computation;

(ii) for purposes of any adjustment pursuant to Section 7(D)(iv) relating to a
Spin-Off, the Average VWAP per share of Common Stock, capital stock or equity
interests of the subsidiary or other business unit being distributed, as
applicable, over the first 10 consecutive Trading Days commencing on and
including the fifth Trading Day immediately following the effective date of such
distribution; and

(iii) for purposes of any adjustment pursuant to Section 7(D)(vi), the Average
VWAP per share of Common Stock over the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the Expiration
Date of the relevant tender offer or exchange offer.

(U) “Deemed Liquidation Event” means any of the following: (i) the lease of all
or substantially all of the assets of the Corporation to a party other than OpCo
(or another subsidiary of OpCo necessary for the operation of the assets of the
Corporation) or the sale, distribution, transfer or conveyance of all or
substantially all of the assets of the Corporation (in each case whether in one
transaction or a series of transactions) to another Person (including any
shareholder of the Corporation) or any Fundamental Transaction; (ii) an
acquisition of the Corporation by another person or entity by means of any
transaction or series of transactions (including any reorganization, merger,
consolidation or share transfer) where the stockholders of the Corporation
immediately preceding such transaction own, following such transaction, less
than 50% of the voting securities of the Corporation; (iii) if any person
(including any syndicate or group deemed to be a “person” under Section 13(d)(3)
of the Exchange Act and the rules

 

4  NTD: The Series A Preferred Stock will initially be convertible into [14.2]%
of the common stock of the Corporation on a fully-diluted basis.

 

3

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of the SEC thereunder) is or becomes the “beneficial owner” (as determined in
accordance with Rule 13d-3 of the Exchange Act, except that a person will be
deemed to own any securities that such person has a right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 50% or more of the total voting power of all classes
of voting stock of the Corporation; (iv) on the first day on which a majority of
the members of the Board does not consist of Continuing Directors; (v) on
approval of a plan of liquidation or dissolution of the Corporation, (vi) if the
Corporation ceases to be a REIT or (vii) if the Corporation enters into any
Non-REIT Transaction. Notwithstanding anything to the contrary herein or
otherwise, the Corporation shall not permit clauses (i) or (ii) of this
definition to occur unless the Corporation can satisfy all of its obligations
under these Articles Supplementary, including its payment obligations, if any,
after giving effect to the matters set forth in clauses (i) or (ii) of this
definition, as applicable.

(V) “Dividend Payment Date” has the meaning given to such term in Section 5(B).

(W) “Dividend Record Date” has the meaning given to such term in Section 5(B).

(X) “DTC” or “Depository” shall mean The Depository Trust Company, or any
successor depository.

(Y) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(Z) “Ex-Date” when used with respect to any issuance or distribution, means the
first date on which shares of Common Stock trade without the right to receive
such issuance or distribution.

(AA) “Fair Market Value” means the fair market value as determined in good faith
and in a reasonable manner by the Board (or an authorized committee thereof),
whose determination shall be final if certified in writing by an independent
appraiser of national reputation, and in respect of a share of Common Stock, if
the Common Stock is then listed, shall not be less than the Average VWAP per
share of the Common Stock over the five consecutive Trading Days immediately
prior to the date of determination.

(BB) “Fundamental Transaction” has the meaning given to such term in
Section 7(D)(ix).

(CC) “Global Series A Preferred Stock” has the meaning given to such term in
Section 15(A)(ii).

(DD) “holder” or “Holder” means any beneficial holder of the Series A Preferred
Stock.

(EE) “Issue Date” has the meaning given to such term in Section 3.

(FF) “Junior Stock” has the meaning given to such term in Section 3.

(GG) “Liquidation Event” has the meaning given to such term in Section 6(A).

(HH) “Liquidation Preference” has the meaning given to such term in
Section 6(A).

(II) “Lower Threshold Date” means the first date after [INSERT DATE THAT IS 7
YEARS AFTER THE DATE OF THE SERIES A PREFERRED STOCK].

(JJ) “Mandatory Conversion” has the meaning given to such term in Section 8.

(KK) “Mandatory Conversion Date” has the meaning given to such term in
Section 8.

(LL) “Mandatory Conversion Trigger Price” means, at any particular time, the
Liquidation Preference for a share of the Series A Preferred Stock divided by
the Conversion Rate in effect at such time; provided that for purposes of this
definition (i) any adjustment to the Conversion Rate as provided under
Section 7(D)(v) hereof shall be disregarded, and (ii) the Mandatory Conversion
Trigger Price shall not be less than the lesser of (x) $2.50 per share and
(y) 10% of the Propco Common Equity Implied Value per share. Notwithstanding
anything to the

 

4

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contrary herein or otherwise, the Corporation shall not intentionally take any
action if a principal purpose of such action is to cause an adjustment to the
Conversion Rate so as to trigger the Corporation’s right of Mandatory Conversion
set forth in Section 8 hereof, and any such action will lead to no adjustment
for the purposes of this definition; provided that any such action approved by
the holders of the Series A Preferred Stock in accordance with Section 10(B)
will not be deemed a violation of the prohibition in this sentence by the
Corporation.

(MM) “Notice of Mandatory Conversion” has the meaning given to such term in
Section 8.

(NN) “Non-REIT Transaction” shall mean any transaction or series of
transactions, including by way of merger or consolidation, a sale of all or
substantially all of the assets, stock sale or otherwise, which causes or is
reasonably likely to cause the Corporation or any successor entity resulting
from such transaction to cease being a REIT.

(OO) “Officer” shall mean the Chief Executive Officer, the President, the Chief
Financial Officer, [any Vice President, the Treasurer, the Secretary or any
Assistant Secretary] of the Corporation.

(PP) “Officers’ Certificate” shall mean a certificate signed by two Officers.

(QQ) “Original Issue Price” shall mean [$300,000,000, divided by the number of
Series A Preferred Stock issued on the Issue Date].

(RR) “OpCo” shall mean [                    ].

(SS) “per annum” means per calendar year from January 1 until December 31

(TT) “Person” means any person, including without limitation any syndicate or
group, that would be deemed to be a “person” under Section 13(d)(3) of the
Exchange Act and the rules of the SEC thereunder.

(UU) “Plan of Reorganization” shall mean [                    ].

(VV) “Preferred Stock” has the meaning given to such term in Article First.

(WW) “PropCo” means [                    ].

(XX) “PropCo Common Equity Implied Value” shall mean $1,768 million.

(YY) “Redemption Date” has the meaning given to such term in Section 9(A).

(ZZ) “Redemption Notice” has the meaning given to such term in Section 9(B).

(AAA) “Redemption Price” has the meaning given to such term in Section 9(A).

(BBB) “Redemption Request” has the meaning given to such term in Section 9(A).

(CCC) “Registration Rights Agreement” means the Registration Rights Agreement
dated as of the effective date of the Plan of Reorganization, by and among the
Corporation and the initial holders.

(DDD) “REIT” means a real estate investment trust within the meaning of
Section 856 of the Code.

(EEE) “Rule 144A Information” has the meaning given to such term in Section 14.

(FFF) “Securities Act” means the Securities Act of 1933, as amended.

(GGG) “SEC” means the U.S. Securities and Exchange Commission.

 

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(HHH) “Special Dividend” has the meaning given to such term in Section 7(D)(v).

(III) “Spin-Off” means a distribution by the Corporation to all or substantially
all of the holders of Common Stock consisting of capital stock of, or similar
equity interests in, or relating to a subsidiary or other business unit of the
Corporation.

(JJJ) “Total Dividends” has the meaning given to such term in Section 5(E).

(KKK) “Trading Day” means a day on which the Common Stock: (i) is not suspended
from trading, and on which trading in Common Stock is not limited, on any
national or regional securities exchange or association or over-the-counter
market during any period or periods aggregating one half-hour or longer; and
(ii) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of Common Stock; provided, that, if the Common Stock is not traded on
any such exchange, association or market, “Trading Day” means any Business Day.

(LLL) “Transfer Agent” means [                    ], acting as the Corporation’s
duly appointed transfer agent, registrar, conversion agent and dividend
disbursing agent for the Series A Preferred Stock. The Corporation may, in its
sole discretion, remove the Transfer Agent with 10 days’ prior notice to the
Transfer Agent; provided that the Corporation shall appoint a successor Transfer
Agent which shall accept such appointment prior to the effectiveness of such
removal and such Transfer Agent is approved by the holders of a majority of the
outstanding shares of Series A Preferred Stock in the event such Transfer Agent
is being removed other than for failure to perform the services for which it was
engaged.

(MMM) “Trigger Event” has the meaning given to such term in Section 7(D)(vi).

(NNN) “VWAP” per share of Common Stock on any Trading Day means the per share
volume-weighted average price as displayed on Bloomberg page “CCI <Equity> AQR”
(or its equivalent successor if such page is not available) in respect of the
period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or,
if such price is not available, “VWAP” means the market value per share of
Common Stock on such Trading Day as determined, using a volume-weighted average
method, by a nationally recognized independent investment banking firm retained
by the Corporation for this purpose.

(OOO) “Yield” means the greater of 5% of the Original Issue Price per annum and
the dividend rate per annum resulting from (i) the aggregate amount of dividends
(including Special Dividends, if any) declared payable to the holders of the
Common Stock as of the record date for the Common Stock, if such date is
concurrent with the Dividend Record Date, or the most recent record date, if
any, following the most recent Dividend Record Date if such record date is not
concurrent, divided by (ii) the PropCo Common Equity Implied Value.

Section 5. Dividends.

(A) The holders of shares of the Series A Preferred Stock are entitled to
receive, when, as and if authorized by the Board (or a duly authorized committee
thereof), out of funds of the Corporation legally available for the payment of
dividends, cumulative preferential dividends at the rate of the Yield, payable
only in additional shares of Series A Preferred Stock; provided, that (i) in the
event of a Breach other than a Breach due to a failure to redeem Series A
Preferred Stock in accordance with Section 9 (Optional Redemption by Holders),
the dividend rate of the Series A Preferred Stock shall increase by an increment
of 2% per annum (such increment payable solely in U.S. dollars), which amount
shall compound quarterly and accrue on a daily basis during the period starting
from the date of occurrence through and including the date that the Breach is
cured or (ii) in the event of a Breach due to a failure to redeem Series A
Preferred Stock in accordance with Section 9 (Optional Redemption by Holders),
the holders of such remaining unredeemed shares of Series A Preferred Stock
shall be entitled to the Additional Payment. For the avoidance of doubt, the
holders of the Series A Preferred Stock shall be entitled only to a single
2% per annum dividend rate increase during the continuance of any one or more
Breaches subject to clause (i) and the holders of the Series A Preferred Stock
whose shares of Series A Preferred Stock were to be redeemed on the Redemption
Date, but were not, shall be entitled to only a single Additional Payment during
the continuance of a Breach subject to clause (ii).

 

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(B) To the extent that dividends on the Series A Preferred Stock have not been
declared and paid, such dividends shall be cumulative and compound quarterly at
the Yield from the most recent date to which dividends have been paid, or if no
dividends have been paid, from the Issue Date and shall be payable quarterly in
arrears on January 15, April 15, July 15 and October 15 of each year or, if any
such date is not a Business Day, the next succeeding Business Day commencing
[            ], 201[    ] (each, a “Dividend Payment Date”) in the form of
additional shares of Series A Preferred Stock, as calculated based on the
Liquidation Preference (other than amounts in respect of Breaches as described
in Section 5(A), which shall be paid in U.S. dollars). Any dividend payable on
the Series A Preferred Stock for any partial dividend period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. Dividends will
be payable to holders of the Series A Preferred Stock as they appear in the
stock records of the Corporation at the close of business on the applicable
record date, which shall be the date set by the Board or, if not set, the last
day of the calendar month immediately preceding the applicable Dividend Payment
Date (each, a “Dividend Record Date”).

(C) No dividends on shares of the Series A Preferred Stock shall be authorized
by the Board or declared by the Corporation or paid or set apart for payment by
the Corporation if such declaration or payment would be prohibited by law.

(D) Notwithstanding the foregoing Section 5(C), dividends on the Series A
Preferred Stock will accrue daily whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared or set aside. Accrued
but unpaid dividends on the Series A Preferred Stock will not bear interest and
holders of the Series A Preferred Stock will not be entitled to any dividends in
excess of the full cumulative and compounded dividends described above. Any
dividend payment made on the Series A Preferred Stock shall first be credited
against the earliest accumulated but unpaid dividend due with respect to such
shares that remains payable.

(E) If, for any taxable year, the Corporation elects to designate as “capital
gain dividends” (as defined in Section 857 of the Internal Revenue Code of 1986,
as amended (the “Code”)) any portion (the “Capital Gains Amount”) of the
dividends (as determined for federal income tax purposes) paid or made available
for the year to holders of all classes of stock (the “Total Dividends”), then
the portion of the Capital Gains Amount that shall be allocable to the holders
of the Series A Preferred Stock shall be the amount that the total dividends (as
determined for federal income tax purposes) paid or made available to the
holders of the Series A Preferred Stock for the year bears to the Total
Dividends. The Corporation will make a similar allocation for each taxable year
with respect to any undistributed long-term capital gains of the Corporation
that are to be included in its stockholders’ long-term capital gains, based on
the allocation of the Capital Gains Amount that would have resulted if such
undistributed long-term capital gains had been distributed as “capital gains
dividends” by the Corporation to its stockholders.

(F) No dividends or other distributions (other than a dividend or distribution
payable solely in shares of Junior Stock or cash in lieu of fractional shares)
will be declared, made or paid or set apart for payment on any Junior Stock, nor
may any Junior Stock be redeemed, purchased or otherwise acquired for any
consideration (other than repurchases pursuant to binding contractual
commitments of Junior Stock held by employees, directors or consultants upon
termination of their employment or services) by the Corporation or on its behalf
(except by conversion of shares of the Series A Preferred Stock into or exchange
for shares of Junior Stock) unless dividends are simultaneously declared on the
Series A Preferred Stock, and full Accrued Dividends and Accumulated Dividends
have been or contemporaneously are declared and paid, or declared and a sum
sufficient for the payment thereof is set apart for such payment on the Series A
Preferred Stock for all dividend periods ending on or prior to the date of such
declaration, payment, redemption, purchase or acquisition; provided, that the
foregoing restriction will not limit the acquisition of shares of Common Stock
or the declaration or payment of cash dividends on Common Stock solely to the
extent necessary to preserve the Corporation’s qualification as a REIT.

 

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(G) The holders of the Series A Preferred Stock at the close of business on a
Dividend Record Date shall be entitled to receive the dividend payment on those
shares on the corresponding Dividend Payment Date notwithstanding the conversion
of such shares following that Dividend Record Date or the Corporation’s default
in payment of the dividend due on that Dividend Payment Date. A holder of Series
A Preferred Stock on a Dividend Record Date that surrenders (or whose transferee
surrenders) any shares for conversion on the corresponding Dividend Payment Date
shall receive the dividend payable by the Corporation on the Series A Preferred
Stock on that date, and the converting holder need not include payment in the
amount of such dividend upon surrender of shares of the Series A Preferred Stock
for conversion.

Section 6. Liquidation Preference.

(A) Immediately prior to or in connection with (i) any voluntary or involuntary
bankruptcy, reorganization, insolvency, liquidation, dissolution or winding-up
of the affairs of the Corporation or any other similar event or proceeding (each
a “Liquidation Event”), (ii) a Deemed Liquidation Event pursuant to clause
(v) of the definition thereof, or (iii) any other Deemed Liquidation Event other
than pursuant to clause (v) of the definition thereof except for any such Deemed
Liquidation Event that was approved by the holders of the Series A Preferred
Stock in accordance with Section 10 hereof, the holders of the Series A
Preferred Stock shall be entitled to receive and to be paid out of the assets of
the Corporation legally available for distribution to its stockholders, for each
share of Series A Preferred Stock, the Original Issue Price, plus an amount
equal to any Accumulated Dividends, if any, and Accrued Dividends, if any, to
the date of payment, before any payment or distribution of assets is made to
holders of the Junior Stock (such amounts, the “Liquidation Preference), subject
to the election provided in section 6(C) hereof. Notwithstanding the foregoing
sentence, it is understood and agreed that if any Deemed Liquidation Event or
Liquidation Event occurs without the approval by the holders of the Series A
Preferred Stock in accordance with Section 10 hereof or pursuant to clauses
(iii), (iv) or (vi) (in the case of clause (vi), as a result of a change in law)
of the definition of Deemed Liquidation Event, due to law or otherwise, then
without limitation to their rights and remedies under these Articles
Supplementary or otherwise, the holders of the Series A Preferred Stock will
continue to retain their Series A Preferred Stock, which, for the avoidance of
doubt, shall be an obligation or the Corporation and not any successor entity,
including by way of merger, unless such holders make a written election within
20 Business Days of receipt of notice of such event from the Corporation to
receive the Liquidation Preference. Upon the payment in full of the Liquidation
Preference, the holders of the Series A Preferred Stock will have no right or
claim to any remaining assets of the Corporation.

(B) If, upon a Liquidation Event or a Deemed Liquidation Event, the assets of
the Corporation available for distribution to the holders of the Series A
Preferred Stock shall be insufficient to permit payment in full to the holders
the sums that such holders are entitled to receive in such case, then all of the
assets available for distribution to the holders of the Series A Preferred Stock
shall be distributed among and paid to the holders of the Series A Preferred
Stock ratably in proportion to the respective amounts that would be payable to
such holders if such assets were sufficient to permit payment in full.

(C) The Corporation shall provide the holders of the Series A Preferred Stock
with written notice of any Liquidation Event or Deemed Liquidation Event
pursuant to clauses (i), (ii), (v) or (vii) of the definition thereof not less
than 20 Business Days prior to the consummation of such transaction and as soon
as reasonably practicable following the Corporation’s knowledge of the
occurrence of any other Deemed Liquidation Event. In addition to the election
provided to holders of Series A Preferred Stock to retain their Series Preferred
Stock, if applicable under Section 6(A) hereof, the holders of the Series A
Preferred Stock may elect in their sole discretion no later than 5 Business Days
prior to the consummation of a Liquidation Event or Deemed Liquidation Event
pursuant to clauses (i), (ii), (v) or (vii) of the definition thereof to convert
their shares of Series A Preferred Stock pursuant to Section 7 into Common Stock
immediately prior to (and subject to the consummation of) such Liquidation Event
or Deemed Liquidation Event and share in the proceeds and other consideration of
the Liquidation Event or Deemed Liquidation Event as holders of Common Stock in
lieu of the Liquidation Preference. For the avoidance of doubt, if no election
is made pursuant to this Section 6(C) to convert their shares of Series A
Preferred Stock pursuant to Section 7 into Common Stock, each holder of the
Series A Preferred Stock will receive the Liquidation Preference or will retain
their Series A Preferred Stock, as applicable, in accordance with Section 6(A)
hereof. For the avoidance of doubt, the holders of the Series A Preferred Stock
may elect in their sole discretion at any time to convert their shares of Series
A Preferred Stock into Common Stock pursuant to Section 7, including in the case
of an event pursuant to clauses (iii), (iv) or (vi) of the definition of Deemed
Liquidation Event.

 

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Section 7. Conversion.

(A) Each holder of a Series A Preferred Stock shall have the right, at any time,
at its option, to convert, subject to the terms and provisions of this
Section 7, any or all of such holder’s shares of Series A Preferred Stock into
such whole number of fully paid and nonassessable shares of Common Stock per
share of converted Series A Preferred Stock based on the Conversion Rate in
effect on the Conversion Date, provided that the holder may make such conversion
contingent upon and subject to the consummation of a Liquidation Event or Deemed
Liquidation Event. If, as of the Conversion Date, the Corporation has not
declared and paid all or any portion of the Accumulated Dividends and/or Accrued
Dividends prior to such Conversion Date, the holders of the Series A Preferred
Stock converting such Series A Preferred Stock at such time shall receive an
additional number of shares of Common Stock based on the Conversion Rate in
effect on the Conversion Date in respect of such Accumulated Dividends and/or
Accrued Dividends.

(B) The conversion right of a holder of Series A Preferred Stock shall be
exercised by such holder by the surrender to the Corporation of the certificates
representing shares to be converted at any time during usual business hours at
its principal place of business or the offices of its duly appointed Transfer
Agent to be maintained by it, accompanied by (i) written notice to the
Corporation in the form of Exhibit B hereto that the holder elects to convert
all or a portion of the shares of Series A Preferred Stock represented by such
certificate and specifying the name or names (with address) in which a
certificate or certificates for shares of Common Stock are to be issued,
(ii) (if so required by the Corporation or its duly appointed Transfer Agent) a
written instrument or instruments of transfer and endorsements in form
reasonably satisfactory to the Corporation or its duly appointed Transfer Agent
duly executed by such holder or its duly authorized legal representative and
transfer tax stamps or funds therefor, if required pursuant to Section 7(H), and
(iii) funds for the payment of any stock transfer, documentary, stamp or similar
taxes not payable by the Corporation. The Corporation will deliver a stock
certificate or certificates representing the shares of Common Stock issuable
upon a conversion, together with, if applicable, any payment of cash dividends
and cash in lieu of fractional shares, to such holder, or in the case of Series
A Preferred Stock held in global certificates, the Transfer Agent will deliver
the shares of Common Stock by a book-entry transfer through DTC. Such delivery
will be made as promptly as practicable, but in no event later than three
Business Days following the Conversion Date.

(C) As of the close of business on the Conversion Date with respect to a
conversion, a converting holder shall be deemed to be the holder of record of
Common Stock issuable upon conversion of such holder’s Series A Preferred Stock
notwithstanding that the share register of the Corporation shall then be closed
or that certificates representing such Common Stock shall not then have been
actually delivered to such holder. On the Conversion Date, all rights with
respect to the shares of Series A Preferred Stock so converted, including the
rights, if any, to receive notices, will terminate, except only the rights of
the holders thereof to (i) receive the number of whole shares of Common Stock
into which such shares of Series A Preferred Stock have been converted (with
such adjustment or cash payment for fractional shares as the Corporation may
elect pursuant to Section 13) and (ii) exercise the rights to which they are
thereafter entitled as holders of Common Stock and/or any other property
receivable by the Holder upon such conversion. Prior to the close of business on
the Conversion Date, the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock will not be deemed to be outstanding for any purpose
and the Holders will have no rights with respect to such Common Stock, including
voting rights, rights to respond to tender offers and rights to receive any
dividends or other distributions on the Common Stock, by virtue of holding
shares of the Series A Preferred Stock.

(D) The Conversion Rate shall be subject to the following additional adjustments
(except as provided in Section 7(E)), without duplication:

(i) Stock Dividends and Distributions. If the Corporation issues shares of
Common Stock as a dividend or other distribution, the Conversion Rate in effect
at 5:00 p.m., New York City time, on the date fixed for determination of the
holders of Common Stock entitled to receive such dividend or other distribution
shall be divided by a fraction:

(a) the numerator of which is the number of shares of Common Stock outstanding
at 5:00 p.m., New York City time, on the date fixed for such determination; and

 

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(b) the denominator of which is the sum of the number of shares of Common Stock
outstanding at 5:00 p.m., New York City time, on the date fixed for such
determination and the total number of shares of Common Stock constituting such
dividend or other distribution.

Any adjustment made pursuant to this clause (i) shall become effective
immediately after 5:00 p.m., New York City time, on the date fixed for such
determination. If any dividend or distribution described in this clause (i) is
declared but not so paid or made, the Conversion Rate shall be readjusted,
effective as of the date the Board (or an authorized committee thereof) publicly
announces its decision not to pay or make such dividend or distribution, to such
Conversion Rate that would be in effect if such dividend or distribution had not
been declared. For the purposes of this clause (i), the number of shares of
Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for
such determination shall include any shares issuable in respect of any scrip
certificates issued in lieu of fractions of shares of Common Stock.

(ii) Issuance of Options, Warrants or Rights. Except as otherwise adjusted
pursuant to Section 7(D)(xi) hereof, if the Corporation issues to all or
substantially all of the holders of Common Stock any options, warrants or rights
entitling such holders from the date of issuance of such options, warrants or
rights, to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price, the Conversion Rate in effect at 5:00 p.m.,
New York City time, on the date fixed for determination of the holders of Common
Stock entitled to receive such rights or warrants shall be increased by
multiplying such Conversion Rate by a fraction:

(a) the numerator of which is the sum of the number of shares of Common Stock
outstanding at 5:00 p.m., New York City time, on the date fixed for such
determination and the number of shares of Common Stock issuable pursuant to such
options, warrants or rights; and

(b) the denominator of which is the sum of the number of shares of Common Stock
outstanding at 5:00 p.m., New York City time, on the date fixed for such
determination and the number of shares of Common Stock equal to the quotient of
the aggregate offering price (including, for clarity, any initial option
premiums) payable to exercise such options, warrants or rights divided by the
Current Market Price.

Any adjustment made pursuant to this clause (ii) shall become effective
immediately after 5:00 p.m., New York City time, on the date fixed for such
determination. In the event that such options, warrants or rights described in
this clause (ii) are not so issued, the Conversion Rate shall be readjusted,
effective as of the date the Board (or an authorized committee thereof) publicly
announces its decision not to issue such options, warrants or rights, to such
Conversion Rate that would then be in effect if such issuance had not been
declared. In determining whether any rights or warrants entitle the holders
thereof to subscribe for or purchase shares of Common Stock at less than the
Current Market Price, and in determining the aggregate offering price payable to
exercise such options, rights or warrants, there shall be taken into account any
consideration received for such options, rights or warrants and the value of
such consideration (if other than cash, to be determined in good faith and in a
reasonable manner by the Board or an authorized committee thereof, which
determination shall be final if certified in writing by an independent
appraiser). For the purposes of this clause (ii), the number of shares of Common
Stock at the time outstanding shall include any shares issuable in respect of
any scrip certificates issued in lieu of fractions of shares of Common Stock.

(iii) Subdivisions and Combinations of the Common Stock. If outstanding shares
of Common Stock shall be subdivided into a greater number of shares of Common
Stock or combined into a lesser number of shares of Common Stock, the Conversion
Rate in effect at 5:00 p.m., New York City time, on the effective date of such
subdivision or combination shall be multiplied by a fraction:

(a) the numerator of which is the number of shares of Common Stock that would be
outstanding immediately after, and solely as a result of, such subdivision or
combination; and

 

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(b) the denominator of which is the number of shares of Common Stock outstanding
immediately prior to such subdivision or combination.

Any adjustment made pursuant to this clause (iii) shall become effective
immediately after 5:00 p.m., New York City time, on the effective date of such
subdivision or combination.

(iv) Debt or Asset Distribution. A) If the Corporation distributes to any holder
of Common Stock evidences of its indebtedness, shares of capital stock,
securities, rights to acquire shares of the Corporation’s capital stock, cash or
other assets (excluding (1) any dividend or distribution covered by
Section 7(D)(i), (2) any options, warrants or rights covered by
Section 7(D)(ii), (3) any dividend or distribution covered by Section 7(D)(v)
and (4) any Spin-Off to which the provisions set forth in Section 7(D)(iv)(B)
apply) in respect of its Common Stock, the Conversion Rate in effect at 5:00
p.m., New York City time, on the date fixed for the determination of holders of
Common Stock entitled to receive such distribution shall be multiplied by a
fraction:

(a) the numerator of which is the Current Market Price; and

(b) the denominator of which is the Current Market Price minus the Fair Market
Value, on such date fixed for determination, of the portion of the evidences of
indebtedness, shares of capital stock, securities, rights to acquire the
Corporation’s capital stock, cash or other assets so distributed applicable to
one share of Common Stock.

B) In the case of a Spin-Off, the Conversion Rate in effect at 5:00 p.m., New
York City time, on the date fixed for the determination of holders of Common
Stock entitled to receive such distribution shall be multiplied by a fraction:

(a) the numerator of which is the sum of the Current Market Price of the Common
Stock and the Fair Market Value of the portion of those shares of capital stock
or similar equity interests so distributed that is applicable to one share of
Common Stock as of the 15th Trading Day after the effective date for such
distribution (or, if such shares of capital stock or equity interests are listed
on a U.S. national or regional securities exchange, the Current Market Price of
such securities); and

(b) the denominator of which is the Current Market Price of the Common Stock.

Any adjustment made pursuant to this clause (iv) shall become effective
immediately after 5:00 p.m., New York City time, on the date fixed for the
determination of the holders of Common Stock entitled to receive such
distribution. In the event that such distribution described in this clause
(iv) is not so made, the Conversion Rate shall be readjusted, effective as of
the date the Board (or an authorized committee thereof) publicly announces its
decision not to make such distribution, to such Conversion Rate that would then
be in effect if such distribution had not been declared.

For purposes of clause (i), clause (ii) and this clause (iv), if any dividend or
distribution to which this clause (iv) is applicable includes one or both of:

(c) a dividend or distribution of shares of Common Stock to which clause (i) is
applicable (the “Clause I Distribution”); and an issuance of rights or warrants
to which clause (ii) is applicable (the “Clause II Distribution”), then (1) such
dividend or distribution, other than the Clause I Distribution, if any, and the
Clause II Distribution, if any, shall be deemed to be a dividend or distribution
to which this clause (iv) is applicable (the “Clause IV Distribution”) and any
Conversion Rate adjustment required by this clause (iv) with respect to such
Clause IV Distribution shall then be made, and (2) the Clause I Distribution, if
any, and Clause II Distribution, if any, shall be deemed to immediately follow
the Clause IV Distribution and any Conversion Rate adjustment required by clause
(i) and clause (ii) with respect thereto shall then be made, except that, if
determined by the Corporation (I) the date fixed for determination of the
holders of Common Stock entitled to receive any Clause I Distribution or Clause
II Distribution shall be deemed to be the date fixed for the determination of
holders of Common Stock entitled to receive the Clause IV Distribution and
(II) any shares of Common Stock included in any Clause I Distribution or Clause
II Distribution shall be deemed not to be “outstanding at 5:00 p.m., New York
City time, on the date fixed for such determination” within the meaning of
clauses (i) and (ii).

 

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(v) Cash Distributions. If the Corporation pays or makes a dividend or other
distribution consisting exclusively of cash to all holders of Common Stock
(excluding any dividend or other distribution in connection with the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation and any
consideration payable as part of a tender or exchange offer by the Corporation
or any subsidiary of the Corporation covered by Section 7(D)(vi)), the
Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed
for determination of the holders of Common Stock entitled to receive such
dividend or other distribution shall be multiplied by a fraction:

(a) the numerator of which is the Current Market Price, and

(b) the denominator of which is the absolute value of the difference between

(1) the Current Market Price and

(2) the amount per share of Common Stock of such dividend or other distribution
(whether ordinary, extraordinary, special or otherwise), provided that if such
amount per share of Common Stock with respect to ordinary regular quarterly cash
dividends on the Common Stock in the aggregate per annum is greater than 5% per
annum of the Current Market Price, such amount per share of Common Stock with
respect to the ordinary regular quarterly cash dividends on the Common Stock
that would result in the ordinary regular cash dividends exceeding 5% per annum
shall be reduced so that the ordinary regular cash dividends per annum equal
5% per annum of the Current Market Price (the “Cap”). The Cap shall not apply to
any extraordinary dividends, special dividends or any dividends or other
distributions that are not ordinary regular quarterly cash dividends
(collectively, “Special Dividends”), and any Special Dividends shall equal the
amount per share of Common Stock of such dividends or other distributions.
Notwithstanding anything to the contrary herein or otherwise, “extraordinary
dividend” shall include, without limitation, any dividend or distribution that
is derived from a sale of assets or activity outside the ordinary course of
business.

Any adjustment made pursuant to this clause (v) shall become effective
immediately after 5:00 p.m., New York City time, on the date fixed for the
determination of the holders of Common Stock entitled to receive such dividend
or other distribution. In the event that any dividend or other distribution
described in this clause (v) is not so paid or made, the Conversion Rate shall
be readjusted, effective as of the date the Board (or an authorized committee
thereof) publicly announces its decision not to pay such dividend or make such
other distribution, to the Conversion Rate which would then be in effect if such
dividend or other distribution had not been declared.

(vi) Self Tender Offers and Exchange Offers. If the Corporation or any
subsidiary of the Corporation successfully completes a tender or exchange offer
pursuant to a Schedule TO or registration statement on Form S-4 for Common Stock
(excluding any securities convertible or exchangeable for Common Stock), where
the cash and the value of any other consideration included in the payment per
share of Common Stock exceeds the Current Market Price, the Conversion Rate in
effect at 5:00 p.m., New York City time, on the date of expiration of the tender
or exchange offer (the “Expiration Date”) shall be multiplied by a fraction:

(a) the numerator of which shall be equal to the sum of:

(1) the aggregate cash and Fair Market Value on the Expiration Date of any other
consideration paid or payable for shares of Common Stock purchased in such
tender or exchange offer; and

(2) the product of (x) the Current Market Price and (y) the number of shares of
Common Stock outstanding at the time such tender or exchange offer expires, less
any purchased shares; and

 

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(b) the denominator of which shall be equal to the product of:

(1) the Current Market Price; and

(2) the number of shares of Common Stock outstanding at the time such tender or
exchange offer expires, including any purchased shares.

Any adjustment made pursuant to this clause (vi) shall become effective
immediately after 5:00 p.m., New York City time, on the 10th Trading Day
immediately following the Expiration Date but will be given effect as of the
open of business on the Expiration Date. In the event that the Corporation or
one of its subsidiaries is obligated to purchase shares of Common Stock pursuant
to any such tender offer or exchange offer, but the Corporation or such
subsidiary is permanently prevented by applicable law from effecting any such
purchases, or all such purchases are rescinded, then the Conversation Rate shall
be readjusted to be such Conversion Rate that would then be in effect if such
tender offer or exchange offer had not been made. Except as set forth in the
preceding sentence, if the application of this clause (vi) to any tender offer
or exchange offer would result in a decrease in the Conversion Rate, no
adjustment shall be made for such tender offer or exchange offer under this
clause (vi).

(vii) Notwithstanding anything in this Section 7(D) to the contrary, if a
Conversion Rate adjustment becomes effective pursuant to any of the foregoing
clauses (i), (ii), (iii), (iv), (v) or (vi) of this Section 7(D) on any Ex-Date
as described above, and a holder that converts its Series A Preferred Stock on
or after such Ex-Date and on or prior to the related record date would be
treated as the record holder of shares of Common Stock as of the related
Conversion Date set forth in Section 7(B) based on an adjusted Conversion Rate
for such Ex-Date, then, notwithstanding the foregoing Conversion Rate adjustment
provisions, the Conversion Rate adjustment relating to such Ex-Date will not be
made for such converting holder. Instead, such holder will be treated as if such
holder were the record owner of the shares of Common Stock on an un-adjusted
basis and participate in the related dividend, distribution or other event
giving rise to such adjustment.

(viii) Notwithstanding anything in this Section 7(D) to the contrary, no
adjustment under this Section 7(D) need be made to the Conversion Rate unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Rate then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, if any, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1% of such
Conversion Rate; provided that on the date of an optional conversion,
adjustments to the Conversion Rate will be made with respect to any such
adjustment carried forward that has not been taken into account before such
date. In addition, at the end of each fiscal year, beginning with the fiscal
year ending [            ], 201[    ], the Conversion Rate shall be adjusted to
give effect to any adjustment or adjustments so carried forward, and such
adjustments will no longer be carried forward and taken into account in any
subsequent adjustment. Adjustments to the Conversion Rate will be calculated to
the nearest 1/10,000th of a share.

(ix) Subject to the provisions of this Section 7(D), the voting rights set forth
in Section 10 hereof [and any voting rights otherwise under the Charter]5, in
the case of any recapitalization, reclassification or change of the Common Stock
(other than changes resulting from a subdivision, combination or
reclassification described in Section 7(D)(iii) above), a consolidation, merger
(excluding a merger solely for the purpose of changing the Corporation’s
jurisdiction of incorporation) or combination involving the Corporation, or a
sale, lease or other transfer to another Person of all or substantially all of
the assets of the Corporation (or of the Corporation and its subsidiaries on a
consolidated basis), or any statutory share exchange, in each case as a result
of which the Common Stock would be converted into, or exchanged for, stock,
other securities, other property or assets (including cash or any combination
thereof) (any of the foregoing, a “Fundamental Transaction”), then, following
any such Fundamental Transaction, in each case pursuant to which shares of
Common Stock would be converted into or exchanged for, or would constitute
solely the right to receive, cash, securities or other property, each share of
Series A Preferred Stock shall be convertible into the kind and amount of
securities, cash or other property which a holder of the number of shares of
Common Stock of the Corporation issuable upon conversion of one share of Series
A Preferred Stock immediately prior to such Fundamental Transaction would have
been entitled to receive pursuant to such Fundamental Transaction, provided that
if the kind and amount of cash, securities or other property receivable

 

5  NTD: subject to review and agreement of the Charter provisions by the
backstop investors.

 

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upon such Fundamental Transaction is not the same for each share of Common Stock
held immediately prior to such Fundamental Transaction by a Person and such
Person has the right to make an election as to the form of consideration
deliverable upon the conversion of the Series A Preferred Stock, then the
property so receivable shall be deemed to be the weighted average of the types
and amounts of consideration received by the holders of the Common Stock that
affirmatively make an election (or of all such holders if none makes an
election).

(x) To the extent permitted by law and the continued listing requirements of any
national securities exchange on which shares of the Common Stock are listed, the
Corporation may, from time to time, increase the Conversion Rate by any amount
for a period of at least 20 Business Days or any longer period permitted or
required by law, so long as the increase is irrevocable during that period and
the Board determines that the increase is in the Corporation’s best interests.
The Corporation will mail a notice of the increase to registered Holders at
least 15 calendar days before the day the increase commences. In addition, the
Corporation may, but is not obligated to, increase the Conversion Rate as it
determines to be advisable in order to avoid or diminish taxes to recipients of
certain distributions.

(xi) To the extent that the Corporation has a stockholder rights plan or
agreement (i.e., a “poison pill”) in effect upon conversion of the Series A
Preferred Stock, the holders of the Series A Preferred Stock will receive, upon
a conversion of such shares of Series A Preferred Stock, in addition to Common
Stock, rights under the stockholder rights plan or agreement with respect to the
Common Stock received upon conversion unless, prior to conversion, the rights
have expired, terminated or been redeemed or unless the rights have separated
from the shares of Common Stock. If the rights provided for in any rights plan
or agreement that the Board has adopted have separated from the shares of Common
Stock in accordance with the provisions of the applicable stockholder rights
plan or agreement so that the holders of the Series A Preferred Stock would not
be entitled to receive any rights in respect of the shares of Common Stock that
the Corporation delivers upon conversion of the Series A Preferred Stock, the
Conversion Rate will be adjusted at the time of separation as if the Corporation
had distributed to all holders of Common Stock evidences of indebtedness or
other assets or property pursuant to Section 7(D)(iv), subject to readjustment
upon the subsequent expiration, termination or redemption of the rights.

(E) The Conversion Rate will not be adjusted upon the issuance of Common Stock
upon the conversion of the Series A Preferred Stock.

(F) The Corporation shall not take any action that would require an adjustment
to the Conversion Rate such that the Conversion Price, as adjusted to give
effect to such action, would be less than the then applicable par value per
share of the Common Stock, except that the Corporation may undertake a share
split or similar event if such share split results in a corresponding reduction
in the par value per share of the Common Stock such that the as-adjusted new
Conversion Price per share would not be below the new as-adjusted par value per
share of the Common Stock following such share split or similar transaction and
the Conversion Rate is adjusted as provided under Section 7(D)(i) and any other
provision of Section 7(D). The Corporation also shall not take any action that
would result in an adjustment to the Conversion Rate in a manner that does not
comply with any applicable stockholder approval rules of any stock exchange on
which the Common Stock is listed at the relevant time.

(G) The Corporation shall at all times reserve and keep available for issuance
upon the conversion of the Series A Preferred Stock such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Series A Preferred Stock.

(H) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Series A Preferred Stock or the payment or partial
payment of a dividend on Series A Preferred Stock in Common Stock shall be made
without charge to the converting holder or recipient of shares of Series A
Preferred Stock for such certificates or for any tax in respect of the issuance
or delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock converted; provided, however, that the Corporation

 

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shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of the shares of the relevant Series A Preferred
Stock and the Corporation shall not be required to issue or deliver such
certificate unless or until the Person or Persons requesting the issuance or
delivery thereof shall have paid to the Corporation the amount of such tax or
shall have established to the reasonable satisfaction of the Corporation that
such tax has been paid.

(I) Upon any increase or decrease in the Conversion Rate, then, and in each such
case, the Corporation promptly shall deliver, or cause to be delivered, to the
Transfer Agent a certificate signed by an Officer, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased Conversion
Rate then in effect following such adjustment (which certificate shall, upon
request, be made available by the Transfer Agent to any holder or beneficial
owner of Series A Preferred Stock).

(J) Any Common Stock issued upon conversion of the Series A Preferred Stock
shall be validly issued, fully paid and nonassessable. The Corporation shall use
its reasonable best efforts to list the Common Stock required to be delivered
upon conversion of the Series A Preferred Stock, prior to such delivery, upon
each national securities exchange, if any, upon which the outstanding shares of
Common Stock are listed at the time of such delivery.

(K) The Corporation shall act in good faith and shall not deny to the holders of
the Series A Preferred Stock, the rights and benefits intended to be conferred
upon the holders thereof (including with respect to adjustments to the
Conversion Rate), including without limitation, by effectuating any merger,
consolidation, reorganization or otherwise.

Section 8. Mandatory Market Trigger Conversion. On and after the sixth
anniversary of the Issue Date, the Corporation shall have the option to compel
all holders to convert all or a portion, on a pro–rata basis, of the Series A
Preferred Stock held by all holders into Common Stock (a “Mandatory
Conversion”). The Corporation may exercise a Mandatory Conversion by providing
written notice to the holders of the Series A Preferred Stock (“Notice of
Mandatory Conversion”) within three Business Days following a period (which, if
any event requiring an adjustment under Section 7(D)(i), (ii), (iii), (iv) or
(vi) occurs, shall not commence until the second business day after such
adjustment pursuant to Section 7(D)(i), (ii), (iii), (iv) and/or (vi), and shall
reset each time any such event occurs) in which for at least 20 Trading Days in
the aggregate during 30 consecutive Trading Days, the VWAP per share of Common
Stock on each Trading Day was equal to or greater than the percentage of the
Mandatory Conversion Trigger Price as set forth below for the relevant 12-month
period beginning with the anniversary of the Issue Date set forth below:

 

Year

   Percentage of
Mandatory Conversion
Trigger Price  

6th Anniversary

     175.0 % 

7th Anniversary

     165.0 % 

8th Anniversary

     160.0 % 

9th Anniversary

     155.0 % 

10th Anniversary

     150.0 % 

11th Anniversary

     145.0 % 

12th Anniversary

     140.0 % 

13th Anniversary

     135.0 % 

14th Anniversary

     130.0 % 

15th Anniversary and thereafter

     125.0 % 

 

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Each share of Series A Preferred Stock subject to a Notice of Mandatory
Conversion shall be convertible into such whole number of fully paid and
nonassessable shares of Common Stock per share of converted Series A Preferred
Stock based on the Conversion Rate in effect on the Conversion Date. The date
specified in the Notice of Mandatory Conversion as the date of the Mandatory
Conversion, which date shall not be less than 20 nor more than 60 days after the
date that the Notice of Mandatory Conversion is issued, is the “Mandatory
Conversion Date.” The Notice of Mandatory Conversion to each holder shall
specify (i) the amount of shares of the Series A Preferred Stock that are
subject to Mandatory Conversion, (ii) the then applicable Conversion Rate, along
with reasonable documentation supporting such calculation and (iii) the number
of shares of Common Stock to be received upon conversion. Each Mandatory
Conversion Date shall be a deemed Conversion Date, and the Corporation will be
required to deliver the Common Stock issuable pursuant to a Mandatory Conversion
Notice in the same manner and time period, and the Mandatory Conversion shall
otherwise have all of the effects of a conversion, as described in Section 7
hereof. In the event the Corporation fails to deliver the Common Stock issuable
upon Mandatory Conversion on the delivery date, then at such holder’s election,
such Notice of Mandatory Conversion will be null and void or such holder may
enforce the Notice of Mandatory Conversion. A Notice of Mandatory Conversion may
not be rescinded by the Corporation without the consent of such holder.

Section 9. Optional Redemption by Holders.

(A) Optional Redemption by Holders. At (i) any time and from time to time on or
after the date that is the tenth (10th) anniversary of the Issue Date, (ii) upon
the occurrence of a Breach or (iii) other than as expressly contemplated in the
Plan of Reorganization, the effective date of a confirmed plan in Chapter 11
bankruptcy case of the Corporation or in a similar bankruptcy or insolvency
proceeding or reorganization or similar event, in each case, upon written notice
from a holder of Series A Preferred Stock (a “Redemption Request”), the number
of outstanding shares of Series A Preferred Stock set forth in the Redemption
Request shall be redeemed by the Corporation for cash out of funds available
therefor under Maryland law at a price per share equal to the Liquidation
Preference (the “Redemption Price”). The date of redemption pursuant to this
Section 9 shall be a date that is not more than 30 days after receipt by the
Corporation of a Redemption Request (the “Redemption Date”). On the Redemption
Date, the Corporation shall redeem the number of outstanding shares of Series A
Preferred Stock set forth in the Redemption Request. If the Corporation does not
have sufficient funds available to redeem on any Redemption Date all shares of
Series A Preferred Stock to be redeemed on the Redemption Date, the Corporation
shall redeem a portion of such holder’s redeemable shares of such stock out of
funds available therefor under Maryland law, and shall redeem the remaining
shares to have been redeemed as soon as practicable after the Corporation has
funds available therefor under Maryland law.

(B) Redemption Notice. The Corporation shall send written notice of the
redemption (the “Redemption Notice”) to each holder of record of Series A
Preferred Stock submitting a Redemption Request as promptly as practicable prior
to the Redemption Date. The Redemption Notice shall state:

(i) the number of shares of Series A Preferred Stock held by the holder that the
holder requests the Corporation to redeem on the Redemption Date specified in
the Redemption Notice;

(ii) the Redemption Date and the Redemption Price; and

(iii) that the holder will surrender to the Corporation, in the manner and at
the place designated, his, her or its certificate or certificates, properly
endorsed, representing the shares of Series A Preferred Stock to be redeemed.

(C) Surrender of Certificates; Payment. On or before the Redemption Date, each
holder of shares of Series A Preferred Stock to be redeemed on the Redemption
Date, unless such holder has exercised his, her or its right to convert such
shares as provided in Section 7, shall surrender the certificate or
certificates, properly endorsed, representing such shares (or, if such
registered holder alleges that such certificate has been lost, stolen or
destroyed, a lost certificate affidavit and agreement reasonably acceptable to
the Corporation to indemnify the Corporation against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
such certificate, which agreement shall not require the posting of a bond) to
the Corporation, in the manner and at the place designated in the Redemption
Notice, and thereupon the Redemption Price for such shares shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof. In the event

 

16

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less than all of the shares of Series A Preferred Stock represented by a
certificate are redeemed, a new certificate representing the unredeemed shares
of Series A Preferred Stock shall promptly be issued by the Corporation to such
holder or their designee.

(D) Rights Prior to Redemption. If the Redemption Request shall have been duly
given, all rights with respect to the outstanding shares of Series A Preferred
Stock shall continue until the Redemption Price payable upon redemption of the
shares of Series A Preferred Stock to be redeemed on the applicable Redemption
Date is paid or tendered for payment in full or deposited in full with an
independent payment agent so as to be available therefor in a timely manner for
payment to such holders.

(E) Rights Subsequent to Redemption. If the Redemption Request shall have been
duly given, and if on the Redemption Date the Redemption Price payable upon
redemption of the shares of Series A Preferred Stock to be redeemed on such
Redemption Date is paid or tendered for payment or deposited with an independent
payment agent so as to be available therefor in a timely manner, then
notwithstanding that the certificates representing any of the shares of Series A
Preferred Stock so called for redemption shall not have been surrendered,
dividends with respect to such shares of Series A Preferred Stock shall cease to
accrue after such Redemption Date and all rights with respect to such shares
shall forthwith after the Redemption Date terminate, except only the right of
the holders to receive the Redemption Price without interest upon surrender of
their certificate or certificates therefor.

(F) Costs. The Corporation agrees to pay all reasonable costs of collection
incurred by the holders of Series A Preferred Stock that delivered the
Redemption Request arising as a result of any breach or default by the
Corporation hereunder, including, without limitation, attorneys’ fees and
expenses.

(G) No Mandatory Redemption Right for Corporation. The Corporation shall not
have any mandatory redemption rights with respect to the Series A Preferred
Stock.

Section 10. Voting Rights.

(A) On any matter presented to the holders of Common Stock of the Corporation
for their action or consideration at any meeting of the holders of Common Stock
of the Corporation (or by written consent of stockholders in lieu of a meeting),
each holder of outstanding shares of Series A Preferred Stock shall be entitled
to cast the number of votes equal to the number of shares of Common Stock into
which the shares of Series A Preferred Stock held by such holder are convertible
pursuant to Section 7 as of the record date for determining the stockholders
entitled to vote on such matter. [Except as provided by law or as provided by
the provisions of the Charter]6, the holders of the Series A Preferred Stock
shall vote together with the holders of Common Stock as a single class on all
matters other than those set forth in Section 10(B) below. Notwithstanding
anything herein to the contrary, to the extent that shares of Common Stock
and/or Series A Preferred Stock held by any holder of Series A Preferred Stock
and/or holder of Common Stock would, on the record date for a vote on matters as
described in the immediately preceding sentence that are submitted to the
holders of Common Stock, enable such holder to vote an interest equal to 5% or
more of the Common Stock issued and outstanding as of such record date, such
holder shall be entitled to vote an interest equal to 4.99% of the issued and
outstanding Common Stock. Any interests held by such holder in excess of 4.99%
shall be deemed cast in the same proportion as the issued and outstanding Common
Stock with respect to such vote. The foregoing shall not apply to any holder
who, on the record date for a vote on matters submitted to a vote of holders of
the Common Stock, holds less than 5% of the vote in respect of such matter, and
shall only apply to matters submitted to the vote of the Common Stock, and not
matters that the Series A Preferred Stock vote on as a separate class set forth
in Section 10(B).

(B) So long as any shares of Series A Preferred Stock remain outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
75% of the shares of Series A Preferred Stock outstanding at the time given in
person or by proxy at a meeting (and for these purposes, excluding such shares
owned by REIT, OpCo or any subsidiary or other entity controlled by or
controlling any such party) (i) repeal, amend, waive or otherwise change any
provisions of the Charter (including with respect to the treatment of any
[Excess Shares] (as

 

6  NTD: Subject to review of the Charter.

 

17

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defined in the Charter)) or Bylaws in any manner (whether by merger,
consolidation or otherwise) that adversely affects the powers, preferences, or
other rights or privileges of the Series A Preferred Stock or its holders set
forth in these Articles Supplementary or the Charter or the Bylaws, whether
direct or indirect, (ii) repeal, amend, waive or otherwise change any provision
of these Articles Supplementary in any manner (whether by merger, consolidation
or otherwise) that adversely affects the powers, preferences, or other rights or
privileges of the Series A Preferred Stock or its holders set forth in these
Articles Supplementary, the Charter and/or the Bylaws, including any repeal,
amendment, waiver or other change that would affect the rights of the holders to
receive any payments or to convert or redeem the Series A Preferred Stock
(including any conversion or redemption for preferred partnership units of the
operating partnership of which the Corporation, or a wholly owned subsidiary of
the Corporation, is the general partner) or to receive notices or to elect to
convert or redeem (in each case, including the timing in respect thereof), the
maturity or ranking of the Series A Preferred Stock, the timing, type or amount
of dividends or distributions in respect of the Series A Preferred Stock, the
definition of “Yield,” the voting rights of the Series A Preferred Stock set
forth in this Section 10(B), the timing, type or amount of Liquidation
Preference, the observer rights of the Series A Preferred Stock set forth in
Section 11 hereof, the optional redemption provisions of Section 9 hereof, the
mandatory conversion provisions of Section 8 hereof including for the avoidance
of doubt, the related definitions, the provisions of Section 7 hereof, the
provisions regarding Breaches (including any amount payable in respect thereof),
or any other matter that would be materially adverse to the holders of Series A
Preferred Stock; provided that to the extent that such repeal, amendment, waiver
or other change would disproportionately adversely affect any holder of Series A
Preferred Stock as compared to any other holder of the Series A Preferred Stock,
the consent of such holder shall be required, (iii) enter into any Fundamental
Transaction, (iv) consummate a Liquidation Event or Deemed Liquidation Event
other than a Deemed Liquidation Event pursuant to (x) clause (vi) of the
definition of Deemed Liquidation Event solely as a result of a change in law and
provided that the Corporation has used its reasonable best efforts to maintain
its REIT status or (y) clauses (iii) or (iv) of such definition, (v) to amend
this Section 10, (vi) increase the number of authorized shares of Series A
Preferred Stock or issue additional shares of Series A Preferred Stock after the
Issue Date other than to pay the dividends on the Series A Preferred Stock in
compliance with Section 5 of these Articles Supplementary, (vii) create any new
class or series of stock, any other equity securities, or any debt or other
securities convertible into equity securities of the Corporation, in each such
case having a preference over, or being in parity with, the Series A Preferred
Stock with respect to dividends, liquidation, voting or redemption; provided
that on and after the Lower Threshold Date, such matters described in clauses
(i) - (vii) above shall only require the affirmative vote or consent of holders
holding at least 60% or more of the then outstanding Series A Preferred Stock;
provided further that, notwithstanding the foregoing in this Section 10(B), the
Corporation may, without the approval of any holder of the Series A Preferred
Stock, issue up to $125,000 in non-convertible, non-voting preferred shares of
the Corporation that are in parity with or senior to the Series A Preferred
Stock with respect to distributions and liquidation in order to meet the
requirement that the Corporation have at least 100 shareholders for REIT
qualification purposes.

Section 11. Observer Rights. In event that at any time and from to time a Breach
occurs pursuant to clauses (i), through (vi) of the definition thereof is not
cured within three months of its occurrence, notwithstanding any other rights or
remedies that the holders of that Series A Preferred Stock may have pursuant to
these Articles Supplementary or applicable law, then the holders holding of a
majority of the then outstanding shares of Series A Preferred Stock shall have
the right to designate a Person (which Person may include a holder of the Series
A Preferred Stock) to attend all meetings of the Board until such time as the
Breach is cured, if curable. The holders holding at least a majority of the
Series A Preferred Stock may elect such Person by written notice to the
Corporation, or alternatively, prior to the time such written notice is received
by the Corporation, upon the written request by any holder of Series A Preferred
Stock to the Corporation, the Corporation shall call a meeting, upon not less
than 10 days and not more than 30 days written notice, to all holders of the
Series A Preferred Stock.

Section 12. Ownership Limitations. The Series A Preferred Stock shall be subject
to the restrictions on ownership and transfer set forth in Article [    ] of the
Charter.7 Any person that violates such restrictions in acquiring actual or
constructive ownership of shares of Series A Preferred Stock is required to give
notice thereof immediately to the Corporation and provide the Corporation with
such other information as the Corporation may request in order to determine the
effect of such acquisition on the Corporation’s status as a REIT. All
certificates representing shares of the Series A Preferred Stock shall be marked
with a legend sufficient under the laws of the

 

7  NTD: Subject to review of the Charter.

 

18

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State of Maryland to provide a purchaser of such shares with notice of the
restrictions on transfer under Article [    ] of the Charter. Nothing in Article
[    ] of the Charter shall preclude the settlement of any transactions entered
into through the facilities of the [            ] or any other national
securities exchange or automated inter-dealer quotation system. The fact that
settlement of any transaction takes place shall not, however, negate the effect
of any provision of Article [    ] of the Charter, and any transferee, and the
shares of capital stock transferred to such transferee in such a transaction,
shall be subject to all of the provisions and limitations in Article [    ] of
the Charter.8

Section 13. No Fractional Shares. No fractional shares of Common Stock or
securities representing fractional shares of Common Stock shall be issued upon
conversion of the Series A Preferred Stock. Instead, the Corporation may elect
to either make a cash payment to each holders of the Series A Preferred Stock
that would otherwise be entitled to a fractional share (based on the Current
Market Price of such share) or, in lieu of such cash payment, the number of
shares of Common Stock to be issued to any particular holder upon conversion or
in respect of dividend payments shall be rounded up to the nearest whole share.

Section 14. SEC Reports. Following the effectiveness of the registration
statement referred to in the Registration Rights Agreement, whether or not the
Corporation is required to file reports with the SEC, if any shares of Series A
Preferred Stock are outstanding, the Corporation shall file with the SEC all
such reports and other information as it would be required to file with the SEC
under Section 13(a) or 15(d) of under the Exchange Act, unless the SEC does not
permit the Corporation to make such filings. The Corporation shall deliver to
each holder of Series A Preferred Stock, upon request, without cost to such
holder, copies of such reports and other information; provided that the filing
of such reports on EDGAR shall be deemed to satisfy such delivery requirement.
Notwithstanding the foregoing, prior to the effectiveness of the registration
statement referred to in the Registration Rights Agreement, the Corporation may
satisfy its obligations under this Section 14 by promptly furnishing or causing
to be furnished Rule 144A Information (as defined below) to any holder of Series
A Preferred Stock or to a prospective purchaser of any such Series A Preferred
Stock designated by any such holder of Series A Preferred Stock, as the case may
be, to the extent required to permit compliance by such holder of Series A
Preferred Stock with Rule 144A under the Securities Act in connection with the
resale of any such security. “Rule 144A Information” shall be such information
as is specified pursuant to Rule 144A(d)(4) under the Securities Act or any
successor provisions. In the event the rules and regulations of the SEC permit
the Corporation and any direct or indirect parent of the Corporation to report
at any such parent entity’s level on a consolidated basis, consolidated
reporting at the parent entity’s level in a manner consistent with that
described in this Section 14 will satisfy this Section 14.

Section 15. [Certificates.]9

(A) (i) Form and Dating. The Series A Preferred Stock and the Transfer Agent’s
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of these Articles
Supplementary. The Series A Preferred Stock certificate may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Corporation is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Corporation).
Each Series A Preferred Stock certificate shall be dated the date of its
authentication.

(ii) Global Series A Preferred Stock. The Series A Preferred Stock shall be
issued initially in the form of one or more fully registered global certificates
with the global securities legend and restricted securities legend set forth in
Exhibit A hereto (the “Global Series A Preferred Stock”), which shall be
deposited on behalf of the purchasers represented thereby with the Transfer
Agent, as custodian for DTC (or with such other custodian as DTC may direct),
and registered in the name of DTC or a nominee of DTC, duly executed by the
Corporation and authenticated by the Transfer Agent as hereinafter provided. The
number of shares of Series A Preferred Stock represented by Global Series A
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided. With respect to shares of

 

8  Ownership limitations will be set forth in the Charter. These provisions
should cross reference the Charter.

9  These Articles Supplementary provide for certificated shares however Caesars
shall deliver such shares in book-entry form on the systems of the transfer
agent or, if reasonably practicable, issue in DTC-eligible global form.

 

19

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Series A Preferred Stock that are not “restricted securities” as defined in Rule
144 on a conversion date, all shares of Common Stock distributed on such
conversion date will be freely transferable without restriction under the
Securities Act (other than by affiliates), and such shares will be eligible for
receipt in global form through the facilities of DTC.

(iii) Book-Entry Provisions. In the event Global Series A Preferred Stock is
deposited with or on behalf of DTC, the Corporation shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Series A Preferred Stock certificates that (a) shall be registered in the name
of DTC as depository for such Global Series A Preferred Stock or the nominee of
DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC’s
instructions or held by the Transfer Agent as custodian for DTC.

Members of, or participants in, DTC (“Agent Members”) shall have no rights under
these Articles Supplementary with respect to any Global Series A Preferred Stock
held on their behalf by DTC or by the Transfer Agent as the custodian of DTC or
under such Global Series A Preferred Stock, and DTC may be treated by the
Corporation, the Transfer Agent and any agent of the Corporation or the Transfer
Agent as the absolute owner of such Global Series A Preferred Stock for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Corporation, the Transfer Agent or any agent of the Corporation or the
Transfer Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices of DTC governing the exercise of the rights
of a holder of a beneficial interest in any Global Series A Preferred Stock.

(iv) Certificated Series A Preferred Stock; Certificated Common Stock. Except as
provided in this Section 15(A) or in Section 15(C), owners of beneficial
interests in Global Series A Preferred Stock will not be entitled to receive
physical delivery of Series A Preferred Stock in fully registered certificated
form (“Certificated Series A Preferred Stock”). With respect to shares of Series
A Preferred Stock that are “restricted securities” as defined in Rule 144 on a
conversion date, all shares of Common Stock issuable on conversion of such
shares on such conversion date will be issued in fully registered certificated
form (“Certificated Common Stock”). Certificates of Certificated Common Stock
will be mailed or made available at the office of the Transfer Agent for the
Series A Preferred Stock on or as soon as reasonably practicable after the
relevant conversion date to the converting holder.

After a transfer of any Series A Preferred Stock or Certificated Common Stock
during the period of the effectiveness of a Shelf Registration Statement
pursuant to any such effective Shelf Registration Statement and in accordance
with the plan of distribution thereof with respect to such Series A Preferred
Stock or such Certificated Common Stock, all requirements pertaining to legends
on such Series A Preferred Stock (including Global Series A Preferred Stock) or
Certificated Common Stock will cease to apply, the requirements requiring that
any such Certificated Common Stock issued to Holders be issued in certificated
form, as the case may, will cease to apply, and Series A Preferred Stock or
Common Stock, as the case may be, in global or fully registered certificated
form, in either case without legends, will be available to the transferee of the
Holder of such Series A Preferred Stock or Certificated Common Stock upon
exchange of such transferring Holder’s Series A Preferred Stock or Common Stock
or directions to transfer such Holder’s interest in the Global Series A
Preferred Stock, as applicable.

(B) Execution and Authentication. Two Officers shall sign the Series A Preferred
Stock certificate for the Corporation by manual or facsimile signature.

If an Officer whose signature is on a Series A Preferred Stock certificate no
longer holds that office at the time the Transfer Agent authenticates the Series
A Preferred Stock certificate, the Series A Preferred Stock certificate shall be
valid nevertheless.

A Series A Preferred Stock certificate shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of authentication
on the Series A Preferred Stock certificate. The signature shall be conclusive
evidence that the Series A Preferred Stock certificate has been authenticated
under these Articles Supplementary.

 

20

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The Transfer Agent shall authenticate and deliver certificates for up to
[                ] shares of Series A Preferred Stock for original issue upon a
written order of the Corporation signed by two Officers or by an Officer and an
Assistant Treasurer of the Corporation. Such order shall specify the number of
shares of Series A Preferred Stock to be authenticated and the date on which the
original issue of Series A Preferred Stock is to be authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable to
the Corporation to authenticate the certificates for Series A Preferred Stock.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate certificates for Series A Preferred Stock whenever the Transfer
Agent may do so. Each reference in these Articles Supplementary to
authentication by the Transfer Agent includes authentication by such agent. An
authenticating agent has the same rights as the Transfer Agent or agent for
service of notices and demands.

(C) Transfer and Exchange. (i) Transfer and Exchange of Certificated Series A
Preferred Stock. When Certificated Series A Preferred Stock is presented to the
Transfer Agent with a request to register the transfer of such Certificated
Series A Preferred Stock or to exchange such Certificated Series A Preferred
Stock for an equal number of shares of Certificated Series A Preferred Stock,
the Transfer Agent shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; provided, however,
that the Certificated Series A Preferred Stock surrendered for transfer or
exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Corporation and the Transfer Agent, duly
executed by the Holder thereof or its attorney duly authorized in writing; and

(2) is being transferred or exchanged pursuant to an effective registration
statement under the Securities Act or pursuant to clause (I) or (II) below, and
is accompanied by the following additional information and documents, as
applicable:

(I) if such Certificated Series A Preferred Stock is being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect in substantially the
form of Exhibit C hereto; or

(II) if such Certificated Series A Preferred Stock is being transferred to the
Corporation or to a “qualified institutional buyer” (“QIB”) in accordance with
Rule 144A under the Securities Act or pursuant to another exemption from
registration under the Securities Act, (i) a certification to that effect (in
substantially the form of Exhibit C hereto) and (ii) if the Corporation so
requests, an Opinion of Counsel or other evidence reasonably satisfactory to it
as to the compliance with the restrictions set forth in the legend set forth in
Section 15 (C) (vii).

(ii) Restrictions on Transfer of Certificated Series A Preferred Stock for a
Beneficial Interest in Global Series A Preferred Stock. Certificated Series A
Preferred Stock may not be exchanged for a beneficial interest in Global Series
A Preferred Stock except upon satisfaction of the requirements set forth below.
Upon receipt by the Transfer Agent of Certificated Series A Preferred Stock,
duly endorsed or accompanied by appropriate instruments of transfer, in form
reasonably satisfactory to the Corporation and the Transfer Agent, together with
written instructions directing the Transfer Agent to make, or to direct DTC to
make, an adjustment on its books and records with respect to such Global Series
A Preferred Stock to reflect an increase in the number of shares of Series A
Preferred Stock represented by the Global Series A Preferred Stock, then the
Transfer Agent shall cancel such Certificated Series A Preferred Stock and
cause, or direct DTC to cause, in accordance with the standing instructions and
procedures existing between DTC and the Transfer Agent, the number of shares of
Series A Preferred Stock represented by the Global Series A Preferred Stock to
be increased accordingly. If no Global Series A Preferred Stock is then
outstanding, the Corporation shall issue and the Transfer Agent shall
authenticate, upon written order of the Corporation in the form of an Officers’
Certificate, a new Global Series A Preferred Stock representing the appropriate
number of shares.

 

21

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(iii) Transfer and Exchange of Global Series A Preferred Stock. The transfer and
exchange of Global Series A Preferred Stock or beneficial interests therein
shall be effected through DTC, in accordance with these Articles Supplementary
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of DTC therefor.

(iv) Transfer of a Beneficial Interest in Global Series A Preferred Stock for a
Certificated Series A Preferred Stock.

(1) Any Person having a beneficial interest in Series A Preferred Stock that is
being transferred or exchanged pursuant to an effective registration statement
under the Securities Act or pursuant to another exemption from registration
thereunder may upon request, but only with the consent of the Corporation, and
if accompanied by a certification from such Person to that effect (in
substantially the form of Exhibit C hereto), exchange such beneficial interest
for Certificated Series A Preferred Stock representing the same number of shares
of Series A Preferred Stock. Upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for DTC from DTC
or its nominee on behalf of any Person having a beneficial interest in Global
Series A Preferred Stock and upon receipt by the Transfer Agent of a written
order or such other form of instructions as is customary for DTC or the Person
designated by DTC as having such a beneficial interest in a Transfer Restricted
Security only, then, the Transfer Agent or DTC, at the direction of the Transfer
Agent, will cause, in accordance with the standing instructions and procedures
existing between DTC and the Transfer Agent, the number of shares of Series A
Preferred Stock represented by Global Series A Preferred Stock to be reduced on
its books and records and, following such reduction, the Corporation will
execute and the Transfer Agent will authenticate and deliver to the transferee
Certificated Series A Preferred Stock.

(2) Certificated Series A Preferred Stock issued in exchange for a beneficial
interest in a Global Series A Preferred Stock pursuant to this Section 15(C)(iv)
shall be registered in such names and in such authorized denominations as DTC,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Transfer Agent. The Transfer Agent shall deliver such
Certificated Series A Preferred Stock to the Persons in whose names such Series
A Preferred Stock are so registered in accordance with the instructions of DTC.

(v) Restrictions on Transfer and Exchange of Global Series A Preferred Stock.

(1) Notwithstanding any other provisions of these Articles Supplementary (other
than the provisions set forth in Section 15(C)(vi)), Global Series A Preferred
Stock may not be transferred as a whole except by DTC to a nominee of DTC or by
a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee
to a successor depository or a nominee of such successor depository.

(2) In the event that the Global Series A Preferred Stock is exchanged for
Series A Preferred Stock in definitive registered form pursuant to
Section 15(C)(vi) prior to the effectiveness of a Shelf Registration Statement
with respect to such securities, such Series A Preferred Stock may be exchanged
only in accordance with such procedures as are substantially consistent with the
provisions of this Section 15(C) (including the certification requirements set
forth in the Exhibits to these Articles Supplementary intended to ensure that
such transfers comply with Rule 144A or such other applicable exemption from
registration under the Securities Act, as the case may be) and such other
procedures as may from time to time be adopted by the Corporation.

(vi) Authentication of Certificated Series A Preferred Stock. If at any time:

(1) DTC notifies the Corporation that DTC is unwilling or unable to continue as
depository for the Global Series A Preferred Stock and a successor depository
for the Global Series A Preferred Stock is not appointed by the Corporation
within 90 days after delivery of such notice;

(2) DTC ceases to be a clearing agency registered under the Exchange Act and a
successor depository for the Global Series A Preferred Stock is not appointed by
the Corporation within 90 days; or

 

22

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(3) the Corporation, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Certificated Series A Preferred
Stock under these Articles Supplementary,

then the Corporation will execute, and the Transfer Agent, upon receipt of a
written order of the Corporation signed by two Officers or by an Officer and an
Assistant Treasurer of the Corporation requesting the authentication and
delivery of Certificated Series A Preferred Stock to the Persons designated by
the Corporation, will authenticate and deliver Certificated Series A Preferred
Stock equal to the number of shares of Series A Preferred Stock represented by
the Global Series A Preferred Stock, in exchange for such Global Series A
Preferred Stock.

(vii) Legend. (1) Except as permitted by the following paragraph (2) and in
Section 15(A)(iii), each certificate evidencing the Global Series A Preferred
Stock, the Certificated Series A Preferred Stock and Certificated Common Stock
shall bear a legend in substantially the following form:

“THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH
THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE CORPORATION THAT (A) SUCH
SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE OF THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE CORPORATION OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(1) THROUGH (5) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES
OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY
WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD
TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.” (*)

(*) Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a Transfer Restricted Security.

(2) Upon any sale or transfer of a Transfer Restricted Security (including any
Transfer Restricted Security represented by Global Series A Preferred Stock)
pursuant to Rule 144 under the Securities Act or another exemption from
registration under the Securities Act or an effective registration statement
under the Securities Act:

(I) in the case of any Transfer Restricted Security that is a Certificated
Series A Preferred Stock, the Transfer Agent shall permit the Holder thereof to
exchange such Transfer Restricted Security for Certificated Series A Preferred
Stock that does not bear the legend set forth above and rescind any restriction
on the transfer of such Transfer Restricted Security; and

 

23

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(II) in the case of any Transfer Restricted Security that is represented by a
Global Series A Preferred Stock, with the consent of the Corporation, the
Transfer Agent shall permit the Holder thereof to exchange such Transfer
Restricted Security for Certificated Series A Preferred Stock that does not bear
the legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder’s request for such exchange was made
in reliance on Rule 144 or another exemption from registration under the
Securities Act and the Holder certifies to that effect in writing to the
Transfer Agent (such certification to be in the form set forth in Exhibit C
hereto).

(viii) Cancelation or Adjustment of Global Series A Preferred Stock. At such
time as all beneficial interests in Global Series A Preferred Stock have either
been exchanged for Certificated Series A Preferred Stock, converted or canceled,
such Global Series A Preferred Stock shall be returned to DTC for cancelation or
retained and canceled by the Transfer Agent. At any time prior to such
cancelation, if any beneficial interest in Global Series A Preferred Stock is
exchanged for Certificated Series A Preferred Stock, converted or canceled, the
number of shares of Series A Preferred Stock represented by such Global Series A
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Series A Preferred
Stock, by the Transfer Agent or DTC, to reflect such reduction.

(ix) Obligations with Respect to Transfers and Exchanges of Series A Preferred
Stock.

(1) To permit registrations of transfers and exchanges, the Corporation shall
execute and the Transfer Agent shall authenticate Certificated Series A
Preferred Stock and Global Series A Preferred Stock as required pursuant to the
provisions of this Section 15(C).

(2) All Certificated Series A Preferred Stock and Global Series A Preferred
Stock issued upon any registration of transfer or exchange of Certificated
Series A Preferred Stock or Global Series A Preferred Stock shall be the valid
obligations of the Corporation, entitled to the same benefits under these
Articles Supplementary as the Certificated Series A Preferred Stock or Global
Series A Preferred Stock surrendered upon such registration of transfer or
exchange.

(3) Prior to due presentment for registration of transfer of any shares of
Series A Preferred Stock, the Transfer Agent and the Corporation may deem and
treat the Person in whose name such shares of Series A Preferred Stock are
registered as the absolute owner of such Series A Preferred Stock and neither
the Transfer Agent nor the Corporation shall be affected by notice to the
contrary.

(4) No service charge shall be made to a Holder for any registration of transfer
or exchange upon surrender of any Series A Preferred Stock certificate or Common
Stock certificate at the office of the Transfer Agent maintained for that
purpose. However, the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Series A Preferred Stock
certificates or Common Stock certificates.

(5) Upon any sale or transfer of shares of Series A Preferred Stock (including
any Series A Preferred Stock represented by a Global Series A Preferred Stock
Certificate) or of Certificated Common Stock pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144 or
another exemption from registration under the Securities Act (and based upon an
Opinion of Counsel reasonably satisfactory to the Corporation if it so
requests):

(A) in the case of any Certificated Series A Preferred Stock or Certificated
Common Stock, the Corporation and the Transfer Agent shall permit the holder
thereof to exchange such Series A Preferred Stock or Certificated Common Stock
for Certificated Series A Preferred Stock or Certificated Common Stock, as the
case may be, that does not bear the legend set forth in paragraph (C)(vii) above
and rescind any restriction on the transfer of such Series A Preferred Stock or
Common Stock issuable in respect of the conversion of the Series A Preferred
Stock; and

 

24

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(B) in the case of any Global Series A Preferred Stock, such Series A Preferred
Stock shall not be required to bear the legend set forth in paragraph (C)(vii)
above but shall continue to be subject to the provisions of paragraph (C)(iv)
hereof; provided, however, that with respect to any request for an exchange of
Series A Preferred Stock that is represented by Global Series A Preferred Stock
for Certificated Series A Preferred Stock that does not bear the legend set
forth in paragraph (c)(vii) above in connection with a sale or transfer thereof
pursuant to Rule 144 or another exemption from registration under the Securities
Act (and based upon an opinion of counsel if the Corporation so requests), the
Holder thereof shall certify in writing to the Transfer Agent that such request
is being made pursuant to such exemption (such certification to be substantially
in the form of Exhibit C hereto).

(x) No Obligation of the Transfer Agent.

(1) The Transfer Agent shall have no responsibility or obligation to any
beneficial owner of Global Series A Preferred Stock, a member of, or a
participant in DTC or any other Person with respect to the accuracy of the
records of DTC or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Series A Preferred Stock or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than DTC) of any notice or the payment of any amount, under or
with respect to such Global Series A Preferred Stock. All notices and
communications to be given to the Holders and all payments to be made to Holders
under the Series A Preferred Stock shall be given or made only to the Holders
(which shall be DTC or its nominee in the case of the Global Series A Preferred
Stock). The rights of beneficial owners in any Global Series A Preferred Stock
shall be exercised only through DTC subject to the applicable rules and
procedures of DTC. The Transfer Agent may rely and shall be fully protected in
relying upon information furnished by DTC with respect to its members,
participants and any beneficial owners.

(2) The Transfer Agent shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under these
Articles Supplementary or under applicable law with respect to any transfer of
any interest in any Series A Preferred Stock (including any transfers between or
among DTC participants, members or beneficial owners in any Global Series A
Preferred Stock) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of these Articles Supplementary, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.

(D) Replacement Certificates. If a mutilated Series A Preferred Stock
certificate is surrendered to the Transfer Agent or if the Holder of a Series A
Preferred Stock certificate claims that the Series A Preferred Stock certificate
has been lost, destroyed or wrongfully taken, the Corporation shall issue and
the Transfer Agent shall countersign a replacement Series A Preferred Stock
certificate if the reasonable requirements of the Transfer Agent are met. If
required by the Transfer Agent or the Corporation, such Holder shall furnish an
indemnity bond sufficient in the judgment of the Corporation and the Transfer
Agent to protect the Corporation and the Transfer Agent from any loss which
either of them may suffer if a Series A Preferred Stock certificate is replaced.
The Corporation and the Transfer Agent may charge the Holder for their expenses
to the extent actually incurred in replacing a Series A Preferred Stock
certificate.

(E) Temporary Certificates. Until definitive Series A Preferred Stock
certificates are ready for delivery, the Corporation may prepare and the
Transfer Agent shall countersign temporary Series A Preferred Stock
certificates. Temporary Series A Preferred Stock certificates shall be
substantially in the form of definitive Series A Preferred Stock certificates
but may have variations that the Corporation considers appropriate for temporary
Series A Preferred Stock certificates. Without unreasonable delay, the
Corporation shall prepare and the Transfer Agent shall countersign definitive
Series A Preferred Stock certificates and deliver them in exchange for temporary
Series A Preferred Stock certificates.

(F) Cancellation. (i) In the event the Corporation shall purchase or otherwise
acquire Certificated Series A Preferred Stock, the same shall thereupon be
delivered to the Transfer Agent for cancelation.

 

25

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(ii) At such time as all beneficial interests in Global Series A Preferred Stock
have either been exchanged for Certificated Series A Preferred Stock, converted,
repurchased or canceled, such Global Series A Preferred Stock shall thereupon be
delivered to the Transfer Agent for cancelation.

(iii) The Transfer Agent and no one else shall cancel and destroy all Series A
Preferred Stock certificates surrendered for transfer, exchange, replacement or
cancelation and deliver a certificate of such destruction to the Corporation
unless the Corporation directs the Transfer Agent to deliver canceled Series A
Preferred Stock certificates to the Corporation. The Corporation may not issue
new Series A Preferred Stock certificates to replace Series A Preferred Stock
certificates to the extent they evidence Series A Preferred Stock which the
Corporation has purchased or otherwise acquired.

Section 16. Additional Rights of Holders. In addition to the rights provided to
Holders under these Articles Supplementary, Holders shall have the rights set
forth in the Registration Rights Agreement.

Section 17. Other Provisions.

(A) Unless otherwise specified in these Articles Supplementary, all notices
provided hereunder shall be given by first-class mail to each record Holder of
shares of Series A Preferred Stock at such Holder’s address as the same appears
on the books of the Corporation. With respect to any notice to a Holder required
to be provided hereunder, neither failure to mail such notice, nor any defect
therein or in the mailing thereof, to any particular Holder shall affect the
sufficiency of the notice or the validity of the proceedings referred to in such
notice with respect to the other Holders or affect the legality or validity of
any distribution, rights, warrant, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any such action. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the Holder
receives the notice.

(B) The shares of Series A Preferred Stock shall be issuable only in whole
shares.

(C) All notice periods referred to herein shall commence on the date of the
mailing of the applicable notice. Notice to any Holder shall be given to the
registered address set forth in the Corporation’s records for such Holder, or
for the Global Series A Preferred Stock, to the Depository in accordance with
its procedures.

(D) Any payments required to be made hereunder on any day that is not a Business
Day shall be made on the next succeeding Business Day without interest or
additional payment for such delay.

(E) Holders of Series A Preferred Stock shall not be entitled to any preemptive
rights to acquire additional capital stock of the Corporation.

(F) [Notwithstanding any provision herein to the contrary, the procedures for
conversion and voting of shares of Series A Preferred Stock represented by
Global Series A Preferred Stock will be governed by arrangements among DTC, its
participants and persons that may hold beneficial interests through such
participants designed to permit settlement without the physical movement of
certificates. Payments, transfers, deliveries, exchanges and other matters
relating to beneficial interests in Global Series A Preferred Stock certificates
may be subject to various policies and procedures adopted by DTC from time to
time.]

THIRD: The Series A Preferred Stock has been classified and designated by the
Board under the authority contained in the Charter.

FOURTH: These Articles Supplementary have been approved by the Board in the
manner and by the vote required by law.

 

26

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FIFTH: These Articles Supplementary shall be effective at the time the
Department accepts these Articles Supplementary for record.

SIXTH: The undersigned                      of the Corporation acknowledges
these Articles Supplementary to be the corporate act of the Corporation and, as
to all matters or facts required to be verified under oath, the undersigned
                     acknowledges that to the best of his knowledge, information
and belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.

IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to
be executed under seal in its name and on its behalf by its                     
and attested to by its Secretary as of the date first written above.

 

ATTEST:     [REIT]                                         
                             By:                                     
                       (SEAL)   Name:     Name:   Title:     Title:  

.

 

27

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EXHIBIT A

FORM OF PREFERRED STOCK

FACE OF SECURITY

[THE SECURITY REPRESENTED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH
THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY REPRESENTED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
REPRESENTED HEREBY AGREES FOR THE BENEFIT OF THE CORPORATION THAT (A) SUCH
SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE CORPORATION OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(1) THROUGH (5) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES
OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY
WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD
TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.”(2)

2 Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a Transfer Restricted Security.

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO
THE CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.] (3)

[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE ARTICLES
SUPPLEMENTARY REFERRED TO BELOW.] (3)

 

A-1

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3 Subject to removal if not a global security.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRANSFER AGENT
SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

FORM OF SERIES A CONVERTIBLE

PREFERRED STOCK

[FACE OF CERTIFICATE]

SERIES A CONVERTIBLE PREFERRED STOCK PAR VALUE $[    ]

SEE REVERSE FOR IMPORTANT NOTICE ON TRANSFER RESTRICTIONS

AND OTHER INFORMATION

 

CERTIFICATE   NUMBER   [●] SHARES

[REIT]

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

CUSIP NO. [●]

THIS CERTIFIES THAT

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE

SERIES A CONVERTIBLE PREFERRED STOCK,

$[    ] PAR VALUE PER SHARE, OF [REIT].

transferable on the books of the Corporation by the holder hereof in person, or
by duly authorized attorney, upon surrender of this certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent.

[THIS CERTIFICATE IS IN GLOBAL FORM AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST CORPORATION (“DTC”) OR A NOMINEE THEREOF. THIS CERTIFICATE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE
OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY ANY SUCH NOMINEE TO A SUCCESSOR OF
DTC OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
THE CORPORATION OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,

 

A-2

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PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.10

 

10  Remove if not a global security.

 

A-3

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WITNESS the facsimile signatures of the duly authorized officers of the
Corporation.

 

[Officer Signature]    DATED [Officer Title]    [Officer Name]    [Officer
Signature]    [Officer Title]    [Officer Name]   

COUNTERSIGNED AND REGISTERED

[            ]

TRANSFER AGENT AND REGISTRAR

 

By:   AUTHORIZED SIGNATURE  

 

 

A-4

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[REVERSE OF CERTIFICATE]

IMPORTANT NOTICE

[REIT]

THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL PROVISIONS OF THE CHARTER AND BYLAWS OF THE CORPORATION, AND THE
AMENDMENTS FROM TIME TO TIME MADE TO EACH, TO ALL OF WHICH THE HOLDER BY
ACCEPTANCE HEREOF ASSENTS. THE CHARTER OF THE CORPORATION AND THE AMENDMENTS AND
SUPPLEMENTS THERETO, INCLUDING THE ARTICLES SUPPLEMENTARY FOR ANY SERIES OR
CLASS OF PREFERRED STOCK OF THE CORPORATION, SET FORTH THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER RIGHTS OF THE SHARES
OF EACH CLASS OF SHARES (AND ANY SERIES THEREOF) AUTHORIZED TO BE ISSUED BY THE
CORPORATION, AND ALSO SET FORTH THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS. THE CORPORATION WILL FURNISH TO EACH
STOCKHOLDER, WITHOUT CHARGE UPON WRITTEN REQUEST, A COPY OF THE FULL TEXT OF THE
CHARTER, BYLAWS AND ARTICLES SUPPLEMENTARY. SUCH REQUEST MUST BE MADE TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

THE CHARTER OF THE CORPORATION AND THE ARTICLES SUPPLEMENTARY FOR THE SERIES A
PREFERRED STOCK EACH SET FORTH CERTAIN RESTRICTIONS ON THE TRANSFER AND
OWNERSHIP OF THE SHARES REPRESENTED HEREBY FOR THE PURPOSE OF ASSISTING THE
CORPORATION IN MAINTAINING ITS STATUS AS A REAL ESTATE INVESTMENT TRUST
(“REIT”). THE CORPORATION MAY REFUSE TO TRANSFER ANY SHARES IF SUCH TRANSFER
WOULD OR MIGHT DISQUALIFY THE CORPORATION AS A REIT. FURTHER, THE CHARTER
PROVIDES THAT NO PERSON MAY ACQUIRE MORE THAN 9.8% OF THE OUTSTANDING SHARES OF
THE CORPORATION’S COMMON STOCK OR SHARES OF ANY CLASS OF THE CORPORATION’S
CAPITAL STOCK WITH AN AGGREGATE MARKET VALUE EXCEEDING 9.8% OF THE AGGREGATE
MARKET VALUE OF ALL OUTSTANDING SHARES OF ALL CLASSES OF THE CORPORATION’S
CAPITAL STOCK. A COPY OF THE CHARTER AND ARTICLES SUPPLEMENTARY, INCLUDING THE
RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF
CAPITAL STOCK OF THE CORPORATION ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR
SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL
OFFICE.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to the applicable laws or regulations:

 

TEN COM   —as tenants in common TEN ENT   —as tenants by the entireties JT TEN  
—as joint tenants with right of survivorship and not as tenants in common UNIF
GIFT MIN ACT   —                      Custodian                     under the  
            (Cust)                     (Minor)   Uniform Gifts to Minors Act  
                            (State) UNIF TRF MIN ACT   —
                    Custodian (until age    )  
(Cust)                            (Minor)

 

A-5

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Under the Uniform Transfers to Minors Act

(State)

Additional abbreviations may also be used though not in the above list.

THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK, $[    ] PAR VALUE PER SHARE
(THE “SERIES A PREFERRED STOCK”), HAVE THE POWERS, DESIGNATIONS, PREFERENCES,
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AS PROVIDED IN THE
ARTICLES SUPPLEMENTARY RELATING TO THE SERIES A PREFERRED STOCK (THE “ARTICLES
SUPPLEMENTARY”), IN ADDITION TO THOSE SET FORTH IN THE CHARTER AND BYLAWS OF THE
CORPORATION.

EACH HOLDER SHALL HAVE THE RIGHT, AT SUCH HOLDER’S OPTION, AT ANY TIME, TO
CONVERT ALL OR ANY PORTION OF SUCH HOLDER’S SERIES A PREFERRED STOCK INTO SHARES
OF COMMON STOCK, $[    ] PAR VALUE PER SHARE, OF THE CORPORATION (“COMMON
STOCK”), AS PROVIDED IN THE ARTICLES SUPPLEMENTARY. THE PRECEDING DESCRIPTION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ARTICLES SUPPLEMENTARY, AND THE
CHARTER AND BYLAWS OF THE CORPORATION.

For value received,                     hereby sell(s), assign(s) and
transfer(s) unto                     [INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]                             [ [INSERT NAME AND
ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE]                 shares
represented by the within Certificate, and does hereby irrevocably constitute
and appoint attorney to transfer the said shares on the books of the
within-named Corporation with full power of substitution in the premises.

 

Dated:           , 20     Signature:  

 

Signature:  

 

 

A-6

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Notice: Signature to this assignment must correspond with the name as written
upon the face of the certificate, in every particular, without alteration or
enlargement or any change whatever.

Signature(s) Guaranteed: Medallion Guarantee Stamp

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO SEC
RULE 17Ad-15.

 

A-7

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EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Holder

in order to Convert the Series A Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares
of Series A Convertible Series A Preferred Stock (the “Series A Preferred
Stock”) of [REIT] (the “Corporation”), represented by share certificate no.(s)
                    (the “Series A Preferred Stock Certificates”), into shares
of common stock, par value $[    ] per share of the Corporation (“Common Stock”)
according to the conditions of the Articles Supplementary of the Series A
Preferred Stock (the “Articles Supplementary”), as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith the Series A Preferred Stock Certificates. No fee will be
charged to the holder for any conversion, except for transfer taxes, if any. A
copy of each Series A Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Articles Supplementary.

Date of Conversion:

Applicable Conversion Rate:

Number of shares of Series A Preferred Stock to be converted:

Number of shares of Common Stock to be issued:11

Signature:

Name:

Address:12

Fax No.:

 

 

11  Certificate(s) (or evidence of loss, theft or destruction thereof) to be
converted are received by the Corporation or its Transfer Agent.

12  Address to which shares of Common Stock and any other payments or
certificates shall be sent by the Corporation.

 

B-1

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EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER OF SERIES A PREFERRED STOCK

Re: Series A Preferred Stock (the “Preferred Stock”) of [REIT]

This Certificate relates to                 shares of Series A Preferred Stock
held in |    | */ book-entry or |    | */ definitive form by             (the
“Transferor”).

The Transferor*:

|    | has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Series A Preferred Stock held by the
Depository shares of Series A Preferred Stock in definitive, registered form
equal to its beneficial interest in such Series A Preferred Stock (or the
portion thereof indicated above); or

|    | has requested the Transfer Agent by written order to exchange or register
the transfer of Series A Preferred Stock.

In connection with such request and in respect of such Series A Preferred Stock,
the Transferor does hereby certify that the Transferor is familiar with the
Articles Supplementary relating to the above-captioned Series A Preferred Stock
and that the transfer of this Series A Preferred Stock does not require
registration under the Securities Act of 1933 (the “Securities Act”) because */:

|    | Such Series A Preferred Stock is being acquired for the Transferor’s own
account without transfer.

|    | Such Series A Preferred Stock is being transferred to the Corporation.

|    | Such Series A Preferred Stock is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A.

 

* /Please check applicable box.

|    | Such Series A Preferred Stock is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Corporation so
requests).

[ INSERT NAME OF TRANSFEROR ]

by

Date:

 

B-2

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Annex IV

Backstop Commitment Agreement

 

29

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BACKSTOP COMMITMENT AGREEMENT

BACKSTOP COMMITMENT AGREEMENT (this “Agreement”), dated as of [            ], is
by and among Caesars Entertainment Operating Company, Inc., a Delaware
corporation (“CEOC”), and the investors identified on Schedule I hereto to the
extent such parties are not Terminating Preferred Backstop Investors (each, a
“Preferred Backstop Investor” and, collectively, the “Preferred Backstop
Investors”).

RECITALS

WHEREAS, on January 15, 2015 (the “Petition Date”), CEOC and certain debtor
affiliates (collectively, the “Debtor”) commenced jointly administered
proceedings (the “Chapter 11 Proceedings”) for relief under chapter 11 of title
11 of the United States Code (as amended, the “Bankruptcy Code”) in the
Bankruptcy Court (as defined in the Restructuring Support Agreement) (and such
case, the “Bankruptcy Case”);

WHEREAS, in connection with the Chapter 11 Proceedings, the Debtor has engaged
in good faith negotiations with certain parties in interest regarding the terms
of the Bankruptcy Plan of Reorganization of the Debtor (the “Plan”), which Plan
shall be consistent in all material respects with the Restructuring Term Sheet
setting forth the principal terms to be included in the Plan and attached as
Exhibit A to the Restructuring Support Agreement;

WHEREAS, pursuant to the Plan, CEOC has agreed to cause the formation of [REIT]
(the “Company”), and the Company has agreed to, in each case on the terms and
conditions set forth therein, commence a rights offering (the “Rights Offering”)
whereby holders1 (each a “Holder” and collectively, the “Holders”) of the Senior
Secured Notes (as defined below) shall be granted non-transferable rights
(“Rights”) to purchase up to [            ] shares of Preferred Stock (as
defined below), as such amount may be increased as required pursuant to the Plan
in connection with the [Preferred Equity Upsize (as defined in the Plan)],
issued by the Company in the aggregate at a purchase price of $[__] per share
(“Per Share Purchase Price”) payable in cash for aggregate proceeds to the
Company of $[250.0]2 million pursuant to the Offering Conditions;

WHEREAS, in order to facilitate the Rights Offering, pursuant to this Agreement,
and subject to the terms, conditions and limitations set forth herein and in
consideration of the payment of the Commitment Payment (as defined below), the
Company is willing to sell, and the Preferred Backstop Investors are willing to
purchase, on the Effective Date, the total number of Preferred Stock not
purchased by Holders in the Rights Offering (the “Unsubscribed Shares”).

NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:

 

 

1  NTD. To extent Preferred Stock is not 1145 eligible, holders who purchase in
the Rights Offering will be required to rep to being one of a QIB, IAI, or a
non-U.S. person under Regulation S as the Rights Offering will be a private
placement. Subscription forms should include such an investor qualification.
Rights to be distributed pro rata among eligible holders.

2  NTD. such amount to be increased if applicable in connection with the
Preferred Equity Upsize

 

1

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Section 1. DEFINITIONS.

(a) As used in this Agreement, the following terms shall have the following
meanings:

“8.5% Notes” means the 8- 1⁄2% Senior Secured Notes due 2020 in the aggregate
principal amount of $1,250,000,000 issued pursuant to that certain Indenture
dated as of February 14, 2012 (as modified, supplemented and/or amended and in
effect on the date hereof) among Caesars Operating Escrow LLC, Caesars Escrow
Corporation, Caesars Entertainment Corporation, and U.S. Bank National
Association, as trustee.

“11.25% Notes” means the 11- 1⁄4% Senior Secured Notes due 2017 in the aggregate
principal amount of $2,095,000,000 issued pursuant to that certain Indenture
dated as of June 10, 2009 (as modified, supplemented and/or amended and in
effect on the date hereof, among Harrah’s Operating Escrow LLC, Harrah’s Escrow
Corporation, Harrah’s Entertainment, Inc. n/k/a Caesars Entertainment
Corporation, and U.S. Bank National Association, as trustee.

“Addendum” has the meaning assigned to it in Section 10.9.

“Additional 9% Notes” means the 9% Senior Secured Notes due 2020 in the
aggregate principal amount of $1,500,000,000 issued pursuant to that certain
Indenture dated as of February 15, 2013 (as modified, supplemented and/or
amended and in effect on the date hereof) among Caesars Operating Escrow LLC,
Caesars Escrow Corporation, Caesars Entertainment Corporation, and U.S. Bank
National Association, as trustee.

“Affiliate” means, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.

“Agreement” has the meaning assigned to it in the preamble hereto.

“Approval Motion” has the meaning assigned to it in Section 5.1.

“Approval Order” has the meaning assigned to it in Section 5.1.

“Assumption Agreement” has the meaning assigned to it in Section 10.9.

“Backstop Commitment” means the commitment of each Preferred Backstop Investor
to acquire the number of Preferred Stock equal to the product of (i) each such
Preferred Backstop Investor’s Backstop Percentage and (ii) the Unsubscribed
Shares.

“Backstop Fees and Expenses” means the reasonable fees and expenses of the
Backstop Professionals in connection with the Restructuring (as defined in the
Restructuring Support Agreement) as documented with summary invoices (i) that
are accrued and unpaid as of July 31, 2015 in an amount not to exceed $4,000,000
and (ii) in an amount not to exceed $300,000 per month (without carryforwards or
carrybacks) in the aggregate for all Backstop Professionals for each month
thereafter.

“Backstop Percentage” means the percentage initially equal to the amount of
Senior Secured Bonds designated by a Preferred Backstop Investor in writing to
KKWC (which amount may not exceed the amount Held by such Preferred Backstop
Investor on January 12, 2015) divided by the aggregate amount of Senior Secured
Bonds designated by all Preferred Backstop

 

2

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Investors. Such Backstop Percentage shall be set forth opposite the name of such
Preferred Backstop Investor under the heading “Backstop Percentage” on Schedule
I hereto (as such Schedule I may be updated pursuant to Section 10.9 hereof
and/or to reflect the increase or deduction of Backstop Commitments or Default
Shares acquired or disposed of pursuant to the last paragraph of Section 8(a)
and Section 8(b)(i) and/or to reflect the removal of a potential Preferred
Backstop Investor pursuant to the definition of Preferred Backstop Investor).
Schedule I hereto shall not be available to the Preferred Backstop Investors,
but each Preferred Backstop Investor shall be entitled to obtain its Backstop
Percentage as soon as reasonably practicable after receipt of written request by
KKWC.3

“Backstop Professionals” means KKWC and Pachulski Stang Ziehl & Jones LLP.

“Backstop Purchase Price” means, with respect to any Preferred Backstop
Investor, such Preferred Backstop Investor’s Backstop Percentage of the product
of the (i) Per Share Purchase Price and (ii) the Unsubscribed Shares.

“Backstop Shares” has the meaning assigned to it in Section 2.2(a).

“Bankruptcy Case” has the meaning assigned to it in the recitals hereto.

“Bankruptcy Code” means title 11 of the United States Code, as amended from time
to time.

“Bankruptcy Court” has the meaning assigned to it in the recitals hereto.

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in the City of New
York.

“Closing” has the meaning assigned to it in Section 2.2(b).

“Commitment Payment” means for each Preferred Backstop Investor a fee equal to
the Commitment Percentage of the product of (i) such Preferred Backstop
Investor’s Backstop Percentage and (ii) $300 million.

“Commitment Percentage” means 5%, provided such percentage shall increase by an
additional 4% for each 240 day period after the Petition Date until the
Subscription Commencement Date begins.

“Company” has the meaning assigned to it in the preamble hereto.

“Confirmation Hearing” shall mean the hearing held by the Bankruptcy Court to
consider the confirmation of the Plan pursuant to section 1129 of the Bankruptcy
Code.

“Confirmation Order” means the Order of the Bankruptcy Court confirming the
Plan.

 

 

3  NTD: This will be redacted in any public disclosure so the Backstop
Percentage is not disclosed unless required by the Bankruptcy Court or
regulators.

 

3

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“Contracts” means any contract, arrangement, note, bond, commitment, purchase
order, sales order, franchise, guarantee, indemnity, indenture, instrument,
lease, license or other agreement, understanding, instrument or obligation,
whether written or oral, all amendments, supplements and modifications of or for
any of the foregoing and all rights and interests arising thereunder or in
connection therewith.

“control” (including the terms “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee, personal representative or
executor, of the power to direct or cause the direction of the affairs, policies
or management of a Person, whether through the ownership of voting securities,
as trustee, personal representative or executor, by Contract, credit arrangement
or otherwise.

“Debtor” has the meaning assigned to it in the recitals hereto.

“Defaulting Preferred Backstop Investor” has the meaning assigned to it in
Section 8(b)(i).

“Default Purchase Right” has the meaning assigned to it in Section 8(b)(i).

“Default Shares” has the meaning assigned to it in Section 8(b)(i).

“Effective Date” has the meaning assigned to it in the Plan.

“Encumbrance” means any security interest, pledge, mortgage, lien, claim,
option, charge or encumbrance.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations promulgated thereunder, or any successor
statute.

“Exculpated Claims” has the meaning assigned to it in Section 9(b).

“Exculpated Parties” has the meaning assigned to it in Section 9(b).

“Governmental Authority” means any federal, national, supranational, foreign,
state, provincial, local, county, municipal or other government, any
governmental, regulatory or administrative authority, agency, department,
bureau, board, commission or official or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority, or any court, tribunal, judicial or arbitral body,
or any Self-Regulatory Organization.

“Held” means (i) Senior Secured Notes beneficially owned by the applicable
Preferred Backstop Investor and/or (ii) Senior Secured Notes for which a binding
trade confirmation or other similar agreement has been executed on or before
January 12, 2015 which Senior Secured Notes are beneficially owned by the
applicable Preferred Backstop Investor on or before January 19, 2015.

“Holder” has the meaning assigned to it in the recitals hereto.

“Indemnitees” has the meaning assigned to it in Section 9(a).

 

4

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“Initial 9% Notes” means the 9% Senior Secured Notes due 2020 in the initial
aggregate principal amount of $1,500,000,000 issued pursuant to that certain
Indenture dated as of August 22, 2012 (as modified, supplemented and/or amended
and in effect on the date hereof) among Caesars Operating Escrow LLC, Caesars
Escrow Corporation, Caesars Entertainment Corporation, and U.S. Bank National
Association, as trustee.

“KKWC” has the meaning assigned to it in Section 10.9.

“Law” means any federal, national, supranational, foreign, state, provincial,
local, county, municipal or similar statute, law, common law, writ, injunction,
decree, guideline, policy, ordinance, regulation, rule, code, Order,
constitution, treaty, requirement, judgment or judicial or administrative
doctrines enacted, promulgated, issued, enforced or entered by any Governmental
Authority.

“Losses” has the meaning assigned to it in Section 9(a) hereof.

“Milestone” has the meaning assigned to it in Section 5.5.

“Milestone Dates” has the meaning assigned to it in Section 5.5.

“Material Adverse Effect” means any event, circumstance, development, change or
effect that, individually or in the aggregate with all other events,
circumstances, developments, changes or effects, (a) has had or would reasonably
be expected to have or result in a material adverse effect or change in the
results of operations, properties, assets, liabilities or condition (financial
or otherwise) of the applicable Company Party taken as a whole or (b) has or
would reasonably be expected to prevent, materially delay or materially impair
the ability of the applicable Company Party to consummate the Rights Offering or
the applicable Company Party to consummate any of the transactions contemplated
hereby.

“Non-Defaulting Preferred Backstop Investors” has the meaning assigned to it in
Section 8(b)(i).

“Non-Terminating Preferred Backstop Investors” means any Preferred Backstop
Investor that is not a Terminating Preferred Backstop Investor.

“Order” means any order, writ, judgment, injunction, decree, rule, ruling,
directive, stipulation, determination or award made, issued or entered by or
with any Governmental Authority, whether preliminary, interlocutory or final.

“Offering Conditions” means those terms and conditions set forth on Exhibit C.

“Payment Date” has the meaning assigned to it in Section 2.3(a).

“Per Share Purchase Price” has the meaning assigned to it in the recitals
hereto.

“Person” means any individual, partnership, firm, corporation, limited liability
company, association, joint venture, trust, Governmental Authority, first
nation, aboriginal or native group or band, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.

 

5

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“Plan” has the meaning assigned to it in the recitals hereto.

“Plan Solicitation Order” means an Order entered by the Bankruptcy Court, in
form and substance materially consistent with this Agreement and the
Restructuring Support Agreement and otherwise reasonably satisfactory to the
Preferred Backstop Investors (as evidenced by their written approval, which
approval may be conveyed in writing by counsel including by electronic mail)and
CEOC, which shall, among other things, approve the disclosure statement relating
to the Plan, including the Rights Offering Documents, and set procedures for the
solicitation of votes to accept or reject the Plan.

“Preferred Backstop Investor Default” has the meaning assigned to it in
Section 8(b)(i).

“Preferred Backstop Investor Material Adverse Effect” means any event,
circumstance, development, change or effect that, individually or in the
aggregate with all other events, circumstances, developments, changes or
effects, has or would reasonably be expected to prevent, materially delay or
materially impair the ability of the applicable Preferred Backstop Investor to
consummate the transactions contemplated hereby.

“Preferred Backstop Investors” means Five Island Asset Management, DDJ Capital
Management, LLC, Whitebox Asymmetric Partners, LP, Whitebox Credit Arbitrage
Partners, LP, Whitebox Multi-Strategy Partners, LP, Whitebox Institutional
Partners, LP, Collins Alternative Solutions Fund, Whitebox Tactical
Opportunities Fund, Elliott Management Corporation (or certain entities or funds
managed or affiliated with it), PIMCO, J.P. Morgan Investment Management, Inc.,
Goldman, Sachs & Co., solely with respect to the Multi Strategy Investing desk
of the Americas Special Situations Group, HBK Master Fund L.P., Farallon Capital
Partners, L.P., Farallon Capital AA Investors, L.P., Farallon Capital
Institutional Partners, L.P., Farallon Capital Institutional Partners II, L.P.,
Farallon Capital Institutional Partners III, L.P., Farallon Capital Offshore
Investors II, L.P., Farallon Capital (AM) Investors, L.P., Noonday Offshore,
Inc. and Brigade Capital Management, LP (on behalf of funds and accounts managed
by it). Notwithstanding the foregoing, Schedule I shall be updated pursuant to
Section 10.9 hereof, and shall exclude any Terminating Preferred Backstop
Investor. For the avoidance of doubt, to the extent that a party no longer has a
Backstop Percentage, such party shall no longer be a “Preferred Backstop
Investor.”

“Preferred Stock” means the Series A Convertible Preferred Stock of the Company,
par value $[    ] per share, on terms and conditions set forth on the term sheet
and the draft Articles Supplementary attached as Exhibit D hereto, as may be
supplemented with the written consent of the Required Preferred Backstop
Investors and CEOC, and subject to definitive documentation acceptable to the
Required Preferred Backstop Investors, as determined by such Required Preferred
Backstop Investors in their reasonable discretion; provided, however, that any
terms affecting the economics of the Preferred Stock, directly or indirectly, as
determined by the Required Preferred Backstop Investors, shall be subject to the
Required Preferred Backstop Investors’ sole discretion.

 

6

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“Required Preferred Backstop Investors” means, as of any date of determination,
the Non-Defaulting Preferred Backstop Investors and Non-Terminating Preferred
Backstop Investors holding more than 66-2/3% of the total Backstop Commitment,
calculated without regard to the Backstop Commitments held by Defaulting
Preferred Backstop Investors and Terminating Preferred Backstop Investors.

“Restructuring Support Agreement” means that certain Restructuring Plan Support
Agreement, made and entered into as of December 19, 2014, by and among the
Debtor, Caesars Entertainment Corporation, LeverageSource III (H Holdings),
L.P., LeverageSource V, L.P., and the Consenting Creditors (as defined therein).

“Rights” has the meaning assigned to it in the recitals hereto.

“Rights Offering” has the meaning assigned to it in the recitals hereto.

“[Rights Offering Documents]” has the meaning assigned to it in the Plan and
shall be approved by the Bankruptcy Court pursuant to the Plan Solicitation
Order in form and substance materially consistent with this Agreement and the
Restructuring Support Agreement and otherwise reasonably satisfactory to the
Preferred Backstop Investors and CEOC.

“Senior Secured Notes” means the (i) 11.25% Notes, (ii) 8.5% Notes,
(iii) Initial 9% Notes and (iv) Additional 9% Notes.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder, or any successor statute.

“Self-Regulatory Organization” means any securities exchange, futures exchange,
contract market, any other exchange or corporation or similar self-regulatory
body or organization applicable to a party to this Agreement.

“Subscription Commencement Date” means the date the Plan Solicitation Package is
mailed or distribution is otherwise commenced in accordance with the Plan
Solicitation Order.

“Subscription Expiration Date” means the date on which the subscription form to
be completed by each Preferred Backstop Investor to facilitate such Preferred
Backstop Investor’s subscription for the Preferred Stock purchased pursuant to
this Agreement must be submitted in order to be effective, which date shall be
             [Insert date that is ten days prior to the Voting Deadline and not
less than 20 days after the Subscription Commencement Date] or such later date
as the Required Preferred Backstop Investors shall agree.

“Subsidiaries” of any Person means any corporation, partnership, joint venture,
limited liability company, trust, estate or other Person of which (or in which),
directly or indirectly, more than 50% of (a) the issued and outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or profits
of such partnership, joint venture or limited liability company or other Person
or (c) the beneficial interest in such trust or estate is at the time owned by
such first Person, or by such first Person and one or more of its other
Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Terminating Preferred Backstop Investors” has the meaning assigned in
Section 8(a).

 

7

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“Unsubscribed Shares” has the meaning assigned to it in the recitals hereto.

“Voting Deadline” means the date set by the Bankruptcy Court as the deadline for
voting to accept or reject the Plan.

Section 2. RIGHTS OFFERING; BACKSTOP; COMMITMENT PAYMENT.

2.1 Rights Offering.

(a) The Company shall make the Rights Offering pursuant to the Plan, which shall
be subject to the Offering Conditions and such other terms and conditions set
forth in the Rights Offering Documents.

(b) Ten Business Days prior to the date of the Confirmation Hearing, the Company
shall notify the Preferred Backstop Investors of the Rights Offering and the
Preferred Backstop Investors shall have the right, but not obligation, upon
written notice to the Company to elect to purchase up to 50% of the Preferred
Stock issued in the Rights Offering (in addition to each of their rights as a
Holder pursuant to the Rights Offering Documents and inclusive of Preferred
Stock issued in compliance with Plan in connection with the CPLV Mezzanine Debt)
on the same terms and conditions as the other Holders under the Rights Offering
Documents; provided, however, that the Preferred Backstop Investors shall not be
required to post funds until the Effective Date. Each Preferred Backstop
Investor shall have the right to purchase its pro rata share of such amount,
based on its Backstop Percentage, and to the extent any Preferred Backstop
Investor elects to not purchase its pro rata share, such share(s) shall be made
available to the Preferred Backstop Investors that are purchasing their pro rata
share.

(c) The Company hereby agrees and undertakes to give, or to cause to be given,
to the Preferred Backstop Investors as soon as reasonably practicable, but in no
event later than two (2) Business Days after the entry of the Confirmation
Order, by overnight mail, e-mail or by electronic facsimile transmission,
(i) written notification setting forth (A) the total number of shares of
Preferred Stock purchased by Holders (inclusive of any shares of Preferred Stock
purchased pursuant to Section 2.1(b)) in the Rights Offering pursuant to the
exercise of Rights and the aggregate cash proceeds received by the Company
therefor, (B) the number of Unsubscribed Shares, (C) the Backstop Purchase Price
for each Preferred Backstop Investor and (D) the targeted Effective Date and
(ii) a subscription form to be completed by each Preferred Backstop Investor to
facilitate such Preferred Backstop Investor’s subscription for the Preferred
Stock purchased pursuant to this Agreement. In addition, on the first Business
Day of each calendar week during the period beginning on the Subscription
Commencement Date and ending on the Subscription Expiration Date, the Company
shall give, or cause to be given, to the Preferred Backstop Investors by
overnight mail, e-mail or by electronic facsimile transmission a written
notification setting forth the then most current information as to the total
amount of Preferred Stock then subscribed for in the Rights Offering, the number
of then unsubscribed Preferred Stock, the Backstop Purchase Price for each
Preferred Backstop Investor (as if the Rights Offering were to be concluded with
the then current amount of subscribed for Preferred Stock) and the targeted
Effective Date.

 

8

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2.2 Backstop.

(a) On the terms and subject to the conditions contained herein, and in reliance
on the representations and warranties set forth in this Agreement, each of the
Preferred Backstop Investors hereby agrees, severally and not jointly, to
purchase on the Effective Date, and the Company hereby agrees to sell and issue
to each such Preferred Backstop Investor, at the Backstop Purchase Price
therefor, its Backstop Percentage of the Unsubscribed Shares, subject to the
Offering Conditions. The Preferred Stock which each of the Preferred Backstop
Investors purchases pursuant to this Agreement are referred to herein as such
Preferred Backstop Investor’s “Backstop Shares.” For the avoidance of doubt, any
shares of Preferred Stock acquired in the Rights Offering pursuant to
Section 2.1(b) shall not be deemed Backstop Shares.

(b) The closing of the purchase and sale of the Backstop Shares hereunder (the
“Closing”) will occur on the Effective Date contemporaneously with substantial
consummation of the Plan. At the Closing, payment for the Backstop Shares that
each Preferred Backstop Investor has agreed to purchase shall be effected by
each such Preferred Backstop Investor delivering to the Company in immediately
available funds its respective Backstop Purchase Price against delivery by the
Company of the Backstop Shares to which such Preferred Backstop Investor is
entitled to and delivery to each Preferred Backstop Investor such certificates,
documents or instruments required to be delivered by the Company to such
Preferred Backstop Investor pursuant to this Agreement. The agreements,
instruments, certificates and other documents to be delivered on the Effective
Date by or on behalf of the Company shall be delivered to each applicable
Preferred Backstop Investor in accordance with Section 10.3 hereof.

2.3 Commitment Payment.

(a) The Commitment Payment shall be earned upon the entry of the Approval Order
and shall be payable, with respect to a Preferred Backstop Investor, upon the
earlier of (x) the Effective Date of the Plan and (y) two Business Days after
the termination of this Agreement by or with respect to such Preferred Backstop
Investor (such date, the “Payment Date”), provided that the Commitment Payment,
with respect to a Preferred Backstop Investor, shall not be required to be paid
to a particular Preferred Backstop Investor to the extent that such termination
of this Agreement with respect to such Preferred Backstop Investor has occurred
due to a breach of this Agreement by such Preferred Backstop Investor, to the
extent such breach has been determined as solely caused by the Preferred
Backstop Investor by a final, non-appealable order entered by a court of
competent jurisdiction.

(b) On the Payment Date, CEOC shall pay to each Preferred Backstop Investor, by
wire transfer in immediately available funds to an account specified by such
Preferred Backstop Investor to CEOC not less than one (1) day prior to the
Payment Date, such Preferred Backstop Investor’s pro rata portion of the
Commitment Payment based on such Preferred Backstop Investor’s Backstop
Percentage (which percentage, for the avoidance of doubt, shall be adjusted
pursuant to the definition of Backstop Percentage).

 

9

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(c) The provisions for the payment of the Commitment Payment and the other
provisions provided herein, are an integral part of the transactions
contemplated by this Agreement and without these provisions the Preferred
Backstop Investors would not have entered into this Agreement, and the
Commitment Payment shall, pursuant to the Approval Order, constitute allowed
administrative expenses of the Debtors’ estate under sections 503(b) and 507 of
the Bankruptcy Code.

Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY and CEOC. Each of the
Company and CEOC (the “Company Parties”) hereby represents and warrants,
severally and not jointly, to each of the Preferred Backstop Investors as of the
date hereof and as of the Effective Date (except for representations and
warranties that are made as of a specific date, which are made only as of such
date), on behalf of itself and not any other party, as follows:

3.1 Organization and Qualification; Subsidiaries. Each Company Party and its
Subsidiaries has been duly organized and is validly existing and is in good
standing under the laws of their respective jurisdictions of organization, with
the requisite power and authority to own its properties and conduct its business
as currently conducted.

3.2 Authorization; Enforcement; Validity. Subject only to Bankruptcy Court
approval, each Company Party has all necessary corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder (including,
without limitation (a) the issuance of the Backstop Shares and (b) the payment
of the Commitment Payment) in accordance with the terms hereof. The execution
and delivery by each Company Party of this Agreement, the performance by each of
the Company and CEOC of its obligations hereunder (including, without
limitation, (x) the issuance of the Backstop Shares and (y) the payment of the
Commitment Payment), have been duly authorized by all requisite action on the
part of such Company Party, and no other action on the part of the Company Party
is necessary to authorize the execution and delivery by the Company Party of
this Agreement or the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by the Company
Party, and assuming due authorization, execution and delivery by the other
parties hereto and subject to Bankruptcy Court approval, this Agreement
constitutes the legal, valid and binding obligation of the Company Party,
enforceable against the Company Party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereafter in effect relating to creditors’ rights generally and subject to
general principles of equity.

3.3 No Conflicts. Assuming that all consents, approvals, authorizations and
other actions described in Section 3.4 have been obtained, and except as may
result from any facts or circumstances relating solely to the applicable
Preferred Backstop Investors, the execution, delivery and performance by the
Company Party of this Agreement and the consummation of the transactions
contemplated hereby (including, without limitation, (x) the issuance of the
Backstop Shares and (y) the payment of the Commitment Payment) do not and will
not: (a) violate, conflict with or result in the breach of the certificate of
incorporation, articles of incorporation, bylaws, certificate of formation,
operating agreement, limited liability company agreement or similar formation or
organizational documents of the Company Party or any of its Subsidiaries;
(b) conflict with or violate any Law or Order applicable to the Company or any
of its respective

 

10

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assets or properties; (c) violate, conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any note, bond, mortgage or indenture, Contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Company Party or its Subsidiaries is a party or to
which any of their respective assets or properties are subject, or result in the
creation of any Encumbrance on any of their respective assets or properties,
except, in the case of clauses (b) and (c), for any such conflict, violation,
breach or default that would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.

3.4 Consents and Approvals. The execution, delivery and performance by the
Company Party of this Agreement do not require any consent, approval,
authorization or other Order of, action by, filing with or notification to, any
Governmental Authority or any other Person under any of the terms, conditions or
provisions of any Law or Order applicable to the Company Party or any of its
Subsidiaries or by which any of their respective assets or properties may be
bound, any Contract to which the Company Party or any of its Subsidiaries is a
party or by which the Company Party or any of its Subsidiaries may be bound,
except the entry of the Approval Order and the Confirmation Order and the
expiration, or waiver by the Bankruptcy Court, of the fourteen (14) day period
set forth in Bankruptcy Rules 6004(h) and 3020(e), as applicable.

Section 4. REPRESENTATIONS AND WARRANTIES OF THE BACKSTOP INVESTORS. Each
Preferred Backstop Investor represents and warrants, severally and not jointly,
to the Company Parties as of the date hereof and as of the Effective Date
(except for representations and warranties that are made as of a specific date,
which are made only as of such date), as follows:

4.1 Authorization; Enforcement; Validity. Such Preferred Backstop Investor has
all necessary corporate, limited liability company or equivalent power and
authority to enter into this Agreement and to carry out, or cause to be carried
out, its obligations hereunder in accordance with the terms hereof. The
execution and delivery by such Preferred Backstop Investor of this Agreement and
the performance by such Preferred Backstop Investor of its obligations hereunder
have been duly authorized by all requisite action on the part of such Preferred
Backstop Investor, and no other action on the part of such Preferred Backstop
Investor is necessary to authorize the execution and delivery by such Preferred
Backstop Investor of this Agreement or the consummation of the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by such Preferred Backstop Investor, and assuming due authorization,
execution and delivery by the other parties hereto, this Agreement constitutes
the legal, valid and binding obligation of such Preferred Backstop Investor,
enforceable against such Preferred Backstop Investor in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to creditors’ rights generally and
subject to general principles of equity.

4.2 No Conflicts. The execution, delivery, and performance by such Preferred
Backstop Investor of this Agreement do not and will not (a) violate any
provision of the organizational documents of such Preferred Backstop Investor;
(b) conflict with or violate any

 

11

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Law or Order applicable to such Preferred Backstop Investor or any of its
respective assets or properties; (c) violate, conflict with, result in any
breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, any note, bond, mortgage or
indenture, Contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which such Preferred Backstop Investor is a
party or to which any of its assets or properties are subject, or result in the
creation of any Encumbrance on any of its assets or properties, except, in the
case of clauses (b) and (c), for any such conflict, violation, breach or default
that would not reasonably be expected to have, individually or in the aggregate,
a Preferred Backstop Investor Material Adverse Effect on such Preferred Backstop
Investor.

4.3 Consents and Approvals. No consent, approval, order, authorization,
registration or qualification of or with any court or Governmental Authority or
body having jurisdiction over such Preferred Backstop Investor is required in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for any consent, approval, order
or authorization required under the Bankruptcy Code.

4.4 Investor Representation. (i) It is either (A) a qualified institutional
buyer as defined in Rule 144A of the Securities Act, (B) an institutional
accredited investor as defined in Rule 501(a)(1), (2), (3), or (7) under the
Securities Act, (C) a non-U.S. person under Regulation S under the Securities
Act, or (D) the foreign equivalent of (A) or (B) above, and (ii) any securities
of the Company acquired by the applicable Preferred Backstop Investor under this
Agreement will have been acquired for investment and not with a view to
distribution or resale in violation of the Securities Act.

Section 5. ADDITIONAL COVENANTS.

5.1 Approval Motion and Approval Order. CEOC agrees to file a motion and
supporting papers (the “Approval Motion”) (including an order in form and
substance materially consistent with this Agreement and otherwise reasonably
satisfactory to CEOC and the Required Preferred Backstop Investors) seeking an
order of the Bankruptcy Court (the “Approval Order”) approving this Agreement,
it being acknowledged and agreed that the Approval Order shall authorize payment
by CEOC of the Backstop Fees and Expenses.

5.2 Commercially Reasonable Efforts. CEOC agrees to use its commercially
reasonable efforts to timely satisfy (if applicable) each of the conditions
under Sections 6 and 7 of this Agreement.

5.3 Further Assurances. Each party hereto, without expanding such party’s
obligations under the Restructuring Support Agreement other than as specifically
contemplated hereby, shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party hereto
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby, in each case at the cost of CEOC.

 

12

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5.4 Use of Proceeds. The Company shall use the net proceeds from the sale of
Preferred Stock issued pursuant to the Rights Offering solely as provided in the
Plan.

5.5 Milestones. CEOC shall use its reasonable best efforts to cause the
following actions (each, individually a “Milestone” and collectively, the
“Milestones”) to occur on or before the dates specified below (such
corresponding date, the “Milestone Date”):

(a) The motion for the Approval Order shall have been filed no later than 45
days from the Petition Date and the Approval Order shall have been entered by
the Bankruptcy Court by no later than the earlier of February 15, 2016, and 60
days after the filing with the Bankruptcy Court of the final report in respect
of the investigation as detailed in the Order Granting in Part and Denying in
Part Motions to Appoint Examiner (Dkt. No. 675);

(b) By the earlier of February 15, 2016 and 60 days after the filing with the
Bankruptcy Court of the final report in respect of the investigation as detailed
in the Order Granting in Part and Denying in Part Motions to Appoint Examiner
(Dkt. No. 675), the Company shall have obtained entry by the Bankruptcy Court of
the Plan Solicitation Order;

(c) By the earlier of May 15, 2016 and 90 days after the Bankruptcy Court’s
approval of the Plan Solicitation Order, the Confirmation Order shall have been
entered by the Bankruptcy Court;

(d) the Company shall file a registration statement under the Securities
Exchange Act of 1933, as amended, (the “Registration Statement”) registering the
Preferred Stock as soon as practicable following the effective date of the Plan
and in any event within 75 days thereafter, and shall cause the Registration
Statement to be effective as soon as practicable thereafter;

(e) the Subscription Expiration Date shall have occurred on the date specified
in such definition; and

(f) the Effective Date shall have occurred by the earlier of July 15, 2016 and
60 days from the date the Confirmation Order has been entered by the Bankruptcy
Court.

5.6 Backstop Fees and Expenses. Subject to entry of the Approval Order, CEOC
shall promptly pay the Backstop Fees and Expenses incurred from time to time,
but in any event not later than ten (10) Business Days after receipt by CEOC of
any applicable receipt or invoice.

5.7 Substantial Contribution Application. In the event that the Bankruptcy Court
fails to approve the payment of the Backstop Fees and Expenses, CEOC covenants
to support a substantial contribution application by the Preferred Backstop
Professionals for the Backstop Fees and Expenses, and to use its commercially
reasonable efforts to have such application approved by the Bankruptcy Court.

Section 6. CONDITIONS TO THE BACKSTOP INVESTORS’ OBLIGATIONS. The obligations of
each of the Preferred Backstop Investors to purchase the Backstop Shares
pursuant to this Agreement on the Effective Date shall be subject to the
satisfaction at or prior to the Effective Date of each of the following
conditions, any one or more of which may be waived in writing by the Required
Preferred Backstop Investors:

6.1 Representations and Warranties. (a) All of the representations and
warranties made by the Company Parties in this Agreement shall be true and
correct in all material respects as of the Effective Date as though made at and
as of the Effective Date (except to the extent such representations and
warranties expressly speak as of an earlier date, which shall be true and
correct as of such date); (b) each of the Company Parties shall have performed
and complied in all material respects with all agreements and covenants required
by this Agreement to be

 

13

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performed by the Company Parties on or prior to the Effective Date or such
earlier date as may be applicable (other than the covenant set forth in
Section 5.7); and (c) with respect to clauses (a) and (b), at the Closing there
shall be delivered to the Preferred Backstop Investors a certificate signed by a
duly authorized representative of the Company to the foregoing effect.

6.2 Approval Order. The Approval Order shall have been entered by the Bankruptcy
Court.

6.3 Confirmation Order. The Confirmation Order shall have been entered by the
Bankruptcy Court, shall not have been stayed pending appeal, and there shall not
have been entered by any court of competent jurisdiction any reversal,
modification or vacatur, in whole or in part, of the Confirmation Order.

6.4 Plan and Rights Offering Documents. (i) Each of the Plan (and the exhibits
thereto) and the Confirmation Order, with respect to provisions that could
affect the economic interests of the Preferred Backstop Investors or that could
be adverse to any of the Preferred Backstop Investors, shall not be inconsistent
with this Agreement and the Restructuring Support Agreement, and shall be in
form and substance reasonably acceptable to the Required Preferred Backstop
Investors, and (ii) the Rights Offering Documents, which shall include the
Offering Conditions, shall be in form and substance materially consistent with
this Agreement and the Restructuring Support Agreement and otherwise reasonably
acceptable to the Required Preferred Backstop Investors and CEOC.

6.5 Conditions to Confirmation. Each of the conditions precedent to the
effectiveness of the Plan and the occurrence of the Effective Date shall have
been satisfied or waived in accordance with the Plan.

6.6 Rights Offering. The Subscription Expiration Date shall have occurred.

6.7 Payment of Amounts. The Company shall have paid each Preferred Backstop
Investor such Preferred Backstop Investor’s pro rata portion of the Commitment
Payment in accordance with the terms of this Agreement.

Section 7. CONDITIONS TO THE COMPANY’S OBLIGATIONS. The obligations of the
Company to issue and sell the Backstop Shares to the applicable Preferred
Backstop Investors pursuant to this Agreement shall be subject to the
satisfaction at or prior to the Effective Date of each of the following
conditions, any one or more of which may be waived in writing by CEOC or the
Company:

7.1 Representations and Warranties. (a) All of the representations and
warranties made by the applicable Preferred Backstop Investor in this Agreement
shall be true and correct in all material respects as of the date hereof and as
of the Effective Date as though made at and as of the Effective Date (except to
the extent such representations and warranties expressly speak as of an earlier
date, which shall be true and correct as of such date), except to the extent
that the breach of any such representation or warranty would not reasonably be
expected to have a Preferred Backstop Investor Material Adverse Effect on such
Preferred Backstop Investor and (b) the applicable Preferred Backstop Investor
shall have performed and complied in all material respects with all agreements
and covenants required by this Agreement to be performed by such Preferred
Backstop Investor on or prior to the Effective Date.

 

14

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7.2 Approval Order. The Approval Order shall have been entered by the Bankruptcy
Court.

7.3 Confirmation Order. The Confirmation Order shall have been entered by the
Bankruptcy Court, shall not have been stayed pending appeal, and there shall not
have been entered by any court of competent jurisdiction any reversal,
modification or vacatur, in whole or in part, of the Confirmation Order.

7.4 Conditions to Confirmation. Each of the conditions precedent to the
effectiveness of the Plan and the occurrence of the Effective Date shall have
been satisfied in accordance with the Plan.

7.5 Rights Offering. The Subscription Expiration Date shall have occurred

7.6 Backstop Subscription Forms. CEOC and the Company shall have received a duly
executed subscription form from each Preferred Backstop Investor in accordance
with Section 2.1(b).

Section 8. TERMINATION.

(a) Termination by the Preferred Backstop Investors. This Agreement may be
terminated at any time by any Preferred Backstop Investor with respect to itself
(and not with respect to any other Preferred Backstop Investor):

(i) upon the failure of any of the conditions set forth in Section 6 hereof to
be satisfied, which failure cannot be cured or is not cured within 10 days of
written notice to the Company and CEOC by such Preferred Backstop Investor;

(ii) if any of the Company Parties alters, amends or modifies any term of this
Agreement without the consent of the Required Preferred Backstop Investor, or if
any alteration, amendment or modification is adverse to any Preferred Backstop
Investor, without the consent of each Preferred Backstop Investor;

(iii) if any of the Company Parties breaches any representation or warranty or
breaches any covenant applicable to it (other than the covenant set forth in
Section 5.7) in any material respect under this Agreement and if such breach is
curable, it is not cured within 10 days of written notice to the applicable
Company Party by such Preferred Backstop Investor;

(iv) if any of the Milestones shall not have occurred on or prior to the
applicable Milestone Date; or

(v) upon the occurrence of any matters set forth in any of clauses (a) through
(k) of Section 8 of the Restructuring Support Agreement and/or a Company
Termination Event (as defined in the Restructuring Support Agreement) and/or a
termination of the Restructuring Support Agreement;

 

15

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provided that, in the event any Preferred Backstop Investor elects to terminate
this Agreement (each, a “Terminating Preferred Backstop Investor”), the Backstop
Commitments allocated to such Terminating Preferred Backstop Investor shall be
allocated to all Non-Defaulting Preferred Backstop Investors who elect to
acquire such Backstop Commitments on a pro rata basis (based on the Backstop
Percentages of such electing Non-Defaulting Preferred Backstop Investors), and
provided further that in the event no Non-Defaulting Preferred Backstop Investor
elects to acquire the Backstop Commitments of the Terminating Preferred Backstop
Investors, this Agreement shall terminate.

(b) Termination by the Company.

(i) (A) upon termination of the Restructuring Support Agreement, the Company may
terminate this Agreement by written notice to the Preferred Backstop Investors
or (B) if any Preferred Backstop Investor breaches this Agreement in a manner
that causes a Preferred Backstop Investor Material Adverse Effect with respect
to such Preferred Backstop Investor, and if such breach is curable, is not cured
within five (5) Business Days after receipt of written notice from the Company
to such Preferred Backstop Investor (each, a “Preferred Backstop Investor
Default” and any such defaulting Preferred Backstop Investor, a “Defaulting
Preferred Backstop Investor”), then following the expiration of the five
(5) Business Day notice period, the Company shall follow the procedures set
forth in clause (ii) below and each of the other Preferred Backstop Investors
(the “Non-Defaulting Preferred Backstop Investors”) shall have the right (the
“Default Purchase Right”) but not the obligation, to purchase on the Effective
Date all or a portion of the Backstop Shares that were to be purchased by the
Defaulting Preferred Backstop Investor (the “Default Shares”) at a price per
share equal to the Per Share Purchase Price. To the extent that the
Non-Defaulting Preferred Backstop Investors (in the aggregate) desire to
purchase more than the total number of Default Shares, such Default Shares shall
be allocated between the Non-Defaulting Preferred Backstop Investors pro rata,
based on their respective Backstop Percentages.

(ii) As soon as practicable after a Preferred Backstop Investor Default, but in
no event later than three (3) Business Days following the Company or CEOC
becoming aware of such Preferred Backstop Investor Default, the Company or CEOC
shall send a written notice (in accordance with the notice provisions set forth
in Section 10.3) to each Non-Defaulting Preferred Backstop Investor, specifying
the number of Default Shares. The Non-Defaulting Preferred Backstop Investors
shall have five (5) Business Days from receipt of such notice to elect to
exercise the Default Purchase Right by notifying the Company and CEOC in writing
of its or their election to purchase all or a portion of the Default Shares then
available as a result of the Preferred Backstop Investor Default or find a
third-party reasonably satisfactory to the Non-Defaulting Preferred Backstop
Investors to replace the commitment of the Defaulting Preferred Backstop
Investor. If at the conclusion of such five (5) Business Day period, the
Non-Defaulting Preferred Backstop Investors have not elected to exercise the
Default Purchase Right in its entirety or have not found a third-party to
replace the commitment of the Defaulting Backstop Purchaser, then the Company or
CEOC may terminate this Agreement.

(iii) Notwithstanding anything to the contrary in this Section 8(b), in addition
to any liability to the Company or CEOC, the parties agree that any Defaulting
Preferred Backstop Investor will be liable to the Non-Defaulting Preferred
Backstop Investors

 

16

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for the consequences to the Non-Defaulting Preferred Backstop Investors of its
breach and that the Non-Defaulting Backstop Purchasers can enforce rights of
damages and/or specific performance pursuant to Section 10.18 immediately upon
the expiration of the original five (5) Business Day notice period set forth
Section 8(b)(i).

(c) Mutual Termination. This Agreement may be terminated by the mutual written
consent of CEOC and the Preferred Backstop Investors representing more than 75%
of the aggregate Backstop Percentage.

(d) Effect of Termination. If this Agreement is terminated pursuant to this
Section 8, subject to the last paragraph of Section 8(a), the obligations of
such parties contained in Sections 2.3, 9, 10.2 through 10.19 and this Section 8
shall survive any such termination.

Section 9. PROTECTION OF COMMITMENT PAYMENT.

Both of the Company and CEOC shall jointly and severally indemnify, save and
hold harmless each Preferred Backstop Investor, and each of their respective
directors, officers, stockholders, employees, partners, members, managers,
representatives, attorneys, other professional advisors and agents and all of
their respective heirs, successors, legal administrators, permitted assigns and
designees, and each Person who (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) controls any of the Preferred
Backstop Investors and the officers, directors, agents and employees of any such
controlling Person (collectively, the “Covered Persons”) from and against all
losses, claims, damages, liabilities, costs (including, without limitation, the
costs of investigation and reasonable attorneys’ fees) and expenses, as incurred
by any or all of the Covered Persons in connection with any direct claim or
claim against them by a third party for avoidance of or otherwise in connection
with or arising from the payment of the Commitment Payment; provided that
neither the Company nor CEOC shall have any obligation to indemnify or save and
hold harmless any Covered Person (i) for any claim or expense that is judicially
determined (the determination having become final and no longer subject to
appeal) to have arisen solely and directly from such Covered Persons’ gross
negligence, willful misconduct, or breach of this Agreement that has caused a
Preferred Backstop Investor Material Adverse Effect and that would result in the
loss of such Preferred Backstop Investor’s entitlement under the terms of this
Agreement to payment of the Commitment Payment or (ii) for any claim or expense
that is settled prior to a judicial determination as to the exclusion set forth
in clause (i) above, but determined by the Bankruptcy Court, after notice and a
hearing, to be a claim or expense for which such Covered Person should not
receive indemnity under the terms of this Section 9; provided that, without
otherwise limiting CEOC’s or the Company’s obligation under this Section 9, CEOC
and the Company shall have no obligation to indemnify any Covered Person pending
such judicial determination where CEOC or the Company has in good faith and in a
reasonable manner, asserted an uncured breach of this Agreement that has caused
a Preferred Backstop Investor Material Adverse Effect that would result in the
loss of such Preferred Backstop Investor’s entitlement under the terms of this
Agreement to payment of the Commitment Payment. This provision will be in
addition to the rights of each and all of the Covered Persons to bring an action
against the Company for breach of any term of this Agreement. The Company
acknowledges and agrees that each and all of the Covered Persons shall be
treated as third-party beneficiaries with rights to bring an action against the
Company under this Section 9.

 

17

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Section 10. MISCELLANEOUS.

10.1 Payments. All payments made by or on behalf of CEOC and/or the Company or
any of their affiliates to a Preferred Backstop Investor or its assigns,
successors or designees pursuant to this Agreement shall be without withholding,
set-off, counterclaim or deduction of any kind.

10.2 Survival. The representations and warranties made in this Agreement will
survive the execution and delivery of this Agreement and the Closing for the
length of the applicable statute of limitations with respect thereto.

10.3 No Waiver of Rights. All waivers hereunder must be made in writing, and the
failure of any party at any time to require another party’s performance of any
obligation under this Agreement shall not affect the right subsequently to
require performance of that obligation. Any waiver of any breach of any
provision of this Agreement shall not be construed as a waiver of any continuing
or succeeding breach of such provision or a waiver or modification of any other
provision.

10.4 Notices. Each Preferred Backstop Investor and its successors and assigns
shall provide its contact information and wire instructions to KKWC. Such
information shall be set forth in Schedule II and Schedule III, respectively,
hereto, and shall be modified from time to time to the extent such Preferred
Backstop Investor provides written notice to KKWC. All notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by an internationally recognized overnight
courier service, by facsimile or registered or certified mail (postage prepaid,
return receipt requested) to the respective parties hereto at the following
addresses (or at such other address for any party as shall be specified by such
party in a notice given in accordance with this Section 10.3).

 

  (a) If to the Company, to:

[REIT]

[    ]

[    ]

Attention: [    ]

Facsimile: [    ]

with a copy (which shall not constitute notice to the Company) to

[    ]

[    ]

[    ]

Facsimile: [    ]

Attention: [    ]

 

18

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  (b) If to CEOC, to:

Caesars Entertainment Operating Company, Inc.

One Caesars Palace Drive

Las Vegas, NV 89109

Attn: General Counsel

With a copy to (which shall not constitute notice):

Kirkland & Ellis LLP

601 Lexington Ave

New York, NY 10022

Attn: Paul M. Basta, P.C.

          Nicole L. Greenblatt

Facsimile: (212) 446 4900

E-mail Address: paul.basta@kirkland.com

ngreenblatt@kirkland.com

-and-

Kirkland & Ellis LLP

300 North LaSalle

Chicago, IL 60654

Attn: David R. Seligman, P.C.

          Ryan Preston Dahl

E-mail Address: dseligman@kirkland.com

rdahl@kirkland.com

Facsimile: (312) 862-2200

 

  (c) If to a Preferred Backstop Investor, to the mailing address or facsimile
number set forth on Schedule II hereto (as such schedule may be updated by
written notice to KKWC).

with a copy (which shall not constitute notice to such Preferred Backstop
Investor) to:

Kleinberg, Kaplan, Wolff & Cohen, P.C.

551 Fifth Avenue, 18th Floor

New York, NY 10176

Telephone: (212) 986-6000

Facsimile: (212) 986-8866

Attention: Mary Kuan, Esq.

Any of the foregoing addresses or facsimile numbers may be changed by giving
notice of such change in the foregoing manner, except that notices for changes
of address or facsimile number shall be effective only upon receipt.

 

19

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10.5 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

10.6 Construction. The parties hereto and their respective legal counsel
participated in the preparation of this Agreement, and therefore, this Agreement
shall be construed neither against nor in favor of any of the parties hereto,
but rather in accordance with the fair meaning thereof.

10.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any Law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect for so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

10.8 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto) and the agreements and documents referenced herein constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof.

10.9 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. Except as set forth below, neither this Agreement nor any of the
rights, interests or obligations under this Agreement will be assigned by any
party (whether by operation of law or otherwise) without the prior written
consent of the other parties. Notwithstanding the foregoing, (i) a Preferred
Backstop Investor may enter into arrangements with other parties regarding its
rights and/or obligations under this Agreement, provided that it shall remain
liable for its obligations with respect to the Backstop Commitment, and (ii) the
rights, obligations and interests hereunder may be assigned, delegated or
transferred, in whole or in part, by any Preferred Backstop Investor (A) either
alone or in connection with a corresponding Transfer (as such term is defined in
the Restructuring Support Agreement) of Claims (as such term is defined in the
Restructuring Support Agreement) to a transferee with the consent of CEOC, such
consent not to be unreasonably withheld, delayed or denied and (B) to affiliates
and to other Preferred Backstop Investors; provided, however, that such
transferee, as a condition precedent to such Transfer, becomes a party to this
Agreement and assumes the obligations of the transferring Preferred Backstop
Investor under this Agreement by executing an addendum substantially in the form
set forth in Exhibit A (the “Addendum”) and, if not at such time a Preferred
Backstop Investor, an assumption in substantially the form set forth in Exhibit
B hereto (the “Assumption Agreement”) and deliver the same to Kleinberg, Kaplan,
Wolff & Cohen, P.C. (“KKWC”) with a copy to CEOC. Any Transfer that is made in
violation of the immediately preceding sentence shall be null and void ab
initio, and CEOC and each Preferred Backstop Investor, as applicable, shall have
the right to enforce the voiding of such transfer. Following any assignment of a
Preferred

 

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Backstop Investor’s rights and obligations in this Agreement described in
Section 10.9(ii) above, Schedule I hereto shall be updated by KKWC (in
consultation with the assigning Preferred Backstop Investor and the Transferee)
and delivered to CEOC solely to reflect the name and address of the applicable
transferee and the Backstop Percentage that shall apply to such transferee, and
any changes to the Backstop Percentage applicable to the assigning Preferred
Backstop Investor. Any update to Schedule I hereto described in the immediately
preceding sentence shall not be deemed an amendment or modification of this
Agreement. In performing this Agreement, CEOC may rely solely on the most
current Schedule I delivered by KKWC.

10.10 No Third Party Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns and, except as expressly set forth in
Section 9, nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever.

10.11 Amendment. This Agreement may not be altered, amended, or modified except
by a written instrument executed by or on behalf of CEOC and the Required
Preferred Backstop Investors, provided that if any alteration, amendment or
modification could be adverse to any of the Preferred Backstop Investors, such
Preferred Backstop Investors’ written consent shall be required. This Agreement
shall become binding only after the same is signed and delivered by or on behalf
of each of the parties hereto.

10.12 Governing Law. This Agreement shall be interpreted, construed and enforced
in accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.

10.13 Consent to Jurisdiction. Each of the parties hereto (a) irrevocably and
unconditionally agrees that any actions, suits or proceedings, at Law or equity,
arising out of or relating to this Agreement or any agreements or transactions
contemplated hereby shall be heard and determined in the Bankruptcy Court;
(b) irrevocably submits to the jurisdiction of such court in any such action,
suit or proceeding; (c) consents that any such action, suit or proceeding may be
brought in such courts and waives any objection that such party may now or
hereafter have to the venue or jurisdiction or that such action or proceeding
was brought in an inconvenient court; and (d) agrees that service of process in
any such action, suit or proceeding may be effected by providing a copy thereof
by any of the methods of delivery permitted by Section 10.3 to such party at its
address as provided in Section 10.3 (provided that nothing herein shall affect
the right to effect service of process in any other manner permitted by Law).

10.14 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES
HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.13.

 

21

--------------------------------------------------------------------------------

10.15 Currency. Unless otherwise specified in this Agreement, all references to
currency, monetary values and dollars set forth herein shall mean United States
(U.S.) dollars and all payments hereunder shall be made in United States
dollars.

10.16 Approvals. Notwithstanding anything to the contrary herein, unless
notified in writing to the contrary, for purposes of seeking approvals of the
Preferred Backstop Investors hereunder, such as in accordance with Section 6.4,
the Company Parties may rely on the written approval (including email) of KKWC.

10.17 Counterparts. This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.

10.18 Specific Performance. Each party hereto acknowledges that, in view of the
uniqueness of the securities referenced herein and the transactions contemplated
by this Agreement, the other parties hereto would not have an adequate remedy at
law for money damages in the event that this Agreement has not been performed in
accordance with its terms, and therefore agrees that such other parties shall be
entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity, without otherwise
limiting the parties’ remedies hereunder.

10.19 Rules of Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term “including” is not limiting, and the
term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,”
“hereunder” and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, annex and exhibit references are to this Agreement
unless otherwise specified. Any reference to this Agreement shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements thereto and thereof, as applicable.
Whenever the context may require, any pronoun includes the corresponding
masculine, feminine and neuter forms.

10.20 Covenants and Representations. Notwithstanding anything to the contrary in
this Agreement or otherwise, (i) CEOC, on behalf of itself and the Debtors,
shall cause the Company to perform each obligations, covenant, undertaking and
agreement in this Agreement, and to cause the Company’s representations and
warranties in this Agreement to be true, complete and correct as of the times
given and shall be liable for all obligations not satisfied or performed by the
Company, (ii) all obligations, covenants, undertakings and agreements of the
Preferred Backstop Investors to the Company shall apply only after the Company
has been properly incorporated and formed in accordance with the Plan and
(iii) the Company shall be deemed to give the representations and warranties
with respect to itself and contained in Section 3 only on the Effective Date and
on the date that it has been properly incorporated and formed in accordance with
the Plan.

[No further text appears; signature pages follow]

 

22

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

CAESARS ENTERTAINMENT OPERATING

COMPANY, INC.

By:  

 

Name:   Title:  

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

PREFERRED BACKSTOP INVESTORS:

 

FIVE ISLAND ASSET MANAGEMENT By:  

 

Name:   Title:  

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

WHITEBOX ASYMMETRIC PARTNERS, LP

By: Whitebox Asymmetric Advisors, LLC, its general partner

By: Whitebox Advisors LLC, its managing member

By:  

 

Name:   Title:  

WHITEBOX CREDIT ARBITRAGE PARTNERS, LP

By: Whitebox Credit Arbitrage Advisors, LLC, its general partner

By: Whitebox Advisors LLC, its managing member

By:  

 

Name:   Title:   WHITEBOX MULTI-STRATEGY PARTNERS, LP

By: Whitebox Multi-Strategy Advisors, LLC, its general partner

By: Whitebox Advisors LLC, its managing member

By:  

 

Name:   Title:  

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

WHITEBOX INSTITUTIONAL PARTNERS, LP By: Whitebox Advisors LLC, its managing
member By:  

 

Name:   Title:  

COLLINS ALTERNATIVE SOLUTIONS FUND,

a series of Trust for Professional Managers

By:  

 

Name:   Title:   WHITEBOX TACTICAL OPPORTUNITIES FUND By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

ELLIOTT INTERNATIONAL, L.P.

By: Elliott International Capital Advisors, Inc., as attorney-in-fact

By:  

 

Name:   Title:  

ELLIOTT ASSOCIATES, L.P.

By: Elliott Capital Advisors, L.P., as general partner

By: Braxton Associates, Inc., as general partner

By:  

 

Name:   Title:  

THE LIVERPOOL LIMITED PARTNERSHIP

By: Liverpool Associates Ltd., as general partner

By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

DDJ CAPITAL MANAGEMENT, LLC By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

PACIFIC INVESTMENT MANAGEMENT

COMPANY, LLC, on behalf of certain funds and

accounts

By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

J.P. MORGAN INVESTMENT MANAGEMENT, INC. By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

GOLDMAN, SACHS & CO., SOLELY WITH RESPECT TO THE MULTI STRATEGY INVESTING DESK
OF THE AMERICAS SPECIAL SITUATIONS GROUP By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

HBK MASTER FUND L.P. By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

FARALLON CAPITAL PARTNERS, L.P. By:  

 

Name:   Title:   FARALLON CAPITAL AA INVESTORS, L.P. By:  

 

Name:   Title:   FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P. By:  

 

Name:   Title:   FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P. By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P. By:  

 

Name:   Title:   FARALLON CAPITAL OFFSHORE INVESTORS II, L.P. By:  

 

Name:   Title:   FARALLON CAPITAL (AM) INVESTORS, L.P. By:  

 

Name:   Title:   NOONDAY OFFSHORE, INC. By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

BRIGADE CAPITAL MANAGEMENT, LP, on behalf of funds and accounts managed by it
By:  

 

Name:   Title:  

 

[Backstop Commitment Agreement]

--------------------------------------------------------------------------------

Schedule I4

SCHEDULE OF PREFERRED BACKSTOP INVESTORS

 

Name of Preferred Backstop Investors

   Backstop
Percentage5  

Certain funds or entities or accounts managed by Brigade Capital Management

          % 

Certain funds or accounts managed by DDJ Capital Management, LLC

  

Certain funds or entities or accounts managed by Elliott Management Corporation

  

Certain funds or entities managed by Farallon Capital Management, LLC

  

Five Island Asset Management

  

Goldman, Sachs & Co., solely with respect to the Multi Strategy Investing desk
of the Americas Special Situations Group

  

HBK Master Fund L.P.

  

Certain funds or entities or accounts managed by JPMorgan Asset Management

  

PIMCO and/or certain funds or entities or accounts managed by PIMCO

  

Certain funds of entities managed by Whitebox Advisors, LLC

     

 

 

 

Total:

     100 % 

 

4  Backstop Percentage has been redacted.

5  NTD: The initial percentage for each Preferred Backstop Investor will be
equal to the product of (i) the quotient resulting from (x) the amount of Senior
Secured Notes designated by such Preferred Backstop Investor, provided such
amount shall not exceed the principal amount of the Senior Secured Notes Held by
such Preferred Backstop Investor on January 12, 2015 divided by (y ) the
aggregate amount of Senior Secured Bonds designated by all Preferred Backstop
Investors pursuant to clause (x) and (ii) 100.

--------------------------------------------------------------------------------

Schedule II

Notice Information for Preferred Backstop Investors6

 

6  Notice information has been redacted.

--------------------------------------------------------------------------------

Schedule III

Wire Instructions7

 

7  Wire instructions have been redacted.

--------------------------------------------------------------------------------

Exhibit A

ADDENDUM

Reference is made to that certain Backstop Commitment Agreement (as amended,
modified or supplemented from time to time, the “Agreement”) by and among
Caesars Entertainment Operating Company, Inc., a Delaware corporation ( “CEOC”),
and each of the Preferred Backstop Investors party thereto from time to time.
Each capitalized term used but not defined herein shall have the meaning given
to it in the Agreement.

Upon execution and delivery of this Addendum by the undersigned, as provided in
Section 10.9 of the Agreement, the undersigned hereby becomes a Preferred
Backstop Investor, as applicable thereunder and bound thereby effective as of
the date of the Agreement.

By executing and delivering this Addendum, the undersigned represents and
warrants, for itself and for the benefit of each party to the Agreement, that:

 

  (a) as of the date of this Addendum, the undersigned has executed and
delivered an Assumption and Joinder Agreement therefor (a copy of which is
attached to this Addendum) or is as of the date of this Addendum a Preferred
Backstop Investor;

 

  (b) as of the date of this Addendum, with respect to each transferee that
(i) is an individual, such Transferee has all requisite authority to enter into
this Addendum and to carry out the transactions contemplated by, and perform its
respective obligation under, the Agreement and (ii) is not an individual, such
transferee is duly organized, validly existing, and in good standing under the
laws of the state of its organization, and has all requisite corporate,
partnership, or limited liability company power and authority to enter into this
Addendum and to carry out the transactions contemplated by, and perform its
respective obligations under, the Agreement;

 

  (c) assuming the due execution and delivery of the Agreement by the Company,
the Addendum and the Agreement are legally valid and binding obligations of it,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency or similar laws, or by equitable principles relating to
or limiting creditors’ rights generally; and

 

  (d) as of the date of this Addendum, it is not aware of any event that, due to
any fiduciary or other duty to any other person, would prevent it from taking
any action required of it under the Agreement and this Addendum.

By executing and delivering this Addendum to CEOC, the undersigned agrees to be
bound by all the terms of the Agreement.

The undersigned acknowledges and agrees that once delivered to CEOC, it may not
revoke, withdraw, amend, change or modify this Addendum unless the Agreement has
been terminated.

--------------------------------------------------------------------------------

THIS ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.

This Addendum may be executed in one or more counterparts, each of which, when
so executed, shall constitute the same instrument and the counterparts may be
delivered by facsimile transmission or by electronic mail in portable document
format (.pdf).

[Signature on Following Page]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed and delivered by their proper and duly authorized officers as of this
[    ] day of [            ].

 

TRANSFEREE WHO BECOMES A PREFERRED BACKSTOP INVESTOR [NAME]

 

as a Preferred Backstop Investor Name:

 

--------------------------------------------------------------------------------

Exhibit B

ASSUMPTION AND JOINDER AGREEMENT

Reference is made to (i) that certain Backstop Commitment Agreement (as amended,
modified or supplemented from time to time, the “Agreement”), dated as of
[    ], 2014, by and among Caesars Entertainment Operating Company, Inc., a
Delaware corporation ( “CEOC”) and each of the Preferred Backstop Investors
party thereto from time to time, and (ii) that certain Addendum, dated as of
[    ], [    ] (the “Transferor Addendum”) submitted by             , as
transferor (the “Transferor”). Each capitalized term used but not defined herein
shall have the meaning given to it in the Agreement.

As a condition precedent to becoming a Preferred Backstop Investor, the
undersigned (the “Transferee”) hereby agrees to become bound by all the terms,
conditions and obligations set forth in the Agreement and the Transferor
Addendum copies of which are attached hereto as Annex I. This Assumption and
Joinder Agreement shall take effect and shall become an integral part of the
Agreement and the Transferor Addendum immediately upon its execution, and the
Transferee shall be deemed to be bound by all of the terms, conditions and
obligations of the Agreement and the Transferor Addendum as of the date thereof.
The Transferee shall hereafter be deemed to be a “Preferred Backstop Investor”
and a “party” for all purposes under the Agreement.

[Signatures on Following Page]

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, this Assumption and Joinder Agreement has been duly executed
by each of the undersigned as of the date specified below.

Date: [            ]

 

 

Name of Transferor

 

  

 

Name of Transferee

 

Authorized Signatory of Transferor   

Authorized Signatory of Transferee

 

 

(Type or Print Name and Title of Authorized Signatory)

  

 

(Type or Print Name and Title of Authorized Signatory)

   Address of Transferee:   

 

  

 

  

 

  

Attn:

 

  

 

Tel:

 

  

 

Fax:

 

  

 

E-mail:

 

--------------------------------------------------------------------------------

Exhibit C

OFFERING CONDITIONS

 

1. Holders shall receive an Election Form and ballot in the Solicitation
Package, which shall be approved by the Bankruptcy Court.

 

2. The Election Form must be submitted by the Subscription Expiration Date.

 

3. Returned Election Form for Holders other than the Preferred Backstop
Investors must provide evidence of financial wherewithal to purchase the shares
of Preferred Stock pursuant to the Rights Offering. CEOC shall determine in its
discretion whether such Holders are satisfactory to CEOC (such approved Holders,
the “Satisfactory Holders”).

 

4. CEOC shall notify the Preferred Backstop Investors of the Satisfactory
Holders and the Preferred Stock such Satisfactory Holders have elected to
purchase pursuant to the Rights Offering no later than three days before the
deadline set by the Bankruptcy Court for the filing of objections to
confirmation of the Plan (the “Objection Deadline”).

 

5. On or before the Objection Deadline, all Holders designated as Satisfactory
Holders (which, for the avoidance of doubt, shall exclude the Preferred Backstop
Investors) shall post cash in the amount of the maximum aggregate Per Share
Purchase Price for all Preferred Stock such Holder elected to purchase (the
“Purchase Amount Obligation”) with a third party escrow agent designated by CEOC
and reasonably satisfactory to the Required Preferred Backstop Investors.

 

6. To the extent that the cash timely posted by the Satisfactory Holders is less
than the Purchase Amount Obligation, the Preferred Backstop Investors shall have
the right, but not the obligation, to satisfy their respective Backstop
Commitments with respect to any shortfall in the Purchase Amount Obligation,
provided that any Backstop Commitment declined by any Preferred Backstop
Investor shall be allocated pro rata (based on the Backstop Commitment of the
Preferred Backstop Investors electing to participate) to the Preferred Backstop
Investors electing to participate.

 

7. Preferred Backstop Investors and other Holders may elect to receive on the
Effective Date Common Stock in lieu of all or a portion of Preferred Stock in
respect of such at the applicable conversation ratio in respect of Preferred
Stock purchased in the Rights Offering and/or as a result of the Backstop
Commitment. The Preferred Backstop Investors and other Holders may elect to
receive Common Stock in lieu of all or a portion of the Preferred Stock
otherwise issuable in the Rights Offering and/or as a result of the Backstop
Commitment by providing written notice of its election to the Company at least
ten (10) Business Days prior to the Effective Date.

--------------------------------------------------------------------------------

Annex V

Debt Term Sheets

 

30

--------------------------------------------------------------------------------

New First Lien OpCo Debt

$[            ] Term Facility

Summary of Principal Terms1

 

Borrower:    [Caesars Entertainment Operating Company, Inc.]2 (the “Borrower”).
Agent/Collateral Agent:   

An Approved Agent (as set forth on Schedule I attached hereto) will act as sole
administrative agent for the Senior Facilities (in such capacity and together
with its permitted successors and assigns, the “Agent”), and will perform the
duties customarily associated with such role.

 

An Approved Agent (as set forth on Schedule I attached hereto) will act as
collateral agent for the Senior Facilities (in such capacity, the “Collateral
Agent”), and will perform the duties customarily associated with such role.

 

If an Approved Agent is unavailable to serve as Agent or Collateral Agent, the
Agent or Collateral Agent, as applicable, shall be a financial institution
reasonably acceptable to the Borrower and Requisite Consenting Creditors.

Facilities:   

(A)   a senior secured term loan facility in an aggregate principal amount set
forth in the Restructuring Term Sheet (the “First Lien Term Facility” and loans
thereunder, the “Term Loans”), which will be deemed to have been provided to the
Borrower by the First Lien Bank Lenders, in accordance with the Restructuring
Term Sheet (in such capacity, collectively the “Lenders”).

 

(B)   at the Borrower’s option, a senior secured revolving credit facility in an
aggregate principal amount not to exceed $200 million, to be provided by one or
more of the First Lien Bank Lenders and/or one or more other financial
institutions (which shall become Lenders under the Senior Facilities), a portion
of which will be available through a subfacility in the form of letters of
credit (the “Revolving Facility” and, together with the First Lien Term
Facility, the “Senior Facilities”).

 

1  All capitalized terms used but not defined herein shall have the meaning
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”).

2  NTD: Assumes CEOC is the operating company in the new REIT structure.

--------------------------------------------------------------------------------

   In accordance with the Restructuring Term Sheet, the Borrower shall use its
commercially reasonable efforts to syndicate the First Lien Term Facility (in
the form of term loans and/or bonds) to the market through an Approved Agent or
otherwise through a financial institution reasonably acceptable to the Requisite
Consenting Creditors at or below the interest rates set forth herein (the
“Syndicated First Lien Term Facility”) and, to the extent so syndicated, the net
cash proceeds thereof will be used to increase the cash payments to the First
Lien Bank Lenders and the First Lien Noteholders on a pro rata basis (based on
the aggregate principal amount of Opco First Lien Debt otherwise contemplated to
be issued to them before giving effect to any such syndication) pursuant to the
terms of the Restructuring Term Sheet. Any such cash payments to the First Lien
Bank Lenders will reduce on a dollar-for-dollar basis the First Lien Term
Facility to be provided by the First Lien Bank Lenders. Any such cash payments
to the First Lien Noteholders will reduce on a dollar-for-dollar basis the
amount of First Lien Notes to be issued to the First Lien Noteholders. If the
aggregate principal amount of the Syndicated First Lien Term Facility is less
than the aggregate principal amount of the First Lien Term Facility to be
provided by the First Lien Bank Lenders on the Closing Date (after giving effect
to the dollar-for-dollar reduction described above), then the terms of the
Syndicated First Lien Term Facility (other than with respect to pricing) shall
be consistent with the terms set forth herein. Definitive Documentation:    The
definitive documentation for the First Lien Term Facility (and, to the extent
documented in the same documentation as the First Lien Term Facility, the
Revolving Facility) shall be based on financing and security documentation
typical and customary for exit financings (the “Senior Facilities
Documentation”) and which shall (x) take into consideration (i) the First Lien
Credit Agreement, dated as of October 11, 2013, among Caesars Entertainment
Resort Properties, LLC, Caesars Entertainment Resort Properties Finance, Inc.,
Harrah’s Las Vegas, LLC, Harrah’s Atlantic City Holding, Inc., Rio Properties,
LLC, Flamingo Las Vegas Holding, LLC, Harrah’s Laughlin, LLC and Paris Las Vegas
Holding, LLC, as borrowers, the lenders party thereto and Citicorp North
America, Inc., as administrative agent (the “CERP Credit Agreement”), (ii) the
operational requirements of the Borrower and its subsidiaries, their capital
structure and size after giving effect to the transactions contemplated by the
Restructuring Term Sheet, and (iii) the operating lease

 

2

--------------------------------------------------------------------------------

   structure of the Borrower and its subsidiaries after giving effect to the
transactions contemplated by the Restructuring Term Sheet, (y) contain the terms
set forth herein, and (z) in all cases be reasonably satisfactory to the
Borrower and the Requisite Consenting Creditors; provided that, in the case of
provisions setting forth the debt and lien capacity, the Senior Facilities
Documentation shall be based on and consistent with the CERP Credit Agreement,
as modified to reflect the terms set forth herein (clauses (x), (y) and (z), the
“Opco Bank Debt Documentation Principles”). Incremental Facilities:   

The Borrower will be permitted after the Closing Date to add additional
revolving or term loan credit facilities (the “Incremental Facilities”) in an
aggregate principal amount not to exceed the greater of (x) $150 million and
(y) an aggregate principal amount of indebtedness that would not cause (1) in
the case of debt incurred under the Incremental Facilities that is secured by
pari passu liens on the Collateral, the pro forma First Lien Net Leverage Ratio
(to be defined as the ratio of total funded debt outstanding that consists of
the Term Loans and other funded debt that is secured by first-priority liens on
the Collateral that are pari passu with the Term Loans (net of unrestricted cash
and cash equivalents not to exceed in the aggregate $100 million) to adjusted
EBITDA) (“First Lien Net Leverage Ratio”) to exceed a ratio to be set on the
Closing Date that is equal to a ratio that is 0.25x greater than the pro forma
First Lien Net Leverage Ratio in effect on the Closing Date3 and (2) in the case
of debt incurred under the Incremental Facilities that is secured by junior
liens on the Collateral, the pro forma Total Secured Net Leverage Ratio (to be
defined as the ratio of total funded debt outstanding that is secured by liens
on the Collateral (net of unrestricted cash and cash equivalents not to exceed
in the aggregate $100 million) to adjusted EBITDA) (“Total Secured Net Leverage
Ratio”) to exceed a ratio to be set on the Closing Date that is equal to a ratio
that is 0.25x greater than the pro forma Total Secured Net Leverage Ratio in
effect on the Closing Date; provided, that:

 

(i)     the loans under such additional credit facilities shall be secured
senior obligations and shall rank pari passu or junior in right of security
with, and shall have the same guarantees as, the Senior Facilities; provided,

 

3 

For the avoidance of doubt, (i) the calculation of the ratios in the OpCo debt
documents shall exclude Chester Downs (from both debt and EBITDA) and (ii) any
Revolving Facility loans outstanding at the time of incurrence of any debt shall
be included in the calculation of any Leverage Ratio at the time of such
incurrence.

 

3

--------------------------------------------------------------------------------

  

that, if such additional credit facilities rank junior in right of security to
the Senior Facilities, (x) such additional credit facilities will be established
as a separate facility from the Senior Facilities and pursuant to separate
documentation, (y) such Incremental Facilities shall be subject to the
Intercreditor Agreements (as defined below) or other intercreditor agreements
that are not materially less favorable to the Lenders and the First Lien
Noteholders than the Intercreditor Agreements and (z) for the avoidance of
doubt, will not be subject to clause (iv) below;

  

(ii)    the loans under the additional term loan facilities will mature no
earlier than, and will have a weighted average life to maturity no shorter than,
that of the First Lien Term Facility and all other terms of any such additional
term loan facility (other than pricing, amortization or maturity) shall be
substantially identical to the First Lien Term Facility or otherwise reasonably
acceptable to the Agent;

  

(iii)  all fees and expenses owing in respect of such increase to the Agent,
Collateral Agent and the Lenders shall have been paid; and

  

(iv)   each incremental term facility shall be subject to a “most favored
nation” pricing provision that ensures that the initial “yield” on the
incremental facility does not exceed the “yield” at such time on the First Lien
Term Facility by more than 50 basis points (with “yield” being determined by the
Agent taking into account the applicable margin, upfront fees, any original
issue discount and any LIBOR or ABR floors, but excluding any structuring,
commitment and arranger or similar fees).

Purpose:    On the Closing Date, each First Lien Bank Lender shall be deemed to
have made Term Loans in accordance with the Restructuring Term Sheet.
Availability:    The Borrower shall incur the full amount of the First Lien Term
Facility on the Closing Date. Amounts under the First Lien Term Facility that
are repaid or prepaid may not be reborrowed.

 

4

--------------------------------------------------------------------------------

Interest Rates:    LIBOR + 4.0% per annum, with a 1.0% LIBOR floor. Default
Rate:    With respect to overdue principal (whether at stated maturity, upon
acceleration or otherwise), the applicable interest rate plus 2.00% per annum,
and with respect to any other overdue amount (including overdue interest), the
interest rate applicable to ABR loans plus 2.00% per annum and in each case,
shall be payable on demand. Final Maturity and Amortization:    The First Lien
Term Facility will mature on the date that is six (6) years after the Closing
Date, and, commencing with the second full fiscal quarter ended after the
Closing Date, will amortize in equal quarterly installments in an aggregate
annual amount equal to 1% of the original principal amount of the First Lien
Term Facility with the balance payable on the maturity date of the First Lien
Term Facility. Guarantees:   

All obligations of the Borrower under the Senior Facilities and, at the option
of the Borrower, under any interest rate protection or other hedging
arrangements entered into with the Agent, an entity that is a Lender or agent at
the time of such transaction (or on the Closing Date, if applicable), or any
affiliate of any of the foregoing (“Hedging Arrangements”), or any cash
management arrangements with any such person (“Cash Management Arrangements”),
will be unconditionally guaranteed (the “Guarantees”) by each existing and
subsequently acquired or organized wholly owned domestic subsidiary of the
Borrower (the “Subsidiary Guarantors”), subject to exceptions consistent with
the Opco Bank Debt Documentation Principles and others, if any, to be agreed
upon. The Guarantees will be joint and several guarantees of payment and
performance and not of collection.

 

In addition, Holdings shall provide a guarantee of the Senior Facilities issued
to the First Lien Bank Lenders on the Closing Date substantially in the form
attached as an exhibit to the Restructuring Term Sheet (the “Holdings
Guaranty”).

Security:    Subject to exceptions described below and other exceptions, if any,
to be agreed upon, the Senior Facilities, the Guarantees, any Hedging
Arrangements and any Cash Management Arrangements will be secured on a
first-priority basis by substantially all the owned material assets of the
Borrower and each Subsidiary Guarantor, in each case whether owned on the
Closing Date or thereafter acquired (collectively, the “Collateral”), including
but not limited to: (a) a perfected first-priority pledge of all the equity
interests directly held by

 

5

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the Borrower or any Subsidiary Guarantor (which pledge, in the case of any
foreign subsidiary, shall be limited to 100% of the non-voting equity interests
(if any) and 65% of the voting equity interests of such foreign subsidiary),
(b) a lien on cash, deposit accounts and securities accounts, and (c) perfected
first-priority security interests in, and mortgages on, substantially all owned
tangible and intangible assets of the Borrower and each Subsidiary Guarantor
(including, but not limited to, accounts receivable, inventory, equipment,
general intangibles, investment property, intellectual property and real
property (including the Borrower’s interest in the CPLV Lease and the Non-CPLV
Lease)) except for (v) real property with a fair market value less than $15.0
million and leaseholds (other than the CPLV Lease and the Non-CPLV Lease),
(w) vehicles, (x) those assets as to which the Borrower, Agent and Collateral
Agent shall reasonably determine that the costs or other consequences of
obtaining such a security interest are excessive in relation to the value of the
security to be afforded thereby, (y) assets to which the granting or perfecting
such security interest would violate any applicable law (including gaming laws
and regulations) or contract (and with regard to which contract the counterparty
thereto requires such prohibition as a condition to entering into such contract,
such contract has been entered into in the ordinary course of business, such
restriction is consistent with industry custom and consent has been requested
and not received), but only so long as such grant or perfection would violate
any such law or contract, and (z) other exceptions consistent with the Opco Bank
Debt Documentation Principles. There shall be neither lockbox arrangements nor
any control agreements relating to the Borrower’s and its subsidiaries’ bank
accounts or securities accounts.

 

All the above-described pledges, security interests and mortgages shall be
created on terms, and pursuant to documentation consistent with the Opco Bank
Debt Documentation Principles.

 

The Senior Facilities Documentation will provide that none of the Collateral
Agent, Lenders or Administrative Agent will be permitted to terminate Caesars
Entertainment Corporation (“Holdings”) or any of its subsidiaries or affiliates
as manager of any of the PropCo facilities without the prior written consent of
PropCo.

 

6

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The relative rights and priorities in the Collateral for each of the Senior
Facilities and the First Lien Notes will be set forth in a customary
intercreditor agreement between the administrative agent for the Senior
Facilities, on the one hand, and the trustee for the First Lien Notes, on the
other hand, which intercreditor agreement shall provide that (i) the
indebtedness outstanding under the Senior Facilities and the First Lien Notes
are pari passu in all respects, and (ii) unless there is a Market Financing, the
indebtedness outstanding under the Senior Facilities and the First Lien Notes
shall vote together as a single class, including in respect of directing the
Collateral Agent in respect thereof (the “First Lien Intercreditor Agreement”).

 

A “Market Financing” shall mean that the aggregate principal amount of the First
Lien Term Facility to be provided by the First Lien Bank Lenders on the Closing
Date and the First Lien Notes to be issued to the First Lien Noteholders (after
giving effect to the dollar-for-dollar reduction in respect of any syndication)
is no more than 50% of the aggregate principal amount of the First Lien Term
Facility and the First Lien Notes contemplated to be provided by the First Lien
Bank Lenders and the First Lien Noteholders on the Closing Date under the
Restructuring Term Sheet (without giving effect to any syndication).

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
a customary intercreditor agreement, consistent with the Opco Bank Debt
Documentation Principles, as between the collateral agent for the Senior
Facilities and the First Lien Notes, on the one hand, and the collateral agent
for the Second Lien Notes, on the other hand (the “First Lien/Second Lien
Intercreditor Agreement” and, together with the First Lien Intercreditor
Agreement, the “Intercreditor Agreements”).

Mandatory Prepayments:    Unless (in the case of clause (a)) the net cash
proceeds are reinvested (or committed to be reinvested) in the business within
12 months after (and, if so committed to be reinvested, are actually reinvested
within three months after the end of such initial 12-month period), a
non-ordinary course asset sale or other non-ordinary disposition of property
(other than sale of receivables in connection with a permitted receivable
financing) of the Borrower or any of the subsidiaries (including insurance and
condemnation proceeds), (a) the Lenders’ Pro Rata Share (to be defined as the
ratio of funded debt outstanding that consists of the Term Loans to the sum of
the total funded debt outstanding that consists of the Term

 

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Loans and the First Lien Notes) of 100% of the net cash proceeds in excess of an
amount to be agreed upon from such non-ordinary course asset sales or other
non-ordinary dispositions of property, and (b) the Lenders’ Pro Rata Share of
100% of the net cash proceeds of issuances, offerings or placements of debt
obligations of the Borrower and its subsidiaries (other than debt permitted to
be incurred under the Senior Facilities Documentation unless otherwise provided
as a condition to the incurrence thereof), shall be applied to prepay the Term
Loans under the First Lien Term Facility, in each case subject to customary and
other exceptions to be agreed upon, including those consistent with the Opco
Bank Debt Documentation Principles.

 

In addition, beginning with the first full fiscal year of the Borrower after the
Closing Date, 50% of Excess Cash Flow (to be defined in a manner consistent with
the Opco Bank Debt Documentation Principles and to take into account application
of Excess Cash Flow under the Lease and otherwise in a manner satisfactory to
the Requisite Consenting Creditors and subject to a minimum threshold to be
agreed) of the Borrower and its restricted subsidiaries (stepping down to 25% if
the First Lien Net Leverage Ratio is less than or equal to 2.75 to 1.00 and
stepping down to 0% if the First Lien Net Leverage Ratio is less than or equal
to 2.25 to 1.00) shall be used to prepay the Term Loans under the First Lien
Term Facility and the First Lien Notes, on a ratable basis based on the Lenders’
Pro Rata Share; provided that any voluntary prepayment of Term Loans made during
any fiscal year (including Loans under the Revolving Facility to the extent
commitments thereunder are permanently reduced by the amount of such prepayments
at the time of such prepayment) and voluntary repayment of the First Lien Notes
shall be credited against excess cash flow prepayment obligations for such
fiscal year (or, at the Borrower’s option, any future year) on a
Dollar-for-Dollar basis.

 

All mandatory prepayments shall be made pro rata among the Lenders.

 

Notwithstanding the foregoing, each Lender under the First Lien Term Facility
shall have the right to reject its pro rata share of any mandatory prepayments
described above, in which case the amounts so rejected may be retained by the
Borrower on terms consistent with the Opco Bank Debt Documentation Principles.

 

8

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The above-described mandatory prepayments shall be applied to the First Lien
Term Facility in direct order of maturity.

 

Prepayments from foreign subsidiaries’ Excess Cash Flow and asset sale proceeds
will be limited under the Senior Facilities Documentation to the extent (x) the
repatriation of funds to fund such prepayments is prohibited, restricted or
delayed by applicable local laws, (y) applied to repay indebtedness of a foreign
subsidiary of the Borrower or (z) the repatriation of funds to fund such
prepayments would result in material adverse tax consequences.

Voluntary Prepayments and Reductions in Commitments:   

Voluntary reductions of the unutilized portion of the commitments under the
Senior Facilities and prepayments of borrowings thereunder will be permitted at
any time in minimum principal amounts to be agreed upon, without premium or
penalty, subject to the following paragraph and subject to reimbursement of the
Lenders’ redeployment costs in the case of a prepayment of Adjusted LIBOR
borrowings other than on the last day of the relevant interest period. All
voluntary prepayments of the First Lien Term Facility will be applied pro rata
to the Term Loan (and pro rata among the Lenders) and to the remaining
amortization payments under the First Lien Term Facility in such order as the
Borrower may direct.

 

Voluntary Prepayments of the Term Loans made prior to the four year anniversary
of the Closing Date will be subject to a prepayment premium, as follows:

 

•    First year following Closing Date: customary “make-whole” premium (T+50)

 

•    Second year following Closing Date: 3%

 

•    Third year following Closing Date: 2%

 

•    Fourth year following Closing Date: 1%

 

•    Fourth year anniversary and thereafter: par

Representations and Warranties:    The following representations and warranties,
among others, if any, to be negotiated in the Senior Facilities Documentation,
will apply (to be applicable to the Borrower and its restricted subsidiaries,
subject to customary and other exceptions and qualifications to be agreed upon,
consistent with the Opco Bank Debt Documentation Principles): organization,
existence, and power; qualification; authorization and enforceability; no
conflict; governmental consents (including, without limitation, from gaming
authorities); subsidiaries; accuracy of financial statements and

 

9

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   other information in all material respects; projections; no material adverse
change since the Closing Date; absence of litigation; compliance with laws
(including PATRIOT Act, OFAC, FCPA, ERISA, margin regulations, environmental
laws, gaming laws and laws with respect to sanctioned persons); payment of
taxes; ownership of properties; governmental regulation (including, without
limitation, gaming regulation); inapplicability of the Investment Company Act;
Closing Date solvency on a consolidated basis; labor matters; validity, priority
and perfection of security interests in the Collateral; intellectual property;
treatment as designated senior debt under subordinated debt documents (if any);
use of proceeds; insurance; real property (including leases thereof); and no
default or event of default. Affirmative Covenants:    The following affirmative
covenants, among others, if any, to be negotiated in the Senior Facilities
Documentation, will apply (to be applicable to the Borrower and its restricted
subsidiaries), subject to customary (consistent with the Opco Bank Debt
Documentation Principles) and other baskets, exceptions and qualifications to be
agreed upon: maintenance of corporate existence and rights; performance and
payment of obligations; delivery of annual and quarterly consolidated financial
statements (accompanied by customary management discussion and analysis and
(annually) by an audit opinion from nationally recognized auditors that is not
subject to any qualification as to scope of such audit or going concern) (with
extended time periods to be agreed for delivery of the first annual and certain
quarterly financial statements to be delivered after the Closing Date) and an
annual budget; delivery of notices of default and material adverse litigation,
ERISA events and material adverse change; maintenance of properties in good
working order; maintenance of books and records; maintenance of customary
insurance; commercially reasonable efforts to maintain ratings (but not a
specific rating); compliance with laws (including, without limitation, gaming
laws); inspection of books and properties; environmental; additional guarantors
and additional collateral (subject to limitations set forth under the captions
“Guarantees” and “Security”); further assurances in respect of collateral
matters; use of proceeds; payment of taxes; and real property (including,
without limitation, leases thereof).    The Senior Facilities Documentation will
provide that any management or similar fees paid to Caesars Entertainment
Corporation or any of its subsidiaries or affiliates will be made on an
arm’s-length basis and on “market” terms (including caps on amounts and consent
rights relating to modifications of applicable agreements relating thereto).

 

10

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Negative Covenants:    The following negative covenants, among others, if any,
to be negotiated in the Senior Facilities Documentation, will apply (to be
applicable to the Borrower and its restricted subsidiaries), subject to
customary exceptions and qualifications (consistent with the Opco Bank Debt
Documentation Principles) and others to be agreed upon:   

1.      Limitation on dispositions of assets.

  

2.      Limitation on mergers and acquisitions.

  

3.      Limitation on dividends and stock repurchases and optional redemptions
(and optional prepayments) of subordinated debt, it being understood that such
limitations will be more restrictive until the Total Net Leverage Ratio is less
than 3.00 to 1.00.

  

4.      Limitation on indebtedness (including guarantees and other contingent
obligations) and preferred stock, it being understood that additional unsecured
indebtedness may be incurred in an aggregate principal amount that would not
cause the pro forma Total Net Leverage Ratio (to be defined as the ratio of
total funded debt outstanding (net of unrestricted cash and cash equivalents not
to exceed in the aggregate $100 million) to adjusted EBITDA) (“Total Net
Leverage Ratio”) to exceed a ratio to be set on the Closing Date that is equal
to a ratio that is 0.25x greater than the pro forma Total Net Leverage Ratio in
effect on the Closing Date.

  

5.      Limitation on loans and investments.

  

6.      Limitation on liens and further negative pledges.

  

7.      Limitation on transactions with affiliates.

  

8.      Limitation on sale/leaseback transactions.

  

9.      Limitation on changes in the business of the Borrower and its
subsidiaries.

  

10.    Limitation on restrictions on ability of subsidiaries to pay dividends or
make distributions.

 

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11.    Limitation on changes to fiscal year.

  

12.    Limitation on modifications to subordinated debt documents.

  

13.    Limitation on material modifications to the MLSA, lease and other
arrangements entered into in connection with the lease structure.

   EBITDA shall be defined in a manner consistent with the Opco Bank Debt
Documentation Principles.    All ratios and calculations shall be measured on a
Pro Forma Basis (to be defined in a manner consistent with the Opco Bank Debt
Documentation Principles, and including the annualized effect of addbacks in the
definition of EBITDA).    With respect to basket amounts, covenant thresholds
and similar levels in the Senior Facilities Documentation provisions with
respect to debt and lien capacity that are tied to dollar amounts, such amounts,
thresholds and levels will be based on the corresponding dollar amounts that are
set forth in the CERP Credit Agreement, in each case as adjusted pursuant to the
agreement of the parties, including to reflect the pro forma capital structure
of the Borrower and the relative size and EBITDA of the Borrower (such amounts
as adjusted, the “Basket Adjustments”). Financial Covenant:    First Lien Term
Facility: None. Events of Default:    The following (subject to customary and
other thresholds and grace periods to be agreed upon, consistent with the Opco
Bank Debt Documentation Principles, and applicable to the Borrower and its
restricted subsidiaries), among others, if any, to be negotiated in the Senior
Facilities Documentation: nonpayment of principal, interest or other amounts;
violation of covenants; incorrectness of representations and warranties in any
material respect; cross payment default, cross event of default and cross
acceleration to material indebtedness; Holdco Covenant Breach (as defined in the
Holdings Guaranty); bankruptcy and similar events (including as to Holdings);
material judgments; ERISA events; invalidity of the Guarantees or any security
document, in each case, representing a material portion of the Guarantees or the
Collateral; gaming license revocation; ineffectiveness or termination of leases;
and Change of Control (to be defined in a manner consistent with the Opco Bank
Debt Documentation Principles).

 

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Unrestricted Subsidiaries:    The Senior Facilities Documentation will contain
provisions pursuant to which, subject to limitations consistent with the Opco
Bank Debt Documentation Principles, the Borrower will be permitted to designate
any existing or subsequently acquired or organized subsidiary as an
“unrestricted subsidiary” and subsequently re-designate any such unrestricted
subsidiary as a restricted subsidiary. Unrestricted subsidiaries will not be
subject to the affirmative or negative covenant or event of default provisions
of the Senior Facilities Documentation, and the results of operations and
indebtedness of unrestricted subsidiaries will not be taken into account for
purposes of calculating the financial ratios contained in the Senior Facilities
Documentation on terms consistent with the Opco Bank Debt Documentation
Principles. Voting:    Usual for facilities and transactions of this type and
consistent with the Opco Bank Debt Documentation Principles; provided that the
Borrower and its affiliates, including the Sponsors, shall not have voting
rights with respect to loans and commitments held by them. Cost and Yield
Protection:    Usual for facilities and transactions of this type, consistent
with the Opco Bank Debt Documentation Principles. Assignments and
Participations:    The Lenders will be permitted to assign loans and commitments
under the Senior Facilities with the consent of the Borrower (not to be
unreasonably withheld or delayed, but which consent under the First Lien Term
Facility shall be deemed granted if the Borrower fails to respond to a request
for consent by a Lender within ten business days of such request being made);
provided, that such consent of the Borrower shall not be required (i) if such
assignment is made, in the case of the First Lien Term Facility, to another
Lender under the First Lien Term Facility or an affiliate or approved fund of a
Lender under the First Lien Term Facility or (ii) after the occurrence and
during the continuance of an event of default relating to payment default or
bankruptcy. All assignments will also require the consent of the Agent (subject
to exceptions consistent with the Opco Bank Debt Documentation Principles) not
to be unreasonably withheld or delayed. Each assignment, in the case of the
First Lien Term Facility, will be in an amount of an integral multiple of
$1,000,000. The Agent will receive a processing and recordation fee of $3,500,
payable by the assignor and/or the assignee, with each assignment. Assignments
will be by novation and will not be required to be pro rata between the Senior
Facilities.

 

13

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   The Lenders will be permitted to sell participations in loans subject to the
restrictions set forth herein and consistent with the Opco Bank Debt
Documentation Principles. Voting rights of participants shall (i) be limited to
matters in respect of (a) increases in commitments of such participant,
(b) reductions of principal, interest or fees payable to such participant,
(c) extensions of final maturity or scheduled amortization of the loans or
commitments in which such participant participates and (d) releases of all or
substantially all of the value of the Guarantees, or all or substantially all of
the Collateral and (ii) for clarification purposes, not include the right to
vote on waivers of defaults or events of default.   

Notwithstanding the foregoing, assignments (and, to the extent such list is made
available to all Lenders, participations) shall not be permitted to ineligible
institutions identified to the Agent on or prior to the Closing Date and, with
the consent of the Agent, thereafter; provided that the Agent shall not be held
liable or responsible for any monitoring or enforcing of the foregoing.

 

Assignments shall not be deemed non-pro rata payments. Non-pro rata prepayments
will be permitted to the extent required to permit “extension” transactions and
“replacement” facility transactions (with existing and/or new Lenders), subject
to customary restrictions consistent with the Opco Bank Debt Documentation
Principles.

 

Assignments to the Sponsors and their respective affiliates (other than the
Borrower and its subsidiaries) (each, an “Affiliated Lender”) shall be permitted
subject to the following restrictions: (i) the Affiliated Lenders may not
purchase Term Loans at any time while they or any of their respective directors
or officers is aware of any material non-public information with respect to the
business of Holdings, the Borrower or any of their subsidiaries at the time of
such purchase that has not been disclosed to the seller or Lenders generally
(other than the Lenders that have elected not to receive material non-public
information), (ii) the limitations on voting set forth above under the heading
“Voting” and (iii) other restrictions to be mutually agreed in the Senior
Facilities Documentation subject to the Opco Bank Debt Documentation Principles.

 

14

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Non-Pro Rata Repurchases:    The Borrower and its subsidiaries may purchase from
any Lender (other than the Borrower or any of its affiliates, including the
Sponsors and/or any Affiliated Lenders), at individually negotiated prices,
outstanding principal amounts or commitments under the First Lien Term Facility
in a non-pro rata manner; provided that (i) the purchaser shall make a
representation to the seller at the time of assignment that it does not possess
material non-public information with respect to the Borrower and its
subsidiaries that has not been disclosed to the seller or Lenders generally
(other than the Lenders that have elected not to receive material non-public
information), (ii) any commitments or loans so repurchased shall be immediately
cancelled, (iii) no default or event of default exists or would result
therefrom, (iv) Term Loans may not be purchased with the proceeds of loans under
the Revolving Facility, and (v) any Term Loans acquired by the Borrower shall be
deemed a repayment of such Term Loans for purposes of calculating excess cash
flow in an amount equal to the amount actually paid by the Borrower for such
Term Loans and shall not be deemed to increase adjusted EBITDA. Expenses and
Indemnification:    Consistent with the Opco Bank Debt Documentation Principles.
Regulatory Matters:    Customary for facilities of this type and consistent with
the Opco Bank Debt Documentation Principles. Governing Law and Forum:    New
York. Counsel to Agent/Collateral Agent:    [            ].

 

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SCHEDULE I

List of Approved Agents

 

  •   Citi

 

  •   CS

 

  •   DB

 

  •   BAML

 

  •   JPM

 

  •   GS

 

  •   MS

 

  •   Barclays

 

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New First Lien OpCo Debt

$[            ] First Lien Notes

Summary of Principal Terms1

 

Issuer:    [Caesars Entertainment Operating Company, Inc.]2, in its capacity as
the issuer of the First Lien Notes (the “Issuer”). Issue:   

The First Lien Notes in an amount set forth in the Restructuring Term Sheet will
be issued pursuant to definitive documentation which shall be based on indenture
and security documentation typical and customary in the case of first lien
senior secured notes issued pursuant to an exit financing (the “First Lien Opco
Documentation”) which shall (x) take into consideration (i) the indenture for
the first-priority senior secured notes issued on October 11, 2013 by Caesars
Entertainment Resort Properties, LLC, Caesars Entertainment Resort Properties
Finance, Inc., Harrah’s Atlantic City Holding, Inc., Harrah’s Las Vegas, LLC,
Harrah’s Laughlin, LLC, Flamingo Las Vegas Holding, LLC, Paris Las Vegas
Holding, LLC, Rio Properties, LLC (the “CERP First Lien Indenture”), (ii) the
operational requirements of the Issuer and its subsidiaries, their capital
structure and size after giving effect to the transactions contemplated by the
Restructuring Term Sheet, and (iii) the operating lease structure of the Issuer
and its subsidiaries after giving effect to the transactions contemplated by the
Restructuring Term Sheet, (y) contain the terms set forth herein, and (z) in all
cases be reasonably satisfactory to the Borrower and the Requisite Consenting
Creditors; provided that, in the case of provisions setting forth the debt and
lien capacity, the First Lien Opco Documentation shall be based on and
consistent with the CERP First Lien Indenture as modified to reflect the terms
set forth herein (clauses (x), (y) and (z), the “Opco First Lien Notes
Documentation Principles”).

 

In accordance with the Restructuring Term Sheet, the Issuer shall use its
commercially reasonable efforts to syndicate the First Lien Notes (in the form
of term loans and/or bonds; provided that if more than 50% of the First Lien
Notes contemplated to be issued to the First Lien Noteholders on the Closing
Date under the Restructuring Term Sheet are so syndicated as term loans, then
all of the First Lien Notes shall instead be issued as term loans) to the market
at or below the

 

1  All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”), or in the New First Lien OpCo Debt
Term Facility Term Sheet attached thereto.

2  NTD: Assumes CEOC is the operating company in the new REIT structure.

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   interest rates set forth herein and, to the extent so syndicated, the net
cash proceeds thereof will be used to increase the cash payments to the First
Lien Bank Lenders and the First Lien Noteholders on a pro rata basis (based on
the aggregate principal amount of Opco First Lien Debt otherwise contemplated to
be issued to them before giving effect to any such syndication) pursuant to the
terms of the Restructuring Term Sheet. Any such cash payments to the First Lien
Bank Lenders will reduce on a dollar-for-dollar basis the First Lien Term
Facility to be provided by the First Lien Bank Lenders. Any such cash payments
to the First Lien Noteholders will reduce on a dollar-for-dollar basis the
amount of First Lien Notes to be issued to the First Lien Noteholders. Purpose:
   On the Closing Date, the First Lien Notes will be issued to each First Lien
Noteholder in accordance with the Restructuring Term Sheet. Maturity:    The
First Lien Notes will mature on the date that is six (6) years after the Closing
Date. Interest Rate:    LIBOR + 4.0% per annum, with a 1.0% LIBOR floor. Default
Rate:    With respect to overdue principal (whether at stated maturity, upon
acceleration or otherwise), the applicable interest rate plus 2.00% per annum,
and with respect to any other overdue amount (including overdue interest), the
interest rate applicable to ABR loans plus 2.00% per annum and in each case,
shall be payable on demand. Ranking:    The First Lien Notes will constitute
senior first-priority secured indebtedness of the Issuer, and will rank pari
passu in all respects, including in right of payment with all obligations under
the Senior Facilities and all other first lien senior indebtedness of the
Issuer. Guarantees:    The First Lien Notes and all obligations under the
indenture related thereto will be unconditionally guaranteed by each existing
and subsequently acquired or organized wholly owned domestic subsidiary of the
Issuer (the “First Lien Note Guarantors”), subject to exceptions consistent with
the Opco First Lien Notes Documentation Principles and others, if any, to be
agreed upon, on a senior first-priority secured basis (the “First Lien Note
Guarantees”). The First Lien Note Guarantees will rank pari passu in all
respects, including in right of payment, with all obligations under the Senior
Facilities and all other senior indebtedness of the First Lien Note Guarantors.
The First Lien Note Guarantees will be joint and several guarantees of payment
and performance and not of collection.

 

2

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   In addition, Holdings shall provide a guarantee of the First Lien Notes
issued to the First Lien Noteholders on the Closing Date substantially in the
form attached as an exhibit to the Restructuring Term Sheet (the “Holdings
Guaranty”). Security:    Subject to the limitations set forth below and other
exceptions, if any, to be agreed upon, the First Lien Notes and the First Lien
Note Guarantees will be secured by a first-priority security interest in
substantially all the owned material assets of the Issuer and each First Lien
Note Guarantor, in each case whether owned on the Closing Date or thereafter
acquired (collectively, the “Collateral”), including but not limited to: (a) a
perfected first-priority pledge of all the equity interests directly held by the
Issuer or any First Lien Note Guarantor (which pledge, in the case of any
foreign subsidiary, shall be limited to 100% of the non-voting equity interests
(if any) and 65% of the voting equity interests of such foreign subsidiary),
(b) a lien on cash, deposit accounts and securities accounts, and (c) perfected
first-priority security interests in, and mortgages on, substantially all owned
tangible and intangible assets of the Issuer and each First Lien Note Guarantor
(including, but not limited to, accounts receivable, inventory, equipment,
general intangibles, investment property, intellectual property and real
property) except for (v) real property with a fair market value less than $15.0
million and leaseholds, (w) vehicles, (x) those assets as to which the Issuer
and Collateral Agent shall reasonably determine that the costs or other
consequences of obtaining such a security interest are excessive in relation to
the value of the security to be afforded thereby, (y) assets to which the
granting or perfecting such security interest would violate any applicable law
(including gaming laws and regulations) or contract (and with regard to which
contract the counterparty thereto requires such prohibition as a condition to
entering into such contract, such contract has been entered into in the ordinary
course of business, such restriction is consistent with industry custom and
consent has been requested and not received), but only so long as such grant or
perfection would violate any such law or contract, and (z) other exceptions
consistent with the Opco First Lien Notes Documentation Principles; and provided
that the pledge of equity interests and other securities will be subject to
customary Rule 3-16 cut-back provisions. There shall be neither lockbox
arrangements nor any control agreements relating to the Issuer’s and its
subsidiaries’ bank accounts or securities accounts.

 

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All of the above-described pledges, security interests and mortgages shall be
created on terms, and pursuant to documentation, consistent with the Opco First
Lien Notes Documentation Principles.

 

The indenture for the First Lien Notes will provide that none of the Collateral
Agent, First Lien Noteholders or Trustee will be permitted to terminate Holdings
or any of its subsidiaries or affiliates as manager of any of the PropCo
facilities without the prior written consent of PropCo.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities and the First Lien Notes will be set forth in the First Lien
Intercreditor Agreement, which shall provide that (i) the indebtedness
outstanding under the Senior Facilities and the First Lien Notes are pari passu
in all respects, and (ii) unless there is a Market Financing, the indebtedness
outstanding under the Senior Facilities and the First Lien Notes shall vote
together as a single class, including in respect of directing the Collateral
Agent in respect thereof.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
the First Lien/Second Lien Intercreditor Agreement.

Mandatory Redemption:    None. Optional Redemption:   

Prior to the first anniversary of the Closing Date, the Issuer may redeem the
First Lien Notes at a make-whole price based on U.S. Treasury notes with a
maturity closest to the first anniversary of the Closing Date plus 50 basis
points.

 

Prior to the first anniversary of the Closing Date, the Issuer may redeem up to
35% of the First Lien Notes in an amount equal to the amount of proceeds from an
equity offering at a price equal to par plus the coupon on such Notes.

 

After the first anniversary of the Closing Date, the First Lien Notes will be
callable at par plus accrued interest plus a premium equal to 3.00%, which
premium shall decline to 2.00% on the second anniversary of the Closing Date, to
1.00% on the third anniversary of the Closing Date and to zero on the fourth
anniversary of the Closing Date.

 

All redemptions shall be made on a pro rata basis among the First Lien Notes.

 

4

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Offer to Repurchase with Proceeds of Debt Issuance:    The Issuer will be
required to make an offer to repurchase the First Lien Notes at par in an amount
equal to the First Lien Noteholders’ Pro Rata Share (to be defined as the ratio
of funded debt outstanding that consists of the First Lien Notes to the sum of
the total funded debt outstanding that consists of the First Lien Notes and the
First Lien Term Facility) of 100% of the net cash proceeds of issuances,
offerings or placements of debt obligations of the Issuer and its subsidiaries
(other than debt permitted to be incurred under the indenture governing the
First Lien Notes unless otherwise provided as a condition to the incurrence
thereof).

Offer to Purchase from

Asset Sale Proceeds:

   The Issuer will be required to make an offer to repurchase the First Lien
Notes at par in an amount equal to the First Lien Noteholders’ Pro Rata Share of
100% of the net cash proceeds from any non-ordinary course asset sales or
dispositions by the Issuer or any First Lien Note Guarantor in accordance with
the Opco First Lien Notes Documentation Principles to the extent any such
proceeds are not otherwise applied in a manner consistent with the Opco First
Lien Notes Documentation Principles. Offer to Repurchase Upon a Change of
Control:    The Issuer will be required to make an offer to repurchase the First
Lien Notes following the occurrence of a “change of control” (to be defined in a
manner consistent with the Opco First Lien Notes Documentation Principles) at a
price in cash equal to 101.0% of the outstanding principal amount thereof, plus
accrued and unpaid interest to the date of repurchase. Offer to Repurchase from
Excess Cash Flow:    Beginning with the first full fiscal year of the Issuer
after the Closing Date, the Issuer will be required to make an offer to
repurchase the First Lien Notes at par in an amount equal to the First Lien
Noteholders’ Pro Rata Share of 50% of Excess Cash Flow (to be defined in a
manner consistent with the definition in the Senior Facilities Documentation and
subject to the same minimum threshold therein) of the Issuer and its restricted
subsidiaries (stepping down to 25% if the First Lien Net Leverage Ratio is less
than or equal to 2.75 to 1.00 and stepping down to 0% if the First Lien Net
Leverage Ratio is less than or equal to 2.25 to 1.00); provided that any
voluntary prepayment of Term Loans made during any fiscal year (including Loans
under the Revolving Facility to the extent commitments thereunder are
permanently reduced by the amount of such prepayments at the time of such
prepayment) and voluntary repayment of the First Lien Notes shall be credited
against excess cash flow prepayment obligations for such fiscal year (or, at the
Borrower’s option, any future year) on a Dollar-for-Dollar basis.

 

5

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   Offers to repurchase from foreign subsidiaries’ Excess Cash Flow and asset
sale proceeds will be limited under the First Lien Notes Documentation to the
extent (x) the repatriation of funds to fund such prepayments is prohibited,
restricted or delayed by applicable local laws, (y) applied to repay
indebtedness of a foreign subsidiary of the Borrower or (z) the repatriation of
funds to fund such prepayments would result in material adverse tax
consequences. Defeasance and Discharge Provisions:    Customary for high yield
debt securities consistent with the Opco First Lien Notes Documentation
Principles. Modification:    Customary for high yield debt securities consistent
with the Opco First Lien Notes Documentation Principles. Notes held by the
Issuer and its affiliates, including the Sponsors, shall not have voting rights.
Registration Rights:    Customary registration rights. Covenants:   

Consistent with the Opco First Lien Notes Documentation Principles (including in
respect of baskets and carveouts to such covenants; provided that such baskets
and carveouts shall conform to the corresponding amounts in the Senior
Facilities Documentation). For the avoidance of doubt, there shall be no
financial maintenance covenants.

 

1. The provisions limiting indebtedness shall, in addition to carve-outs
consistent with the Opco First Lien Notes Documentation Principles, provide that
the amount of indebtedness incurred under the “bank basket” will not exceed an
amount equal to the sum of (i) the aggregate principal amount of the Senior
Facilities (including the accordion provisions thereunder), plus (ii) such
additional amount of indebtedness that may be incurred that would not cause the
ratio of funded debt (including the debt referred to in clause (i) of this
sentence) outstanding that is (A) secured by a first priority lien on the
Collateral (net of unrestricted cash and cash equivalents not to exceed in the
aggregate $100 million) to adjusted EBITDA (the “Net First Lien Leverage Ratio”)
to exceed a ratio to be set on the Closing Date that is equal to a ratio that is
0.25x greater than the pro forma First Lien Net Leverage Ratio in effect on the
Closing Date, (B) secured by junior liens on the Collateral (net of unrestricted
cash and cash equivalents not to exceed in the

 

6

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   aggregate $100 million) to adjusted EBITDA (the “Net Total Secured Leverage
Ratio”) to exceed a ratio to be set on the Closing Date that is equal to a ratio
that is 0.25x greater than the pro forma Net Total Secured Leverage Ratio in
effect on the Closing Date and (C) unsecured (net of unrestricted cash and cash
equivalents not to exceed in the aggregate $100 million) to adjusted EBITDA (the
“Net Total Leverage Ratio”) to exceed a ratio to be set on the Closing Date that
is equal to 0.25x greater than the pro forma Net Total Leverage Ratio in effect
on the Closing Date;3    2. The provisions limiting liens shall provide for
customary permitted liens consistent with the Opco First Lien Notes
Documentation Principles and include (i) the ability to incur first-priority
liens on indebtedness to the extent that the pro forma Net First Lien Leverage
Ratio is not greater than a ratio to be set on the Closing Date that is equal to
a ratio that is 0.25x greater than the pro forma First Lien Net Leverage Ratio
in effect on the Closing Date; (ii) the ability to incur liens junior to the
liens securing the First Lien Notes, provided that the indebtedness secured by
such junior liens is permitted under the indenture, and (iii) the ability to
incur liens on assets of non-First Lien Note Guarantor subsidiaries so long as
such liens secure obligations of non-First Lien Note Guarantor subsidiaries that
are otherwise permitted.    3. With respect to basket amounts, covenant
thresholds and similar levels in the indenture governing the First Lien Notes
provisions with respect to debt and lien capacity that are tied to dollar
amounts, such amounts, thresholds and levels will be based on the corresponding
dollar amounts that are set forth in the CERP First Lien Indenture, in each case
as adjusted pursuant to the agreement of the parties, including to reflect the
pro forma capital structure of the Issuer and the relative size and EBITDA of
the Issuer (such amounts as adjusted, the “Basket Adjustments”).    4. The
provisions limiting dividends and stock repurchases and optional redemptions
(and optional prepayments) of subordinated debt will be more restrictive until
the Net Total Leverage Ratio is less than 3.00 to 1.00.

 

3 

For the avoidance of doubt, (i) the calculation of the ratios in the OpCo debt
document shall exclude Chester Downs (from both debt and EBITDA) and (ii) any
Revolving Facility loans outstanding at the time of incurrence of any debt shall
be included in the calculation of any Leverage Ratio at the time of such
incurrence.

 

7

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   5. The indenture for the First Lien Notes will provide that any management or
similar fees paid to Caesars Entertainment Corporation or any of its
subsidiaries or affiliates will be made on an arm’s-length basis and on “market”
terms (including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto). Events of Default:    Customary for
high yield debt securities and consistent with the Opco First Lien Notes
Documentation Principles; provided that the bankruptcy events of default shall
include Holdings and a Holdco Covenant Breach (as defined in the Holdings
Guaranty) shall constitute an event of default. Governing Law:    New York.
Regulatory Matters:    Consistent with the Opco First Lien Notes Documentation
Principles. Counsel to the Notes Lead Arranger:    [             ].

 

8

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New Second Lien OpCo Debt

$[            ] Second Lien Notes

Summary of Principal Terms1

 

Issuer:    [Caesars Entertainment Operating Company, Inc.]2, in its capacity as
the issuer of the Second Lien Notes (the “Issuer”). Issue:    The Second Lien
Notes in an amount set forth in the Restructuring Term Sheet will be issued
pursuant to definitive documentation which shall be based on indenture and
security documentation typical and customary in the case of second lien senior
secured notes issued pursuant to an exit financing (the “Second Lien Opco
Documentation”), which shall (x) take into consideration (i) the indenture for
the second-priority senior secured notes issued on October 11, 2013 by Caesars
Entertainment Resort Properties, LLC, Caesars Entertainment Resort Properties
Finance, Inc., Harrah’s Atlantic City Holding, Inc., Harrah’s Las Vegas, LLC,
Harrah’s Laughlin, LLC, Flamingo Las Vegas Holding, LLC, Paris Las Vegas
Holding, LLC, Rio Properties, LLC (the “CERP Second Lien Indenture”), (ii) the
operational requirements of the Issuer and its subsidiaries, their capital
structure and size after giving effect to the transactions contemplated by the
Restructuring Term Sheet, and (iii) the operating lease structure of the Issuer
and its subsidiaries after giving effect to the transactions contemplated by the
Restructuring Term Sheet, (y) contain the terms set forth herein, and (z) in all
cases be reasonably satisfactory to the Borrower and the Requisite Consenting
Creditors; provided that, in the case of provisions setting forth the debt and
lien capacity, the Second Lien Opco Documentation shall be based on and
consistent with the CERP Second Lien Indenture as modified to reflect the terms
set forth herein (clauses (x), (y) and (z), the “Opco Second Lien Notes
Documentation Principles”). Purpose:    On the Closing Date, the Second Lien
Notes will be issued to each First Lien Bank Lender and First Lien Noteholder in
accordance with the Restructuring Term Sheet. Maturity:    The Second Lien Notes
will mature on the date that is seven (7) years after the Closing Date.

 

1  All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”), or in the New First Lien OpCo Debt
Term Facility Term Sheet or New First Lien OpCo Debt First Lien Notes Term Sheet
attached thereto.

2  NTD: Assumes CEOC is the operating company in the new REIT structure.

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Interest Rate:    A fixed rate equal to 8.5%. Default Rate:    With respect to
overdue principal (whether at stated maturity, upon acceleration or otherwise)
or any other overdue amount (including overdue interest), the applicable
interest rate plus 2.00% per annum, which shall be payable on demand. Ranking:
   The Second Lien Notes will constitute senior second-priority secured
indebtedness of the Issuer, and will rank pari passu in right of payment with
all obligations under the Senior Facilities and all other senior indebtedness
(including the First Lien Notes) of the Issuer. Guarantees:   

The Second Lien Notes and all obligations under the indenture related thereto
will be unconditionally guaranteed by each existing and subsequently acquired or
organized wholly owned domestic subsidiary of the Issuer that guarantees the
Senior Facilities or the First Lien Notes (the “Note Guarantors”), subject to
exceptions consistent with the Opco Second Lien Notes Documentation Principles
and others, if any, to be agreed upon, on a senior second-priority secured basis
(the “Note Guarantees”). The Note Guarantees will rank pari passu in right of
payment with all obligations under the Senior Facilities and all other senior
indebtedness of the Note Guarantors. The Note Guarantees will be automatically
released upon release of the corresponding guarantees of the Senior Facilities
and the First Lien Notes; provided that such released guarantees shall be
reinstated if such released guarantors thereof are required to subsequently
guarantee the Senior Facilities or the First Lien Notes. The Note Guarantees
will be joint and several guarantees of payment and performance and not of
collection.

 

In addition, Holdings shall provide a guarantee of the Second Lien Notes issued
to each of the First Lien Bank Lenders and the First Lien Noteholders on the
Closing Date, in each case substantially in the form attached as an exhibit to
the Restructuring Term Sheet (the “Holdings Guaranty”).

Security:    Subject to the limitations set forth below and other exceptions, if
any, to be agreed upon, the Second Lien Notes and the Note Guarantees will be
secured by a second-priority security interest in those assets of the Issuer and
the Note Guarantors that secure the First Lien Notes (the “Collateral”),
provided that (i) assets securing the Second Lien Notes shall not include
property excluded from the Collateral securing the First Lien Notes and (ii) the
pledge of equity interests and other securities will be subject to customary
Rule 3-16 cut-back provisions.

 

2

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The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
the First Lien/Second Lien Intercreditor Agreement.

 

The indenture for the Second Lien Notes will provide that none of the Collateral
Agent, note holders or Trustee will be permitted to terminate Holdings or any of
its subsidiaries or affiliates as manager of any of the PropCo facilities
without the prior written consent of PropCo.

Mandatory Redemption:    None. Optional Redemption:   

Prior to the first anniversary of the Closing Date, the Issuer may redeem the
Second Lien Notes at a make-whole price based on U.S. Treasury notes with a
maturity closest to the first anniversary of the Closing Date plus 50 basis
points.

 

Prior to the first anniversary of the Closing Date, the Issuer may redeem up to
35% of the Second Lien Notes in an amount equal to the amount of proceeds from
an equity offering at a price equal to par plus the coupon on such Notes.

 

After the first anniversary of the Closing Date, the Second Lien Notes will be
callable at par plus accrued interest plus a premium equal to 3.00%, which
premium shall decline to 2.00% on the second anniversary of the Closing Date, to
1.00% on the third anniversary of the Closing Date and to zero on the fourth
anniversary of the Closing Date.

 

All redemptions shall be made on a pro rata basis among the Second Lien Notes.

Offer to Purchase from

Asset Sale Proceeds:

   The Issuer will be required to make an offer to repurchase the Second Lien
Notes at par with the net cash proceeds from any non-ordinary course asset sales
or dispositions by the Issuer or any Note Guarantor in accordance with the Opco
Second Lien Notes Documentation Principles to the extent any such proceeds are
not otherwise applied in a manner consistent with the Opco Second Lien Notes
Documentation Principles. Offer to Repurchase Upon a Change of Control:    The
Issuer will be required to make an offer to repurchase the Second Lien Notes
following the occurrence of a “change of control” (to be defined in a manner
consistent with the Opco Second Lien Notes Documentation Principles) at a price
in cash equal to 101.0% of the outstanding principal amount thereof, plus
accrued and unpaid interest to the date of repurchase.

 

3

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Defeasance and Discharge Provisions:    Customary for high yield debt securities
consistent with the Opco Second Lien Notes Documentation Principles.
Modification:    Customary for high yield debt securities consistent with the
Opco Second Lien Notes Documentation Principles. Notes held by the Issuer and
its affiliates, including the Sponsors, shall not have voting rights.
Registration Rights:    Customary registration rights. Covenants:    Consistent
with the Opco Second Lien Notes Documentation Principles (including in respect
of baskets and carveouts to such covenants); provided, that such covenants shall
in no event be more restrictive than the corresponding covenant in the First
Lien Notes. For the avoidance of doubt, there shall be no financial maintenance
covenants.    1. The provisions limiting indebtedness shall, in addition to
carve-outs consistent with the Opco Second Lien Notes Documentation Principles,
provide that the amount of indebtedness incurred under the “bank basket” will
not exceed an amount equal to the sum of (i) the aggregate principal amount of
the Senior Facilities (including the accordion provisions thereunder), plus (ii)
such additional amount of indebtedness that may be incurred that would not cause
the ratio of funded debt outstanding that is (A) secured by a first priority
lien on the Collateral (net of unrestricted cash and cash equivalents not to
exceed in the aggregate $100 million) to adjusted EBITDA (the “Net First Lien
Leverage Ratio”) to exceed a ratio to be set on the Closing Date that is equal
to a ratio that is 0.25x greater than the pro forma First Lien Net Leverage
Ratio in effect on the Closing Date, (B) secured by junior liens on the
Collateral (net of unrestricted cash and cash equivalents not to exceed in the
aggregate $100 million) to adjusted EBITDA (the “Net Total Secured Leverage
Ratio”) to exceed a ratio to be set on the Closing Date that is equal to a ratio
that is 0.25x greater than the pro forma Net Total Secured Leverage Ratio in
effect on the Closing Date and (C) unsecured (net of unrestricted cash and cash
equivalents not to exceed in the aggregate $100 million) to adjusted EBITDA (the
“Net Total Leverage Ratio”) to exceed a ratio to be set on the Closing Date that
is equal to 0.25x greater than the pro forma Net Total Leverage Ratio in effect
on the Closing Date.3

 

3  For the avoidance of doubt, (i) the calculation of the ratios in the OpCo
debt document shall exclude Chester Downs (from both debt and EBITDA) and
(ii) any Revolving Facility loans outstanding at the time of incurrence of any
debt shall be included in the calculation of any Leverage Ratio at the time of
such incurrence.

 

4

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   2. The provisions limiting liens shall provide for customary permitted liens
consistent with the Opco Second Lien Notes Documentation Principles and include
(i) the ability to incur (x) first-priority liens on indebtedness to the extent
that the pro forma Net First Lien Leverage Ratio is not greater than a ratio to
be set on the Closing Date that is equal to a ratio that is 0.25x greater than
the pro forma Net First Lien Leverage Ratio in effect on the Closing Date and
(y) pari passu liens on indebtedness so long as such liens are subject to the
First Lien/Second Intercreditor Agreement or another intercreditor agreement
that is not materially less favorable to the holders than the First Lien/Second
Lien Intercreditor Agreement and such indebtedness is permitted under the
indenture; (ii) the ability to incur liens junior to the liens securing the
Second Lien Notes, provided that the indebtedness secured by such junior liens
is permitted under the indenture and (iii) the ability to incur liens on assets
of non-Note Guarantor subsidiaries so long as such liens secure obligations of
non-Note Guarantor subsidiaries that are otherwise permitted.    3. With respect
to basket amounts, covenant thresholds and similar levels in the indenture
governing the Second Lien Notes provisions with respect to debt and lien
capacity that are tied to dollar amounts, such amounts, thresholds and levels
will be based on the corresponding dollar amounts that are set forth in the CERP
Second Lien Indenture, in each case as adjusted pursuant to the agreement of the
parties, including to reflect the pro forma capital structure of the Issuer and
the relative size and EBITDA of the Issuer (such amounts as adjusted, the
“Basket Adjustments”)   

4. The provisions limiting dividends and stock repurchases and optional
redemptions (and optional prepayments) of subordinated debt will be more
restrictive until the Net Total Leverage Ratio is less than 3.00 to 1.00.

 

5. The indenture for the Second Lien Notes will provide that any management or
similar fees paid to Caesars Entertainment Corporation or any of its
subsidiaries or affiliates will be made on an arm’s-length basis and on “market”
terms (including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto).

 

5

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Events of Default:    Customary for high yield debt securities and consistent
with the Opco Second Lien Notes Documentation Principles; provided that the
bankruptcy events of default shall include Holdings and a Holdco Covenant Breach
(as defined in the Holdings Guaranty) shall constitute an event of default.
Governing Law:    New York. Regulatory Matters:    Consistent with the Opco
Second Lien Notes Documentation Principles. Counsel to the Notes Lead Arranger:
   [             ].

 

6

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New First Lien PropCo Debt

$[            ] Term Facility

Summary of Principal Terms1

 

Borrower:    [REIT PropCo] (the “Borrower”). Agent/Collateral Agent:   
[         ] will act as sole administrative agent for the Senior Facilities (in
such capacity and together with its permitted successors and assigns, the
“Agent”), and will perform the duties customarily associated with such role.   

[         ] will act as collateral agent for the Senior Facilities (in such
capacity, the “Collateral Agent”) and will perform the duties customarily
associated with such role.

 

The Agent and Collateral Agent shall each be acceptable to the First Lien Bank
Lenders and First Lien Noteholders.

Facilities:   

(A)   a senior secured term loan facility in an aggregate principal amount set
forth in the Restructuring Term Sheet (the “First Lien Term Facility” and loans
thereunder, the “Term Loans”), which will be deemed to have been provided to the
Borrower by each First Lien Bank Lender in accordance with the Restructuring
Term Sheet (in such capacity, the “Lenders”).

  

(B)   at the Borrower’s option, a senior secured revolving credit facility in an
aggregate principal amount not to exceed an amount to be agreed (and acceptable
to the Requisite Consenting Creditors) (the “Revolving Facility” and, together
with the First Lien Term Facility, the “Senior Facilities”), to be provided by
the First Lien Bank Lenders or such other financial institutions to become
Lenders under the Senior Facilities, a portion of which will be available
through a subfacility in the form of letters of credit.

Definitive Documentation:    The definitive documentation for the Senior
Facilities shall be based on financing and security documentation typical and
customary for exit financings (the “Senior Facilities Documentation”), which
shall (x) take into consideration (i) the First Lien Credit Agreement, dated as
of October 11, 2013, among Caesars Entertainment Resort Properties, LLC, Caesars
Entertainment Resort Properties Finance, Inc.,

 

1 

All capitalized terms used but not defined herein shall have the meaning
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”).

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   Harrah’s Las Vegas, LLC, Harrah’s Atlantic City Holding, Inc., Rio
Properties, LLC, Flamingo Las Vegas Holding, LLC, Harrah’s Laughlin, LLC and
Paris Las Vegas Holding, LLC, as borrowers, the lenders party thereto and
Citicorp North America, Inc., as administrative agent, (ii) the operational
requirements of the Borrower and its subsidiaries, their capital structure and
size after giving effect to the transactions contemplated by the Restructuring
Term Sheet, and (iii) the operating lease and REIT structure of the Borrower and
its subsidiaries after giving effect to the transactions contemplated by the
Restructuring Term Sheet, (y) contain the terms set forth herein, and (z) in all
cases be reasonably satisfactory to the Borrower and the Requisite Consenting
Creditors (clauses (x), (y) and (z), the “Propco Bank Debt Documentation
Principles”). Incremental Facilities:    The Borrower will be permitted after
the Closing Date to add additional revolving or term loan credit facilities (the
“Incremental Facilities”) on terms consistent with Propco Bank Debt
Documentation Principles. Purpose:    On the Closing Date, each First Lien Bank
Lender shall be deemed to have made Term Loans in accordance with the
Restructuring Term Sheet. Availability:    The Borrower shall incur the full
amount of the First Lien Term Facility on the Closing Date. Amounts under the
First Lien Term Facility that are repaid or prepaid may not be reborrowed.
Interest Rates:    LIBOR + 3.5% per annum, with a 1.0% LIBOR floor. Default
Rate:    With respect to principal (whether at stated maturity, upon
acceleration or otherwise), the applicable interest rate plus 2.00% per annum,
and with respect to any other overdue amount (including overdue interest), the
interest rate applicable to ABR loans plus 2.00% per annum and in each case,
shall be payable on demand. Final Maturity and Amortization:    The First Lien
Term Facility will mature on the date that is five (5) years after the Closing
Date, and, commencing with the second full fiscal quarter ended after the
Closing Date, will amortize in equal quarterly installments in an aggregate
annual amount equal to 1% of the original principal amount of the First Lien
Term Facility with the balance payable on the maturity date of the First Lien
Term Facility.

 

2

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Guarantees:    All obligations of the Borrower under the Senior Facilities and,
at the option of the Borrower, under any interest rate protection or other
hedging arrangements entered into with the Agent, an entity that is a Lender or
agent at the time of such transaction (or on the Closing Date, if applicable),
or any affiliate of any of the foregoing (“Hedging Arrangements”), or any cash
management arrangements with any such person (“Cash Management Arrangements”),
will be unconditionally guaranteed (the “Guarantees”) by each existing and
subsequently acquired or organized wholly owned domestic subsidiary of the
Borrower (the “Subsidiary Guarantors”), subject to exceptions consistent with
the Propco Bank Debt Documentation Principles and others, if any, to be agreed
upon. The Guarantees will be joint and several guarantees of payment and
performance and not of collection. Security:    Subject to exceptions described
below and other exceptions, if any, to be agreed upon, the Senior Facilities,
the Guarantees, any Hedging Arrangements and any Cash Management Arrangements
will be secured on a first-priority basis by substantially all the owned
material assets of the Borrower and each Subsidiary Guarantor, in each case
whether owned on the Closing Date or thereafter acquired (collectively, the
“Collateral”), including but not limited to: (a) a perfected first-priority
pledge of all the equity interests directly held by the Borrower or any
Subsidiary Guarantor (which pledge, in the case of any foreign subsidiary, shall
be limited to 100% of the non-voting equity interests (if any) and 65% of the
voting equity interests of such foreign subsidiary), (b) a perfected first
priority lien on cash, deposit accounts and securities accounts, and
(c) perfected first-priority security interests in, and mortgages on,
substantially all owned tangible and intangible assets of the Borrower and each
Subsidiary Guarantor (including, but not limited to, accounts receivable,
inventory, equipment, general intangibles, investment property, intellectual
property and real property (including assignment of rents)) except for (v) real
property with a fair market value less than $15.0 million and leaseholds,
(w) vehicles, (x) those assets as to which the Borrower, Agent and Collateral
Agent shall reasonably determine that the costs or other consequences of
obtaining such a security interest are excessive in relation to the value of the
security to be afforded thereby, (y) assets to which the granting or perfecting
such security interest would violate any applicable law (including gaming laws
and regulations) or contract (and with regard to which contract such
counterparty thereto requires such

 

3

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prohibition as a condition to entering into such contract, such contract has
been entered into in the ordinary course of business, such restriction is
consistent with industry custom and consent has been requested and not
received), but only so long as such grant or perfection would violate any such
law or contract, and (z) other exceptions consistent with the Propco Bank Debt
Documentation Principles. For the avoidance of doubt, lockbox arrangements and
control agreements relating to the Borrower’s and its subsidiaries’ bank
accounts and securities accounts will be required to be delivered at closing.
The operating lease with [Caesars Entertainment Operating Company, Inc.]
(“Opco”) shall be subject to a customary subordination and non-disturbance
agreement as provided in the Lease Term Sheet attached to the Restructuring
Support Agreement.

 

All the above-described pledges, security interests and mortgages shall be
created on terms, and pursuant to documentation consistent with the Propco Bank
Debt Documentation Principles.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities and the First Lien Notes will be set forth in a customary
intercreditor agreement between the administrative agent for the Senior
Facilities, on the one hand, and the trustee for the First Lien Notes, on the
other hand, except that such intercreditor agreement shall provide that the
indebtedness outstanding under the Senior Facilities and the First Lien Notes
vote together as one class and are pari passu in all respects, including in
respect of directing the collateral agent thereunder (the “First Lien
Intercreditor Agreement”).

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
a customary intercreditor agreement between the collateral agent for the Senior
Facilities and the First Lien Notes, on the one hand, and the collateral agent
for the Second Lien Notes, on the other hand (the “First Lien/Second Lien
Intercreditor Agreement”).

Mandatory Prepayments:    Customary asset sale mandatory prepayments and Excess
Cash Flow mandatory prepayments (commencing with, with respect to Excess Cash
Flow, the first full fiscal year of the Borrower after the Closing Date, and
subject to a minimum threshold to be agreed), on terms and definitions
consistent with Propco Bank Debt Documentation Principles, with Excess Cash Flow
to be calculated for these purposes after any Mandatory REIT Distributions.
Asset sale payments and Excess Cash Flow payments will be made ratably between
the Term Loans and the First Lien Notes (and ratably among the Lenders and
holders of the First Lien Notes).

 

4

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Voluntary Prepayments and Reductions in Commitments:   

Voluntary reductions of the unutilized portion of the commitments under the
Senior Facilities and prepayments of borrowings thereunder will be permitted at
any time, in minimum principal amounts to be agreed upon, without premium or
penalty, subject to the following paragraph and subject to reimbursement of the
Lenders’ redeployment costs in the case of a prepayment of Adjusted LIBOR
borrowings other than on the last day of the relevant interest period. All
voluntary prepayments of the First Lien Term Facility will be applied pro rata
to the Term Loan (and pro rata among the Lenders) and to the remaining
amortization payments under the First Lien Term Facility in such order as the
Borrower may direct.

 

Voluntary Prepayments of the Term Loans made prior to the four year anniversary
of the Closing Date will be subject to a prepayment premium, as follows:

 

•    First year following Closing Date: customary “make-whole” premium (T+50)

 

•    Second year following Closing Date: 3%

 

•    Third year following Closing Date: 2%

 

•    Fourth year following Closing Date: 1%

 

•    Fourth year anniversary and thereafter: par

Representations and Warranties:    The following representations and warranties,
among others, if any, to be negotiated in the Senior Facilities Documentation,
will apply (to be applicable to the Borrower and its restricted subsidiaries,
subject to customary and other exceptions and qualifications to be agreed upon,
consistent with the Propco Bank Debt Documentation Principles): organization,
existence, and power; qualification; authorization and enforceability; no
conflict; governmental consents (including, without limitation, from gaming
authorities); subsidiaries; accuracy of financial statements and other
information in all material respects; projections; no material adverse change
since the Closing Date; absence of litigation; compliance with laws (including
PATRIOT Act, OFAC, FCPA, ERISA, margin regulations, environmental laws, gaming
laws and laws with respect to sanctioned persons); payment of taxes; ownership
of properties; governmental regulation (including, without limitation,

 

5

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   gaming regulation); inapplicability of the Investment Company Act; Closing
Date solvency on a consolidated basis; labor matters; validity, priority and
perfection of security interests in the Collateral; intellectual property;
treatment as designated senior debt under subordinated debt documents (if any);
use of proceeds; insurance; real property; and no default or event of default.
Affirmative Covenants:    The following affirmative covenants, among others, if
any, to be negotiated in the Senior Facilities Documentation, will apply (to be
applicable to the Borrower and its restricted subsidiaries), subject to
customary (consistent with the Propco Bank Debt Documentation Principles) and
other baskets, exceptions and qualifications to be agreed upon: maintenance of
corporate existence and rights; performance and payment of obligations; delivery
of annual and quarterly consolidated financial statements of the Borrower
(accompanied by customary management discussion and analysis and (annually) by
an audit opinion from nationally recognized auditors that is not subject to any
qualification as to scope of such audit or going concern) (other than solely
with respect to, or resulting solely from an upcoming maturity date under any
series of indebtedness occurring within one year from the time such opinion is
delivered) (with extended time periods to be agreed for delivery of the first
annual and certain quarterly financial statements to be delivered after the
Closing Date) and an annual budget (it being understood that the public REIT
reporting that includes the Borrower shall satisfy the Borrower’s reporting
obligations so long as it includes a consolidating income statement and balance
sheet for the Borrower); delivery of any “Tenant Financial Statements” (as
defined in the term sheet regarding the operating lease with OpCo) the Borrower
receives under the operating lease with OpCo promptly after receipt by the
Borrower of such Tenant Financial Statements from OpCo; delivery of financial
statements of CPLV Holding or CPLV Sub promptly after receipt of such financial
statements by the Borrower from CPLV Holding or CPLV Sub, respectively; delivery
of notices of default and material adverse litigation, ERISA events and material
adverse change; maintenance of properties in good working order; maintenance of
books and records; maintenance of customary insurance; commercially reasonable
efforts to maintain ratings (but not a specific rating); compliance with laws
(including, without limitation, gaming laws); inspection of books and
properties; environmental; additional guarantors and additional collateral
(subject to limitations set forth under the captions “Guarantees” and
“Security”); further assurances in respect of collateral matters; use of
proceeds; payment of taxes; and real property. Negative Covenants:    The
following negative covenants, among others, if any, to be negotiated in the
Senior Facilities Documentation, will apply (to be applicable to the Borrower
and its restricted subsidiaries), subject to customary exceptions and
qualifications (consistent with the Propco Bank Debt Documentation Principles)
and others to be agreed upon:

 

6

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1.      Limitation on dispositions of assets.

  

2.      Limitation on mergers and acquisitions.

  

3.      Limitations on dividends and stock repurchases and optional redemptions
(and optional prepayments) of subordinated debt; provided, that, any
distributions required to be made to distribute 100% of REIT taxable income or
satisfy any REIT-related requirements shall be permitted (such distributions,
the “Mandatory REIT Distributions”).

  

4.      Limitation on indebtedness (including guarantees and other contingent
obligations) and preferred stock.

  

5.      Limitation on loans and investments.

  

6.      Limitation on liens and further negative pledges.

  

7.      Limitation on transactions with affiliates.

  

8.      Limitation on sale/leaseback transactions.

  

9.      Limitation on changes in the business of the Borrower and its
subsidiaries.

  

10.    Limitation on restrictions on ability of subsidiaries to pay dividends or
make distributions.

  

11.    Limitation on changes to fiscal year.

  

12.    Limitation on modifications to subordinated debt documents.

  

13.    Limitation on material modifications to the MLSA, lease and other
arrangements entered into in connection with the lease structure.

   EBITDA shall be defined in a manner consistent with the Propco Bank Debt
Documentation Principles.    All ratios and calculations shall be measured on a
Pro Forma Basis (to be defined in a manner consistent with the Propco Bank Debt
Documentation Principles, and including the annualized effect of addbacks in the
definition of EBITDA).

 

7

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   The Senior Facilities Documentation will provide that any management or
similar fees paid to Caesars Entertainment Corporation or any of its
subsidiaries or affiliates will be made on an arm’s-length basis and on “market”
terms (including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto). Financial Covenant:    First Lien Term
Facility: None. Events of Default:    The following (subject to customary and
other thresholds and grace periods to be agreed upon, consistent with the Propco
Bank Debt Documentation Principles, and applicable to the Borrower and its
restricted subsidiaries), among others, if any, to be negotiated in the Senior
Facilities Documentation: nonpayment of principal, interest or other amounts;
violation of covenants; incorrectness of representations and warranties in any
material respect; cross event of default and cross acceleration to material
indebtedness; bankruptcy and similar events; material judgments; ERISA events;
invalidity of the Guarantees or any security document, in each case,
representing a material portion of the Guarantees or the Collateral; and Change
of Control (to be defined in a manner consistent with the Propco Bank Debt
Documentation Principles). Unrestricted Subsidiaries:    The Senior Facilities
Documentation will contain provisions pursuant to which, subject to limitations
consistent with the Propco Bank Debt Documentation Principles, the Borrower will
be permitted to designate any existing or subsequently acquired or organized
subsidiary as an “unrestricted subsidiary” and subsequently re-designate any
such unrestricted subsidiary as a restricted subsidiary. Unrestricted
subsidiaries will not be subject to the affirmative or negative covenant or
event of default provisions of the Senior Facilities Documentation, and the
results of operations and indebtedness of unrestricted subsidiaries will not be
taken into account for purposes of calculating the financial ratios contained in
the Senior Facilities Documentation on terms consistent with the Propco Bank
Debt Documentation Principles. In addition, CPLV Holding and CPLV Sub shall each
constitute an unrestricted subsidiary of the Borrower on the Closing Date.
Voting:    Usual for facilities and transactions of this type and consistent
with the Propco Bank Debt Documentation Principles; provided that the Borrower
and its affiliates, including the Sponsors, shall not have voting rights with
respect to loans and commitments held by them.

 

8

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Cost and Yield Protection:    Usual for facilities and transactions of this
type, consistent with the Propco Bank Debt Documentation Principles. Assignments
and Participations:    Customary assignment provisions consistent with the
Propco Bank Debt Documentation Principles. Non-Pro Rata Repurchases:    The
Borrower and its subsidiaries may purchase from any Lender (other than the
Borrower or any of its affiliates, including the Sponsors), at individually
negotiated prices, outstanding principal amounts or commitments under the First
Lien Term Facility in a non-pro rata manner; provided that (i) the purchaser
shall make a representation to the seller at the time of assignment that it does
not possess material non-public information with respect to the Borrower and its
subsidiaries that has not been disclosed to the seller or Lenders generally
(other than the Lenders that have elected not to receive material non-public
information), (ii) any commitments or loans so repurchased shall be immediately
cancelled, (iii) no default or event of default exists or would result
therefrom, (iv) Term Loans may not be purchased with the proceeds of loans under
the Revolving Facility, and (v) any such Term Loans acquired by the Borrower
shall be deemed a repayment of the Term Loans for purposes of calculating excess
cash flow in an amount equal to the amount actually paid by the Borrower for
such Term Loans and shall not be deemed to increase adjusted EBITDA. Expenses
and Indemnification:    Consistent with the Propco Bank Debt Documentation
Principles. Regulatory Matters:    Customary for facilities of this type and
consistent with the Propco Bank Debt Documentation Principles. Governing Law and
Forum:    New York. Counsel to Agent/Collateral Agent:    [             ].

 

9

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New First Lien PropCo Debt

$[            ] First Lien Notes

Summary of Principal Terms1

 

Issuer:    [REIT PropCo], in its capacity as the issuer of the First Lien Notes
(the “Issuer”). Issue:    The First Lien Notes in an amount set forth in the
Restructuring Term Sheet will be issued under and have the benefit of an
indenture and security documentation typical and customary in the case of first
lien senior secured notes issued pursuant to an exit financing (the “First Lien
Propco Documentation”), and which shall (x) take into consideration (i) the
indenture for the first-priority senior secured notes issued on October 11, 2013
by Caesars Entertainment Resort Properties, LLC, Caesars Entertainment Resort
Properties Finance, Inc., Harrah’s Atlantic City Holding, Inc., Harrah’s Las
Vegas, LLC, Harrah’s Laughlin, LLC, Flamingo Las Vegas Holding, LLC, Paris Las
Vegas Holding, LLC, Rio Properties, LLC (the “CERP First Lien Indenture”), (ii)
the operational requirements of the Issuer and its subsidiaries, their capital
structure and size after giving effect to the transactions contemplated by the
Restructuring Term Sheet, and (iii) the operating lease structure and the REIT
structure of the Issuer and its subsidiaries after giving effect to the
transactions contemplated by the Restructuring Term Sheet, (y) contain the terms
set forth herein; provided that, in the case of provisions setting forth the
debt and lien capacity, the First Lien Propco Documentation shall be based on
and consistent with the CERP First Lien Indenture as modified to reflect the
terms set forth herein and (z) in all cases be reasonably satisfactory to the
Borrower and the Requisite Consenting Creditors (clauses (x), (y) and (z), the
“Propco First Lien Notes Documentation Principles”). Purpose:    On the Closing
Date, the First Lien Notes will be issued to each First Lien Noteholder in
accordance with the Restructuring Term Sheet. Maturity:    The First Lien Notes
will mature on the date that is five (5) years after the Closing Date. Interest
Rate:    LIBOR + 3.5% per annum, with a 1.0% LIBOR floor.

 

1  All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”), or in the New First Lien PropCo Debt
Term Facility Term Sheet attached thereto.

--------------------------------------------------------------------------------

Default Rate:    With respect to principal (whether at stated maturity, upon
acceleration or otherwise), the applicable interest rate plus 2.00% per annum,
and with respect to any other overdue amount (including overdue interest), the
interest rate applicable to ABR loans plus 2.00% per annum and in each case,
shall be payable on demand. Ranking:    The First Lien Notes will constitute
senior first-priority secured indebtedness of the Issuer, and will rank pari
passu in all respects, including in right of payment, with all obligations under
the Senior Facilities and all other first lien senior indebtedness of the
Issuer. Guarantees:    The First Lien Notes and all obligations under the
indenture related thereto will be unconditionally guaranteed by each existing
and subsequently acquired or organized wholly owned domestic subsidiary of the
Issuer (the “Note Guarantors”), subject to exceptions consistent with the Propco
First Lien Notes Documentation Principles and others, if any, to be agreed upon,
on a senior first-priority secured basis (the “Note Guarantees”). The Note
Guarantees will rank pari passu in all respects, including in right of payment,
with all obligations under the Senior Facilities and all other senior
indebtedness of the Note Guarantors. The Note Guarantees will be joint and
several guarantees of payment and performance and not of collection. Security:
   Subject to the limitations set forth below and other exceptions, if any, to
be agreed upon, the First Lien Notes and the Note Guarantees will be secured by
a first-priority security interest in substantially all the owned material
assets of the Issuer and each Note Guarantor, in each case whether owned on the
Closing Date or thereafter acquired (collectively, the “Collateral”), including
but not limited to: (a) a perfected first-priority pledge of all the equity
interests directly held by the Issuer or any Note Guarantor (which pledge, in
the case of any foreign subsidiary, shall be limited to 100% of the non-voting
equity interests (if any) and 65% of the voting equity interests of such foreign
subsidiary), (b) a perfected first priority lien on cash, deposit accounts and
securities accounts, and (c) perfected first-priority security interests in, and
mortgages on, substantially all owned tangible and intangible assets of the
Issuer and each Note Guarantor (including, but not limited to, accounts
receivable, inventory, equipment, general intangibles, investment property,
intellectual property and real property (including an assignment of rents))
except for (v) real property with a fair market value less than $15.0 million
and leaseholds, (w) vehicles, (x) those assets as to which the Issuer and
Collateral Agent shall

 

2

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reasonably determine that the costs or other consequences of obtaining such a
security interest are excessive in relation to the value of the security to be
afforded thereby, (y) assets to which the granting or perfecting such security
interest would violate any applicable law (including gaming laws and
regulations) or contract (and with regard to which contract the counterparty
thereto requires such prohibition as a condition to entering into such contract,
such contract has been entered into in the ordinary course of business, such
restriction is consistent with industry custom and consent has been requested
and not received), but only so long as such grant or perfection would violate
any such law or contract, and (z) other exceptions consistent with the Propco
First Lien Notes Documentation Principles; and provided that the pledge of
equity interests and other securities will be subject to customary Rule 3-16
cut-back provisions. For avoidance of doubt, lockbox arrangements and control
agreements relating to the Issuer’s and its subsidiaries’ bank accounts and
securities accounts will be required to be delivered at closing. The operating
lease with [Caesars Entertainment Operating Company, Inc.] (“Opco”) shall be
subject to a customary subordination and non-disturbance agreement as provided
in the Lease Term Sheet attached to the Restructuring Support Agreement.

 

All the above-described pledges, security interests and mortgages shall be
created on terms, and pursuant to documentation, consistent with the Propco
First Lien Notes Documentation Principles.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities and the First Lien Notes will be set forth in the First Lien
Intercreditor Agreement.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
the First Lien/Second Lien Intercreditor Agreement, which shall provide that the
indebtedness outstanding under the Senior Facilities and the First Lien Notes
vote together as a single class and are pari passu in all respects, including in
respect of directing the collateral agent thereunder.

Mandatory Redemption:    None. Optional Redemption:    Prior to the first
anniversary of the Closing Date, the Issuer may redeem the First Lien Notes at a
make-whole price based on U.S. Treasury notes with a maturity closest to the
first anniversary of the Closing Date plus 50 basis points.

 

3

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Prior to the first anniversary of the Closing Date, the Issuer may redeem up to
35% of the First Lien Notes in an amount equal to the amount of proceeds from an
equity offering at a price equal to par plus the coupon on such First Lien
Notes.

 

After the first anniversary of the Closing Date, the First Lien Notes will be
callable at par plus accrued interest plus a premium equal to 3.0%, which
premium shall decline to 2.0% on the second anniversary of the Closing Date, to
1.0% on the third anniversary of the Closing Date and to zero on the fourth
anniversary of the Closing Date.

 

All redemptions shall be made on a pro rata basis among the First Lien Notes.

Offer to Purchase from Asset Sale Proceeds:    The Issuer will be required to
make an offer to repurchase the First Lien Notes at par with the First Lien
Noteholders’ Pro Rata Share (as defined herein) of the net cash proceeds from
any non-ordinary course asset sales or dispositions by the Issuer or any Note
Guarantor in accordance with the Propco First Lien Notes Documentation
Principles to the extent any such proceeds are not otherwise applied in a manner
consistent with the Propco First Lien Notes Documentation Principles. Offer to
Repurchase with Proceeds of Debt Issuance:    The Issuer will be required to
make an offer to repurchase the First Lien Notes at par in an amount equal to
the First Lien Noteholders’ Pro Rata Share (to be defined as the ratio of funded
debt outstanding that consists of the First Loan Notes to the sum of the total
funded debt that consists of the First Lien Notes and First Lien Term Facility)
of 100% of the net cash proceeds of issuances, offerings or placements of debt
obligations of the Issuer and its subsidiaries (other than debt permitted to be
incurred under the indenture governing the First Lien Notes unless otherwise
provided as a condition to the incurrence thereof). Offer to Repurchase Upon a
Change of Control:    The Issuer will be required to make an offer to repurchase
the First Lien Notes following the occurrence of a “change of control” (to be
defined in a manner consistent with the Propco First Lien Notes Documentation
Principles) at a price in cash equal to 101.0% of the outstanding principal
amount thereof, plus accrued and unpaid interest to the date of repurchase.

 

4

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Offer to Purchase from Excess Cash Flow:    Beginning with the first full fiscal
year of the Issuer after the Closing Date, the Issuer will be required to make
an offer to repurchase the First Lien Notes at par in an amount equal to the
First Lien Noteholders’ Pro Rata Share of Excess Cash Flow (to be defined in a
manner consistent with the Senior Facilities Documentation and subject to the
same minimum threshold therein) of the Issuer and its restricted subsidiaries.
Defeasance and Discharge Provisions:    Customary for high yield debt securities
consistent with the Propco First Lien Notes Documentation Principles.
Modification:    Customary for high yield debt securities consistent with the
Propco First Lien Notes Documentation Principles. Notes held by the Issuer and
its affiliates, including the Sponsors, shall not have voting rights.
Registration Rights:    Customary registration rights. Covenants:    Consistent
with the Propco First Lien Notes Documentation Principles (including in respect
of baskets and carveouts to such covenants; provided, that such baskets and
covenants shall conform to the corresponding amounts in the Senior Facilities
Documentation (including with respect to the Mandatory REIT Distributions), and
such covenants shall include the delivery to the trustee of annual and quarterly
consolidated financial statements of the Borrower (with extended time periods to
be agreed for delivery of the first annual and certain quarterly financial
statements to be delivered after the Closing Date) (it being understood that the
public REIT reporting that includes the Issuer shall satisfy the Borrower’s
reporting obligations so long as it includes a consolidating income statement
and balance sheet for the Borrower), delivery to the trustee of any Tenant
Financial Statements the Issuer receives under the operating lease with OpCo
promptly after receipt by the Issuer of such Tenant Financial Statements from
OpCo and delivery to the trustee of financial statements of CPLV Holding or CPLV
Sub promptly after receipt of such financial statements by the Issuer from CPLV
Holding or CPLV Sub, respectively). For the avoidance of doubt, there shall be
no financial maintenance covenants.    CPLV Holding and CPLV Sub shall each
constitute an unrestricted subsidiary of the Issuer on the Closing Date.   

The provisions limiting dividends and stock repurchases and optional redemptions
(and optional prepayments) of subordinated debt shall be subject to only those
very limited carveouts that shall be agreed to by the Issuer and the Requisite
Consenting Creditors, but shall in any event permit the Mandatory REIT
Distributions.

 

The indenture for the First Lien Notes will provide that any management or
similar fees paid to Caesars Entertainment Corporation or any of its
subsidiaries or affiliates will be made on an arm’s-length basis and on “market”
terms (including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto).

 

5

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Events of Default:    Customary for high yield debt securities and consistent
with the Propco First Lien Notes Documentation Principles. Governing Law:   
New York. Regulatory Matters:    Consistent with the Propco First Lien Notes
Documentation Principles. Counsel to the Notes Lead Arranger:    [            
].

 

6

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New Second Lien PropCo Debt

$[            ] Second Lien Notes

Summary of Principal Terms1

 

Issuer:    [REIT PropCo], in its capacity as the issuer of the Second Lien Notes
(the “Issuer”). Issue:    The Second Lien Notes in an amount set forth in the
Restructuring Term Sheet will be issued under and have the benefit of an
indenture and security documentation typical and customary in the case of second
lien senior secured notes issued pursuant to an exit financing (the “Second Lien
Propco Documentation”), and which shall (x) take into consideration (i) the
indenture for the second-priority senior secured notes issued on October 11,
2013 by Caesars Entertainment Resort Properties, LLC, Caesars Entertainment
Resort Properties Finance, Inc., Harrah’s Atlantic City Holding, Inc., Harrah’s
Las Vegas, LLC, Harrah’s Laughlin, LLC, Flamingo Las Vegas Holding, LLC, Paris
Las Vegas Holding, LLC, Rio Properties, LLC (the “CERP Second Lien Indenture”),
(ii) the operational requirements of the Issuer and its subsidiaries, their
capital structure and size after giving effect to the transactions contemplated
by the Restructuring Term Sheet, and (iii) the operating lease structure and the
REIT structure of the Issuer and its subsidiaries after giving effect to the
transactions contemplated by the Restructuring Term Sheet, (y) contain the terms
set forth herein; provided that, in the case of provisions setting forth the
debt and lien capacity, the Second Lien Propco Documentation shall be based on
and consistent with the CERP Second Lien Indenture as modified to reflect the
terms set forth herein and (z) in all cases be reasonably satisfactory to the
Borrower and the Requisite Consenting Creditors (clauses (x), (y) and (z), the
“Propco Second Lien Notes Documentation Principles”). Purpose:    On the Closing
Date, the Second Lien Notes will be issued to each First Lien Noteholder in
accordance with the Restructuring Term Sheet. Maturity:    The Second Lien Notes
will mature on the date that is six (6) years after the Closing Date.

 

1  All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”), or in the New First Lien PropCo Debt
Term Facility Term Sheet or New First Lien PropCo Debt First Lien Notes Term
Sheet attached thereto.

--------------------------------------------------------------------------------

Interest Rate:    A fixed rate equal to 8.0%. Default Rate:    With respect to
overdue principal (whether at stated maturity, upon acceleration or otherwise)
or any other overdue amount (including overdue interest), the applicable
interest rate plus 2.00% per annum, which shall be payable on demand. Ranking:
   The Second Lien Notes will constitute senior second-priority secured
indebtedness of the Issuer, and will rank pari passu in right of payment with
all obligations under the Senior Facilities and all other senior indebtedness of
the Issuer. Guarantees:    The Second Lien Notes and all obligations under the
indenture related thereto will be unconditionally guaranteed by each existing
and subsequently acquired or organized wholly owned domestic subsidiary of the
Issuer that guarantees the Senior Facilities or the First Lien Notes (the “Note
Guarantors”), subject to exceptions consistent with the Propco Second Lien Notes
Documentation Principles and others, if any, to be agreed upon, on a senior
second-priority secured basis (the “Note Guarantees”). The Note Guarantees will
rank pari passu in right of payment with all obligations under the Senior
Facilities and all other senior indebtedness of the Note Guarantors. The Note
Guarantees will be automatically released upon release of the corresponding
guarantees of the Senior Facilities and First Lien Notes; provided that such
released guarantees shall be reinstated if such released guarantors thereof are
required to subsequently guarantee the Senior Facilities or First Lien Notes.
The Note Guarantees will be joint and several guarantees of payment and
performance and not of collection. Security:   

Subject to the limitations set forth below and other exceptions, if any, to be
agreed upon, the Second Lien Notes and the Note Guarantees will be secured by a
second-priority security interest in those assets of the Issuer and the Note
Guarantors that secure the First Lien Notes (the “Collateral”), provided that
(i) assets securing the Second Lien Notes shall not include property excluded
from the Collateral securing the First Lien Notes and (ii) the pledge of equity
interests and other securities will be subject to customary Rule 3-16 cut-back
provisions.

 

The relative rights and priorities in the Collateral for each of the Senior
Facilities, the First Lien Notes and the Second Lien Notes will be set forth in
the First Lien/Second Lien Intercreditor Agreement.

 

2

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Mandatory Redemption:    None. Optional Redemption:   

Prior to the third anniversary of the Closing Date, the Issuer may redeem the
Second Lien Notes at a make-whole price based on U.S. Treasury notes with a
maturity closest to the third anniversary of the Closing Date plus 50 basis
points.

 

Prior to the third anniversary of the Closing Date, the Issuer may redeem up to
35% of the Second Lien Notes in an amount equal to the amount of proceeds from
an equity offering at a price equal to par plus the coupon on such Second Lien
Notes.

 

After the third anniversary of the Closing Date, the Second Lien Notes will be
callable at par plus accrued interest plus a premium equal to one-half of the
coupon on such Second Lien Notes, which premium shall decline ratably on each
anniversary of the Closing Date thereafter to zero on the date that is two years
prior to the maturity date.

 

All redemptions shall be made on a pro rata basis among the Second Lien Notes.

Offer to Purchase from

Asset Sale Proceeds:

   The Issuer will be required to make an offer to repurchase the Second Lien
Notes at par with the net cash proceeds from any non-ordinary course asset sales
or dispositions by the Issuer or any Note Guarantor in accordance with the
Propco Second Lien Notes Documentation Principles to the extent any such
proceeds are not otherwise applied in a manner consistent with the Propco Second
Lien Notes Documentation Principles. Offer to Repurchase Upon a Change of
Control:    The Issuer will be required to make an offer to repurchase the
Second Lien Notes following the occurrence of a “change of control” (to be
defined in a manner consistent with the Propco Second Lien Notes Documentation
Principles) at a price in cash equal to 101.0% of the outstanding principal
amount thereof, plus accrued and unpaid interest to the date of repurchase.
Defeasance and Discharge Provisions:    Customary for high yield debt securities
consistent with the Propco Second Lien Notes Documentation Principles.
Modification:    Customary for high yield debt securities consistent with the
Propco Second Lien Notes Documentation Principles. Notes held by the Issuer or
its affiliates, including the Sponsors, shall not have voting rights.
Registration Rights:    Customary registration rights.

 

3

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Covenants:    Consistent with the Propco Second Lien Notes Documentation
Principles (including in respect of baskets and carveouts to such covenants);
provided, that such covenants shall in no event be more restrictive than the
corresponding covenant in the First Lien Notes (including, without limitation,
with respect to the Mandatory REIT Distributions). For the avoidance of doubt,
there shall be no financial maintenance covenants, but the covenants shall
include the delivery to the trustee of annual and quarterly consolidated
financial statements of the Issuer (with extended time periods to be agreed for
delivery of the first annual and certain quarterly financial statements to be
delivered after the Closing Date) (it being understood that the public REIT
reporting that includes the Borrower shall satisfy the Borrower’s reporting
obligations so long as it includes a consolidating income statement and balance
sheet for the Issuer), delivery to the trustee of any Tenant Financial
Statements the Issuer receives under the operating lease with OpCo promptly
after receipt by the Issuer of such Tenant Financial Statements from OpCo and
delivery to the trustee of financial statements of CPLV Holding or CPLV Sub
promptly after receipt of such financial statements by the Issuer from CPLV
Holding or CPLV Sub, respectively.   

CPLV Holding and CPLV Sub shall each constitute an unrestricted subsidiary of
the Issuer on the Closing Date.

 

The indenture for the Second Lien Notes will provide that any management or
similar fees paid to Caesars Entertainment Corporation or any of its
subsidiaries or affiliates will be made on an arm’s-length basis and on “market”
terms (including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto).

Events of Default:    Customary for high yield debt securities and consistent
with the Propco Second Lien Notes Documentation Principles. Governing Law:   
New York. Regulatory Matters:    Consistent with the Propco Second Lien Notes
Documentation Principles. Counsel to the Notes Lead Arranger:    [
            ].

 

4

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CPLV Mezz Debt

$[            ] Term Facility

Summary of Principal Terms1

 

Borrower:    [CPLV Mezz Holding] (the “Borrower”), a newly-formed holding
company that directly or indirectly owns 100% of the outstanding stock or other
equity interests of the wholly-owned subsidiary (or subsidiaries) of the Propco
subsidiary that will own CPLV (collectively, the “CPLV Sub”). Each of Borrower,
CPLV Holding (as defined below) and CPLV Sub shall be a special purpose,
bankruptcy remote entity satisfactory to the Requisite Consenting Creditors with
two (2) independent directors and otherwise complying with all applicable rating
agency standards for such entities (a “SPE”). Agent:    [     ] will act as sole
administrative agent and collateral agent for the Term Facility (in such
capacity and together with its permitted successors and assigns, the “Agent”),
and will perform the duties customarily associated with such roles.

 

1  All capitalized terms used but not defined herein shall have the meaning
assigned thereto in the Restructuring Term Sheet to which this Term Sheet is
attached (the “Restructuring Term Sheet”).

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Facilities:    A secured non-recourse (subject to customary carve outs and
limitations) term loan facility in an aggregate principal amount equal to the
difference in the amount of CPLV Market Debt (as defined below) issued in
accordance with the Restructuring Term Sheet and $2,6002 million (the “CPLV Mezz
Facility” and loans thereunder, the “CPLV Mezz Loans”), which will be issued to
each First Lien Bank Lender and First Lien Noteholder in accordance with the
Restructuring Term Sheet (in such capacity, the “Lenders”), subject, in the
event the amount of CPLV Market Debt is less than $2,000 million, to the right
of the First Lien Noteholders to have their CPLV Mezz Upsized Amount (as defined
herein) issued in the form of Propco Preferred Equity Upsize rather than CPLV
Mezzanine Debt, in accordance with the Restructuring Term Sheet.3 In accordance
with the Restructuring Term Sheet, at least $1,800 million of real estate
financing shall be issued to third party investors for cash proceeds on or
before consummation of the Restructuring, which shall be structurally senior to
the CPLV Mezz Debt (the “CPLV Market Debt”). In the event that less than $2,000
million of CPLV Market Debt is issued, then with respect to the amount of
increased CPLV Mezzanine Debt that would otherwise be issued to the First Lien
Noteholders as a result of such reduction of CPLV Market Debt below $2,000
million (such amount, the “CPLV Mezz Upsized Amount”), the First Lien
Noteholders shall receive cash in an amount equal to the CPLV Mezz Upsized
Amount (which cash shall be funded by increasing the amount of Propco Preferred
Equity issued in accordance with the Restructuring Term Sheet). Definitive
Documentation:    The definitive documentation for the CPLV Mezz Facility (the
“Mezz Facility Documentation”) shall be based on customary documentation for
commercial real estate mezzanine financings, as modified to reflect the
operating lease structure and the REIT structure of the Borrower and reasonably
acceptable to the Borrower and the Requisite Consenting Creditors (the
“Documentation Precedent”). The Mezz Facility Documentation, including all
representations, warranties and covenants thereunder, shall conform to the CPLV
Market Debt documentation in accordance with standard industry practice.

 

2  Subject to adjustment as set forth in the Restructuring Term Sheet.

3  For the avoidance of doubt, the Lenders will be issued notes backed by the
CPLV Mezz Loans through a customary securitization structure.

 

2

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Purpose:    On the Closing Date, the CPLV Mezz Loans will be issued to each
First Lien Bank Lender and First Lien Noteholder in accordance with the
Restructuring Term Sheet. Availability:    The full amount of the CPLV Mezz
Facility will be issued on the Closing Date. Amounts under the CPLV Mezz
Facility that are repaid or prepaid may not be reborrowed. Interest Rates:    A
rate equal to 8.00% if the principal amount of the CPLV Mezz Facility is greater
than or equal to $600 million, increasing by 0.25% for every $25 million
reduction in the principal amount of the CPLV Mezz Facility below $600 million
on the Closing Date (before giving effect to any Equitized Debt) (up to a
maximum interest rate of 13.0%). Default Rate:    With respect to principal, the
applicable interest rate plus 2.00% per annum, and with respect to any other
overdue amount (including overdue interest), the interest rate applicable to ABR
loans plus 2.00% per annum and in each case, shall be payable on demand. Final
Maturity and Amortization:    The CPLV Mezz Facility will mature on the date
that is six (6) years after the Closing Date. Guarantees:    A customary
“bad-boy” guaranty of the non-recourse carve outs and limitations shall be
provided by Propco or such other entity that provides a guaranty of non-recourse
carve outs for the CPLV Market Debt. Security:   

Subject to customary exceptions, the CPLV Mezz Facility will be secured on a
first-priority basis by a pledge of the equity interests in a newly formed
holding company that will directly own 100% of CPLV Sub (“CPLV Holding”).
Borrower shall obtain a customary Eagle 9 policy and a customary mezzanine
lender’s endorsement to the owner’s title insurance policy. The operating lease
with [Caesars Entertainment Operating Company, Inc.] (“Opco”) shall be subject
to a customary subordination and non-disturbance agreement as provided in the
Lease Term Sheet attached to the Restructuring Support Agreement.

 

The relative rights and priorities in the Collateral for the CPLV Mezz Facility
and the CPLV Market Debt will be set forth in a customary intercreditor
agreement, as between the collateral agent for the CPLV Mezz Facility, on the
one hand, and the collateral agent for the CPLV Market Debt, on the other hand.

 

3

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Mandatory Prepayments:    Customary for commercial real estate mezzanine
financings. Voluntary Prepayments and Reductions in Commitments:    Voluntary
prepayments of borrowings under the CPLV Mezz Facility will be permitted at any
time, in minimum principal amounts to be agreed upon, without premium or
penalty, pro rata among the Lenders. Representations and Warranties:    The
following representations and warranties will apply to the Borrower, CPLV
Holding and CPLV Sub (subject to customary and other exceptions and
qualifications to be agreed upon, consistent with the Documentation Precedent);
provided, that, such representations and warranties shall in no event be more
restrictive than the corresponding representations and warranties in the CPLV
Market Debt: organization, existence, and power; qualification; authorization
and enforceability; no conflict; governmental consents; subsidiaries; accuracy
of financial statements and other information in all material respects;
projections; no material adverse change since the Closing Date; absence of
litigation; compliance with laws (including PATRIOT Act, OFAC, FCPA, ERISA,
margin regulations, environmental laws and laws with respect to sanctioned
persons); payment of taxes; ownership of properties; governmental regulation;
inapplicability of the Investment Company Act; Closing Date solvency on a
consolidated basis; labor matters; validity, priority and perfection of security
interests in the Collateral; intellectual property; use of proceeds; insurance;
zoning; compliance; easements; utilities; access; assessments; licenses; flood
zone; physical condition; survey; leases; special purpose entity requirements;
MLSA agreement; REAs; use of property; purchase options; and other
representations and warranties consistent with Documentation Precedent.
Affirmative Covenants:    The following affirmative covenants will apply to the
Borrower, CPLV Holding and CPLV Sub, subject to customary (consistent with the
Documentation Precedent) and other baskets, exceptions and qualifications to be
agreed upon; provided, that, such covenants shall in no event be more
restrictive than the corresponding covenants in the CPLV Market Debt:
maintenance of corporate existence and rights; performance and payment of
obligations; delivery of annual and quarterly consolidated financial statements
of CPLV Sub (accompanied by customary management discussion and analysis and
(annually) by an audit opinion from nationally recognized auditors that is not
subject to any qualification as to scope of such audit or going concern) (other
than solely

 

4

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   with respect to, or resulting solely from an upcoming maturity date under any
series of indebtedness occurring within one year from the time such opinion is
delivered) (with extended time periods for delivery of the first annual and
certain quarterly financial statements to be delivered after the Closing Date)
and an annual budget (it being understood that the public REIT reporting that
includes the Borrower shall satisfy the Borrower’s reporting obligations so long
as it includes a consolidating income statement and balance sheet for the
Borrower, unless otherwise required by the CPLV Market Debt); delivery of any
Tenant Financial Statements CPLV Sub receives under the operating lease with
OpCo promptly after receipt by CPLV Sub of such Tenant Financial Statements from
OpCo; delivery of notices of default and material adverse litigation, ERISA
events and material adverse change; maintenance of properties in good working
order; maintenance of books and records; maintenance of customary insurance;
commercially reasonable efforts to maintain ratings (but not a specific rating);
compliance with laws; inspection of books and properties; environmental;
additional guarantors and additional collateral (subject to limitations set
forth under the captions “Guarantees” and “Security”); further assurances in
respect of collateral matters; use of proceeds; payment of taxes; leasing;
alterations to property; material agreements; handicap access; REA; and
insurance, subject, to the extent applicable, to the rights of CPLV Sub under
the Lease. Negative Covenants:    The following negative covenants, among
others, if any, to be negotiated in the Mezz Facility Documentation, will be
applicable to the Borrower, CPLV Holding and CPLV Sub, subject to customary
exceptions and qualifications (consistent with the Documentation Precedent) and
others to be agreed upon; provided, that, such covenants shall in no event be
more restrictive than the corresponding covenants in the CPLV Market Debt:   

1.      Limitation on dispositions of assets.

  

2.      Limitation on mergers and acquisitions.

  

3.      Limitation on dividends and stock repurchases and optional redemptions
(and optional prepayments) of subordinated debt; provided that, any
distributions required to be made to distribute 100% of REIT taxable income or
satisfy any REIT-related requirements shall be permitted (such distributions,
the “Mandatory REIT Distributions”).

 

5

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4.      Limitation on indebtedness (including guarantees and other contingent
obligations) and preferred stock.

  

5.      Limitation on loans and investments.

  

6.      Limitation on liens and further negative pledges.

  

7.      Limitation on transactions with affiliates.

  

8.      Limitation on sale/leaseback transactions.

  

9.      Limitation on changes in the business of the Borrower and its
subsidiaries.

  

10.    Limitation on restrictions on ability of subsidiaries to pay dividends or
make distributions.

  

11.    Limitation on changes to fiscal year.

  

12.    Limitation on modifications to the CPLV Market Debt Documents and
refinancing of the CPLV Market Debt.

  

13.    Limitation on material modifications to the MLSA, lease and other
arrangements entered into in connection with the lease structure.

 

14.    Limitations on subordinate debt (including subordinate mezzanine debt,
but not Propco “corporate level” debt).

 

15.    Limitations on direct or indirect transfers of equity interests in the
Borrower, limitations on transfers of interests in the Property (but not
transfers of stock in Propco over any nationally recognized stock exchange) or
other customary permitted transfers for a borrower owned by a REIT listed on a
nationally recognized stock exchange.

 

16.    Limitation on indebtedness of the Borrower, CPLV Holding and CPLV Sub to
trade payables incurred in the ordinary course of business subject to market
caps and paid on a timely basis.

 

17.    Limitations on changes to zoning in a manner that would prohibit the
current use of the property and joint assessments with respect to the CPLV
property.

 

6

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   The Mezz Facility Documentation will provide that any management or similar
fees paid to Caesars Entertainment Corporation or any of its subsidiaries or
affiliates will be made on an arm’s-length basis and on “market” terms
(including caps on amounts and consent rights relating to modifications of
applicable agreements relating thereto). Financial Covenant:    CPLV Mezz
Facility: None. Events of Default:    To include the following (subject to
customary and other thresholds and grace periods to be agreed upon, consistent
with the Documentation Precedent, and applicable to the Borrower, CPLV Holding
and CPLV Sub): nonpayment of principal, interest or other amounts; nonpayment of
taxes or other charges, insurance policies not being kept in full force and
effect; mechanics or other Liens; default by CPLV Sub under the CPLV Lease
beyond all applicable notice and cure periods thereunder; violation of
covenants; incorrectness of representations and warranties in any material
respect; cross event of default and cross acceleration to material indebtedness
(including CLV Market Debt); bankruptcy and similar events; material judgments;
ERISA events; invalidity of the Guarantees or any security document; transfers
of direct or indirect equity interests in Borrower, CPLV Sub or CPLV Holdings or
in the Property not permitted under the loan documents. Voting:    Usual for
facilities and transactions of this type and consistent with the Documentation
Precedent; provided that the Borrower and its affiliates, including the
Sponsors, shall not have voting rights with respect to loans and commitments
held by them. . Cost and Yield Protection:    Usual for facilities and
transactions of this type, consistent with the Documentation Precedent.
Assignments and Participations:    The Lenders will be permitted to sell,
transfer, syndicate and assign loans or grant participations therein or issue
pass-through certificates or other securities without any consent from the
Borrower. The Lenders will enter into an intercreditor agreement with the
lenders holding the CPLV Market Debt containing customary restrictions on
transfer of mezzanine debt. Borrower shall cooperate with any such assignment,
sale, transfer, participation, securitization or otherwise (including the
creation of one or more additional tranches of pari passu or subordinate debt
(including one or more classes of so-called junior mezzanine debt)), shall

 

7

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   consent to disclosure of property related information and financial
statements and shall enter into customary indemnification agreements related
thereto, subject to limitations on modification of terms. Borrower expenses and
“rate creep” prior to default to be set forth in the CPLV Mezz Facility loan
documents. Expenses and Indemnification:    Consistent with the Documentation
Precedent. Regulatory Matters:    Customary for facilities of this type and
consistent with the Documentation Precedent. Governing Law and Forum:    New
York. Counsel to Agent:    [             ].

 

8

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Annex VI

OpCo Debt Guaranty

 

31

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[Form of]

GUARANTY AND PLEDGE AGREEMENT (FIRST LIEN NOTES)

GUARANTY AND PLEDGE AGREEMENT dated as of [            ] (as amended, restated,
supplemented or otherwise modified from time to time, this “Agreement”) made by
CAESARS ENTERTAINMENT CORPORATION, a Delaware corporation (“Holdings”), in favor
of [the indenture trustee], as indenture trustee (in such capacity, the
“Trustee”), and [ ], as collateral agent, in each case for (i) [the holders (the
“Noteholders”) of the first lien notes (the “First Lien Notes”) parties to the
Indenture, dated as of [            ] (as amended, restated, supplemented or
otherwise modified from time to time, the “Indenture”) between [Caesars
Entertainment Operating Company, Inc., a Delaware corporation] (the “Borrower”)
as issuer and the Trustee and (ii) the other Secured Parties (as defined
herein).1

W I T N E S S E T H :

WHEREAS, it is a condition precedent to the effectiveness of the Indenture that
Holdings shall have executed and delivered this Agreement to the Trustee for the
ratable benefit of the Secured Parties so that the Secured Parties would receive
the benefits of the credit support provided by this Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Trustee, the
Noteholders to enter into the Indenture, as the case may be, Holdings hereby
agrees with the Trustee, for the ratable benefit of the Secured Parties, as
follows:

1. Defined Terms. Unless otherwise defined herein, terms that are defined in the
Indenture and used herein are so used as so defined. All terms referred to
herein that are defined in the New York UCC (as defined herein) and not defined
in this Agreement or the Indenture have the meanings specified in the New York
UCC. The following terms shall have the following meanings:

“Agreement”: this Guaranty and Pledge Agreement (First Lien Notes), as amended,
restated, supplemented, waived or otherwise modified from time to time.

“Arbitration Decision”: as defined in paragraph 25.

 

 

1  NTD: This form will be updated to reflect the following structure: A separate
Guarantee Agreement will be entered into with respect to each of (1) the First
Lien Notes issued to the First Lien Bondholders on the Closing Date and (2) the
First Lien bank debt that is issued to the First Lien Bank Lenders on the
Closing Date. The Lease will receive a guarantee under the MLSA guarantee.
Separately, a Pledge Agreement reflecting the terms of this form will be entered
into for the benefit of such holders of First Lien Notes and First Lien bank
debt and the Landlord. Substantially similar documents will be created with
respect to the Opco second lien debt that is issued to the First Lien Bank
Lenders and First Lien Bondholders on the Closing Date with the Pledge Agreement
for the benefit of the second lien Opco debt being modified to reflect the
junior priority nature of the pledge. Documents will consistently preserve the
voting/consent and exercise of remedies rights reflected herein. The Pledge
Agreement will include the Lease as a secured obligation and the Landlord as a
Secured Party on terms consistent with the MLSA Term Sheet.

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“Article 9 Collateral”: all right, title and interest in or to any and all of
the following assets and properties now owned or at any time hereafter acquired
by Holdings or in which Holdings now has or at any time in the future may
acquire any right, title or interest:

 

  (i) all Accounts;

 

  (ii) all Chattel Paper;

 

  (iii) all cash and Deposit Accounts;

 

  (iv) all Documents;

 

  (v) all Equipment;

 

  (vi) all Fixtures;

 

  (vii) all General Intangibles;

 

  (viii) all Instruments;

 

  (ix) all Intellectual Property;

 

  (x) all Inventory;

 

  (xi) all Investment Property other than the Pledged Securities;

 

  (xii) all Letter of Credit Rights;

 

  (xiii) all Commercial Tort Claims as described on Schedule II hereto (as such
Schedule may be amended from time to time in accordance with paragraph 29);

 

  (xiv) all books and records pertaining to the Article 9 Collateral;

 

  (xv) all Proceeds of Excluded Property to the extent not prohibited by law or
otherwise constituting Excluded Property; and

 

  (xvi) to the extent not otherwise included, all Proceeds, Supporting
Obligations and products of any and all of the foregoing and all collateral
security and guarantees given by any person with respect to any of the
foregoing;

provided that Article 9 Collateral shall not include any Excluded Property.

“Authorized Representative”: (i) the Trustee with respect to the Indenture and
(ii) any duly authorized representative of any Guaranteed Party under any Other
Holdco Guaranteed Agreement designated as “Authorized Representative” for any
Guaranteed Party in an Other Holdco Guaranty Party Consent delivered to the
Trustee.

“Bankruptcy Code”: title 11 of the United States Code, as amended.

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“Borrower Distributions”: all consideration actually received from the Borrower
and its subsidiaries on account of the Holdco Guaranteed Obligations; provided
that if any such consideration is required to be disgorged or recharacterized
such amounts shall be adjusted as set forth in paragraph 3(b). Borrower
Distributions not constituting cash shall be valued for purposes of determining
the amount of such Borrower Distribution in accordance with paragraph 4. So long
as there is no Holdco Guaranty Breach and the Holdco Guaranteed Obligations have
been irrevocably paid in full, Borrower Distributions received after the
Principal Payment Date (other than, for the avoidance of doubt, any
consideration that has been taken into account in determining that the Holdco
Guaranteed Obligations have been irrevocably paid in full, including non-cash
consideration valued in accordance with paragraph 4), if any, will be turned
over to Holdings in the form received.

“Borrower Event of Default”: an “Event of Default” as defined in the Indenture.

“Borrower Plan”: a plan of reorganization confirmed by the bankruptcy court in a
case filed under chapter 11 of the Bankruptcy Code related to Borrower.

“CFC”: a “controlled foreign corporation” within the meaning of Section 957(a)
of the Code.

“Claim Amount”: an amount equal to 100% of the unpaid amount of the outstanding
Holdco Guaranteed Obligations.

“Closing Date”: [                    ] [NTD: The Effective Date (as defined in
the RSA Term Sheet)].

“Collateral”: (i) the Pledged Securities, (ii) the Article 9 Collateral and
(iii) all Proceeds thereof.

“Credit Agreement”: the Credit Agreement dated as of [            ] (as amended,
restated, supplemented or otherwise modified from time to time) among Borrower,
the Lenders party thereto from time to time, the Credit Agreement Agent and the
other parties named therein.

“Credit Agreement Agent”: the agent for the Lenders and other secured parties
under the Credit Agreement.

“Excluded Property”: (i) motor vehicles and other assets subject to certificates
of title and letter of credit rights (in each case, other than to the extent a
Lien on such assets or such rights can be perfected by filing a UCC-1),
(ii) pledges and security interests to the extent and for so long as not
effective under, or prohibited by, applicable law, rule or regulation (including
any Gaming Law) or any enforceable contractual obligation binding on the assets
(and with regard to which contractual obligation entered into after the Closing
Date the counterparty thereto requires such prohibition as a condition to
entering into the relevant contract, such contract was entered into in the
ordinary course of business, such restriction is consistent with industry custom
and consent has been requested and not received in each case, except to the
extent such ineffectiveness or prohibition is unenforceable after giving effect
to the applicable anti-assignment provisions of Article 9 of the Uniform
Commercial Code of any applicable jurisdiction), (iii) any lease, license or
other agreement to the extent and for so long as a grant of

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a security interest therein would violate or invalidate such lease, license or
agreement or create a right of termination in favor of any other party thereto
(and with regard to which lease, license or other agreement entered into after
the Closing Date the counterparty thereto requires such prohibition as a
condition to entering into such lease, license or agreement, such lease, license
or agreement was entered into in the ordinary course of business, such
restriction is consistent with industry custom and consent has been requested
and not received) after giving effect to the applicable anti-assignment
provisions of Article 9 of the Uniform Commercial Code of any applicable
jurisdiction, (iv) any governmental licenses (including gaming licenses) or
state or local franchises, charters and authorizations, to the extent and for so
long as security interests in such licenses, franchises, charters or
authorizations are prohibited or restricted thereby after giving effect to the
applicable anti-assignment provisions of Article 9 of the Uniform Commercial
Code of any applicable jurisdiction, (v) pending United States “intent-to-use”
trademark applications for which a verified statement of use or an amendment to
allege use has not been filed with and accepted by the United States Patent and
Trademark Office and (vi) any Excluded Securities; provided that the Proceeds of
Excluded Property shall not be deemed Excluded Property to the extent permitted
by law (unless such Proceeds would otherwise constitute Excluded Property).

“Excluded Securities”: any of the following:

(a) in the case of any pledge of voting Equity Interests of any Foreign
Subsidiary or FSHCO, any voting Equity Interest of such Foreign Subsidiary or
FSHCO in excess of 65% of the outstanding Equity Interests of such class;

(b) any Equity Interests or Indebtedness to the extent and for so long as the
pledge thereof would be prohibited by any Requirement of Law (including any
Gaming Laws) after giving effect to the applicable anti-assignment provisions of
Article 9 of the Uniform Commercial Code of any applicable jurisdiction;

(c) any Equity Interests of any person that is not a Wholly-Owned Subsidiary to
the extent and for so long as (A) a pledge thereof to secure the Obligations is
prohibited by (i) any applicable organizational documents, joint venture
agreement or shareholder agreement or (ii) any other contractual obligation with
an unaffiliated third party (in each case, (x) other than non-assignment
provisions which are ineffective under Article 9 of the Uniform Commercial Code
of any applicable jurisdiction or other applicable Requirements of Law and
(y) as such document, agreement or obligation exists on the Closing Date, or if
later, the date of acquisition of such interest), and (B) any organizational
documents, joint venture agreement or shareholder agreement (or other
contractual obligation referred to in subclause (A)(ii) above) prohibits such a
pledge without the consent of any other party or gives such party the right to
terminate such agreement (and, in each case, (x) with regard to which any such
document, agreement or contractual obligation the unaffiliated third party
thereto requires such prohibition as a condition to entering into such document,
agreement or contractual obligation, such restriction is consistent with
industry custom and has not been agreed to for the purpose of avoiding a pledge
under this Agreement and consent to such pledge has been requested and not
received, after commercially reasonable efforts to obtain such consent,
(y) other than termination provisions which are ineffective under Article 9 of
the Uniform Commercial Code of any applicable jurisdiction or other applicable
Requirements of Law, and (z) as such document, agreement or obligation exists on
the Closing Date or, if later, the date of acquisition of such interest);

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(d) any Margin Stock; and

(e) any Regulation S-X Excluded Collateral.

“Exhaustion of Remedies Date”: earlier of (a) the date on which the Trustee has
exhausted all of its Remedies against Borrower and the Subsidiary Loan Parties
in respect of the Holdco Guaranteed Loan Obligations and (b) the Principal
Payment Date.

“FSHCO”: any Subsidiary that owns no material assets other than the Equity
Interests of one or more Foreign Subsidiaries that are CFCs and/or of one or
more FSHCOs.

“Gaming Authorities”: in any jurisdiction in which the Borrower or any of its
subsidiaries manages or conducts any casino, gaming business or activities, the
applicable gaming board, commission, or other governmental gaming regulatory
body or agency which (a) has, or may at any time after the date hereof have,
jurisdiction over the gaming activities at the property or any successor to such
authority or (b) is, or may at any time after the date hereof be, responsible
for interpreting, administering and enforcing the Gaming Laws.

“Gaming Laws”: all applicable constitutions, treaties, laws, rates, regulations
and orders and statutes pursuant to which any Gaming Authority possesses
regulatory, licensing or permit authority over gaming, gambling or casino
activities and all rules, rulings, orders, ordinances, regulations of any Gaming
Authority applicable to the gambling, casino or gaming business or activities of
the Borrower or any of its subsidiaries in any jurisdiction, as in effect from
time to time, including the policies, interpretations and administration thereof
by the Gaming Authorities.

“Guaranteed Amount”: (a) with respect to the Holdco Guaranteed Loans in effect
on the Closing Date, 100% of the principal amount of such Holdco Guaranteed
Loans plus, for the avoidance of doubt, and without duplication, all accrued and
unpaid interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on such principal amount and
all accrued and unpaid fees and expenses in respect of the Holdco Guaranteed
Loans[; (b) with respect to Holdco Guaranteed Loans constituting Incremental
Term Loans incurred or guaranteed after the Closing Date, the applicable amount
specified in the Incremental Assumption Agreement with respect thereto; and
(c) with respect to any Holdco Guaranteed Other Obligations, the applicable
amount specified in the Other Holdco Guaranteed Agreement with respect thereto].

“Guaranteed Parties”: (a) the Trustee, (b) the Noteholders and (c) the
successors and permitted assigns of each of the foregoing.

“Governmental Authority”: any federal, state, local or foreign court or govern-
mental agency, authority, instrumentality or regulatory or legislative body.

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“Holdco Covenant Breach”:2 (i) with respect to any Disputed Default (as defined
in paragraph 25) or any other transaction that is the subject of the Dispute
Mechanism (as defined in Exhibit A), the failure by Holdings or any Subsidiary
to comply for 15 days after an Arbitration Decision or the completion of the
Dispute Mechanism, as the case may be, with any of their respective covenants
set forth in this Agreement that was the subject of such Arbitration Decision or
Dispute Mechanism, (ii) any Holdco Event of Default constituting a failure by
Holdings to make any payment required hereunder and (iii) any other Holdco Event
of Default that does not constitute a Disputed Default (after the ten
(10) Business Days required for Holdings to inform the applicable Notice Party
that Holdings has made a good faith determination that no such Holdco Event of
Default has occurred in paragraph 25 have lapsed with respect thereto).

“Holdco Event of Default”: (i) failure by Holdings to make any payment required
hereunder, and such failure shall continue unremedied for a period of five
Business Days, (ii) failure by Holdings or any Subsidiary to comply for 30 days
after notice from the Trustee (or Noteholders representing at least 25% of the
principal balance of outstanding First Lien Notes of any issue of First Lien
Notes) with any of their other respective covenants set forth in this Agreement
or (iii) the occurrence of any Holdings Filing. For the avoidance of doubt, any
Default or Event of Default under any Loan Document shall not constitute a
Holdco Event of Default hereunder (unless it constitutes an event specified in
the preceding sentence), and a Holdco Event of Default shall arise hereunder
only upon the occurrence of any event specified in the preceding sentence.

“Holdco Guaranteed Loan Document Obligations”: (i) the unpaid principal of and
accrued and unpaid interest due (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Holdco
Guaranteed Loans made to the Borrower under the Loan Documents and (ii) the
unpaid amount of any other outstanding monetary obligations of the Borrower and
the other Loan Parties then due and payable under the Loan Documents, including
fees, costs and expenses (including reasonable fees and expenses of counsel
incurred by the Trustee under the Loan Documents) then due and payable under the
Loan Documents, in each case of (i) and (ii) as and when payable hereunder by
Holdings pursuant to paragraph 3; provided that, with respect to any Holdco
Guaranteed Loan, the principal amount of such Holdco Guaranteed Loan that shall
receive the benefit (and be included in the amount) of Holdco Guaranteed Loan
Document Obligations shall be the Guaranteed Amount with respect to such Holdco
Guaranteed Loan.

“Holdco Guaranteed Loans”: the First Lien Notes.

“Holdco Guaranteed Obligations”: the Holdco Guaranteed Loan Document
Obligations.

“Holdco Guaranteed Other Obligations”: the unpaid principal of and, to the
extent specified to be included as Holdco Guaranteed Other Obligations pursuant
to the terms of the applicable Other Holdco Guaranteed Agreement, accrued and
unpaid interest due thereon

 

2 

[NTD: This will result in a cross-default under the First Lien Opco Debt
Documents.]

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(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on Indebtedness under any Other Holdco Guaranteed
Agreement (“Holdco Other Debt”), as and when payable hereunder by Holdings
pursuant to paragraph 3, that have been incurred only as otherwise permitted
pursuant to this Agreement and have been designated as Holdco Guaranteed Other
Obligations pursuant to and in accordance with paragraph 34; provided that, with
respect to any Holdco Other Debt, the principal amount of such Holdco Other Debt
that shall receive the benefit (and be included in the amount) of Holdco
Guaranteed Other Obligations shall be the Guaranteed Amount with respect to such
Holdco Other Debt.

[“Holdco Guaranteed Other Secured Obligations”: the Holdco Guaranteed Other
Obligations under any Other Holdco Guaranteed Agreement; to the extent such
Other Holdco Guaranteed Agreement provides that such Holdco Guaranteed Other
Obligations are to be Holdco Guaranteed Secured Obligations hereunder.]

“Holdco Guaranteed Secured Obligations”: the Holdco Guaranteed Loan Document
Obligations.

“Holdco Guaranty Breach”: (i) the failure by Holdings to pay the principal
amount of the Holdco Guaranteed Obligations on the first Business Day after the
Principal Payment Date, less any Borrower Distributions actually received as of
11:59 p.m. on the Principal Payment Date, (ii) the failure by Holdings to timely
make any Holdings Current Amount Payment required hereunder with respect to any
payment of interest, and such failure continues unremedied for a period of five
Business Days, (iii) the failure by Holdings to timely make any Holdings Current
Amount Payment required hereunder with respect to any payment of any other
amounts not included in clause (ii) above and such failure continues unremedied
for a period of five Business Days after Holdings has received notice that such
payment is owed (it being understood that delivery of an invoice to Holdings
constitutes notice to Holdings), (iv) the occurrence of a Holdco Covenant Breach
or (v) the occurrence of a Holdings Filing.

“Holdco Intercreditor Agreement”: each Intercreditor Agreement, dated as of the
Closing Date, among the Credit Agreement Agent [for the First Lien bank debt],
the Trustee, Holdings, on the one hand, and each Authorized Representative of
any Other Holdco Guaranteed Parties, or [the Landlord (as defined in the MLSA),
as the case may be], as the same may be amended, restated, supplemented or
otherwise modified from time to time.

[“Holdco Other Debt”: has the meaning assigned to such term in the definition of
Holdco Guaranteed Other Obligations.]

“Holdings Current Amount Payments”: (i) 100% of the interest due and payable on
the Holdco Guaranteed Obligations outstanding from time to time (at the
non-default rate of interest due thereon) under the Loan Documents (less any
adequate protection or similar payments received by the Trustee or the
Guaranteed Parties in the Borrower’s cases with respect to the applicable
interest period and characterized as interest; provided that if any such payment
is required to be disgorged or recharacterized as principal, such amounts shall
not be deducted from the amount of Holdings Current Amount Payments), including
interest on the Holdco Guaranteed Obligations at the non-default rate following
the stated maturity on any unpaid

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Holdco Guaranteed Obligations whether or not the underlying loan agreements
provided for such interest and (ii) 100% of all fees, costs and expenses due and
payable under the Loan Documents, in each case of (i) and (ii) at the times and
on the terms required by the Loan Documents.

“Holdings Filing”: (i) the commencement by Holdings of any voluntary case,
proceeding or action under the Bankruptcy Code, or any other voluntary
proceeding or action under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency, administration or liquidation or
similar law of any jurisdiction whether now or hereafter enacted; or (ii) the
commencement against Holdings of any involuntary case, proceeding or action
under the Bankruptcy Code, which Holdings consents to, or fails to have
dismissed, within 60 days of its filing; or (iii) the entry of any order of
relief or other order approving any such case, proceeding or action, or the
entry of an order appointing a custodian (as defined in the Bankruptcy Code),
judicial manager, receiver, receiver manager, trustee, administrator or similar
person for, or to take charge of, all or any substantial portion of the property
of Holdings.

“Liquor Authorities”: in any jurisdiction in which the Borrower or any of its
subsidiaries sells and distributes liquor, the applicable alcoholic beverage
commission or other Governmental Authority responsible for interpreting,
administering and enforcing the Liquor Laws.

“Liquor Laws”: the laws, rules, regulations and orders applicable to or
involving the sale and distribution of liquor by the Borrower or any of its
subsidiaries in any jurisdiction, as in effect from time to time, including the
policies, interpretations and administration thereof by the applicable Liquor
Authorities.

“Loan Documents”: (a) the Indenture, (b) the Security Documents and (c) for
purposes of paragraph 16(b) only, the Holdco Intercreditor Agreement.

“Loan Party”: each of Holdings, the Borrower, the Subsidiary Loan Parties and
each other Subsidiary of the Borrower that is a party to the Indenture or any
other Loan Document as a pledgor or guarantor.

“New York UCC”: the Uniform Commercial Code from time to time in effect in the
State of New York.

[“Other Holdco Guaranteed Agreement”: any indenture, credit agreement (excluding
the Credit Agreement) or other agreement, document or instrument pursuant to
which any Loan Party has or will incur Holdco Guaranteed Other Obligations.

“Other Holdco Guaranteed Parties”: collectively, the holders of Holdco
Guaranteed Other Obligations and any Authorized Representative with respect
thereto.

“Other Holdco Guaranteed Party Consent”: a consent substantially in the form of
Exhibit I to this Agreement executed by the Authorized Representative of any
holders of Holdco Guaranteed Other Obligations pursuant to paragraph 34.

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“Other Holdco Secured Parties”: collectively, the holders of Holdco Guaranteed
Other Secured Obligations and any Authorized Representative with respect
thereto.]

“Pledged Debt Securities”: all debt securities directly held by Holdings on the
Closing Date or thereafter acquired, together with all promissory notes and any
other instruments, if any, including such debt securities (in each case other
than Excluded Securities).

“Pledged Entity”: the Borrower and each Subsidiary of Holdings who is the issuer
of any Pledged Equity hereunder.

“Pledged Equity”: all Equity Interests directly held by Holdings on the Closing
Date or thereafter acquired, together with all certificates, options or rights
(including any additional Equity Interests of any nature whatsoever that may be
issued or granted to Holdings while this Agreement is in effect) (in each case,
other than Excluded Securities).

“Pledged Securities”: all Pledged Equity and Pledged Debt Securities.

“Principal Payment Date”: (i) if Borrower is a debtor in a case under chapter 7
of the Bankruptcy Code (or is a debtor in a case under chapter 11 of the
Bankruptcy Code that is converted into a chapter 7 case), the earlier of (a) the
date on which the chapter 7 trustee in such case makes the final distribution to
the Guaranteed Parties on account of the Holdco Guaranteed Obligations pursuant
to section 726 of the Bankruptcy Code and (b) the twelve month anniversary of
the stated maturity of the Holdco Guaranteed Obligations or, if such chapter 7
trustee has not made an initial distribution to the Guaranteed Parties on
account of the Holdco Guaranteed Obligations pursuant to section 726 of the
Bankruptcy Code by such anniversary, the date of such initial distribution;
(ii) if any out-of-court transaction occurs that restructures the Holdco
Guaranteed Obligations following a Borrower Event of Default, the closing date
of such transaction; (iii) if the Trustee commences a foreclosure proceeding
(judicial or non-judicial) against Borrower or any of its subsidiaries, the
earlier of (a) the completion of foreclosure by the Trustee upon all material
assets of Borrower and its subsidiaries on which the Trustee on behalf of the
Guaranteed Parties has a lien and (b) the twelve month anniversary of the stated
maturity of the Holdco Guaranteed Obligations and (iv) if Borrower or any
material Subsidiary Loan Parties are debtors in a case under chapter 11 of the
Bankruptcy Code, the effective date of the Borrower Plan in such case with
respect to Borrower or the effective date of any plan of reorganization
confirmed by the bankruptcy court in such case related to one or more Subsidiary
Loan Parties (and not Borrower) that involves substantially all of the material
assets of Borrower and its subsidiaries, taken as a whole.

“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the New York UCC on the date hereof and, in any event, including, without
limitation, all principal, interest, dividends or other income from the Pledged
Securities, and any and all collections on the foregoing or distributions with
respect to the foregoing, and any securities or other consideration received in
exchange for any of the foregoing.

“Remedies”: all rights and remedies at law and in equity that the Trustee or the
Guaranteed Parties may have against the Borrower or any of the Subsidiary Loan
Parties and their respective property to collect, or obtain payment of, the
Holdco Guaranteed Obligations,

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including, without limitation, through foreclosure or similar judicial or
non-judicial proceedings, a chapter 11 case, a chapter 7 case or any other
proceeding under a Debtor Relief Law with respect to the Borrower or any of the
Subsidiary Loan Parties, litigation and collection on all applicable insurance
policies, and termination of all commitments to advance additional funds to the
Borrower under the Loan Documents.

“Requirement of Law”: with respect to any person, the common law and all
federal, state, local and foreign laws, rules and regulations, orders,
judgments, decrees and other legal requirements or determinations (including,
without limitation, any Gaming Law) of any Governmental Authority or arbitrator,
applicable to or binding upon such person or any of its property or which such
Person or any of its property is subject.

“Second Lien Guaranty and Pledge Agreement”: that certain Guaranty and Pledge
Agreement (Second Lien) dated as of [            ] by Holdings in favor of
[            ], as trustee for the holders of the Second Lien Notes guaranteed
thereunder, as amended, restated, supplemented, waived or otherwise modified
from time to time.

“Secured Parties”: (a) the Noteholders, (b) the Other Holdco Secured Parties and
(c) the successors and permitted assigns of each of the foregoing.

“Security Documents”: this Agreement and each other agreement entered into in
favor of the Trustee for purposes of securing the Holdco Guaranteed Secured
Obligations.

“Subsidiary Loan Party”: any Subsidiary of Borrower that is a Loan Party or that
otherwise has obligations under the Loan Documents.

2. Guarantee. Subject to the terms and conditions set forth in this Agreement,
Holdings hereby irrevocably, absolutely and unconditionally guarantees, as
primary obligor and not merely as surety, and promises to pay to the Trustee for
the benefit of the Guaranteed Parties, the prompt and complete payment in full
in cash of the Holdco Guaranteed Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under section 362(a) of the Bankruptcy Code or
similar laws, and including, without limitation or duplication, all Holdings
Current Amount Payments), and shall be jointly and severally liable with the
Borrower for the payment thereof. Holdings further agrees that the Holdco
Guaranteed Obligations may be extended or renewed, in whole or in part, without
notice to or further assent from it, and that it will remain bound upon its
guarantee notwithstanding any extension or renewal of any Holdco Guaranteed
Obligation. Neither Trustee nor any Guaranteed Party shall seek to enforce
payment under the terms of this Agreement prior to delivery of written notice to
Holdings from the Trustee of an Event of Default under the Loan Documents or a
default hereunder (other than the occurrence of a Holdings Filing, in which case
no such notice shall be required prior to Trustee’s seeking to enforce payment
under the terms of this Agreement); provided that Trustee’s failure to deliver
such notice, or delay in giving such notice, shall not relieve Holdings of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of Trustee,
or any Guaranteed Party, against Holdings, except as set forth in this sentence.
Holdings, to the extent permitted by applicable law, waives

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diligence, presentment, protest, demand for payment and notice of default
(except as expressly provided in this paragraph 2) or nonpayment to or upon the
Borrower or Holdings with respect to the Holdco Guaranteed Obligations when the
same shall become due to the Guaranteed Parties, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
section 362(a) of the Bankruptcy Code).

3. Guarantee Mechanics.

(a) Notwithstanding any other provision of this Agreement or any Loan Document,
(i) Holdings shall be obligated to pay promptly the full amount of the Holdings
Current Amount Payments from and after any failure of the Borrower or its
subsidiaries to make payment on account of the Holdings Guaranteed Obligations
(to the extent of such failure) until the final payment in full of all Holdco
Guaranteed Obligations, including in the event that such payment occurs after
the stated maturity date of any Holdco Guaranteed Obligations and (ii) so long
as there has been no Holdco Guaranty Breach, neither the Trustee nor any
Guaranteed Party shall seek to require Holdings to pay any principal amount of
the Holdco Guaranteed Obligations until the Exhaustion of Remedies Date and
Holdings shall not be obligated to pay any principal amount of the Holdco
Guaranteed Obligations until the Exhaustion of Remedies Date.

(b) So long as there has been no Holdco Guaranty Breach, all Borrower
Distributions shall be credited against, and applied to reduce, the principal
amount of the Holdco Guaranteed Obligations; provided that if any such payments
are required to be disgorged or recharacterized as something other than a
payment or distribution in respect of principal, the amount previously so
credited against the principal amount of the Holdco Guaranteed Obligations shall
be reversed and such payment and reduction of the principal amount of the Holdco
Guaranteed Obligations by reason of such payment shall be deemed not to have
been made. In the event that any such payments are so credited against, and
applied to reduce, the outstanding principal amount of the Holdco Guaranteed
Obligations, interest shall cease to accrue on the amount of such principal
reduction; provided that in the event that any such credit is thereafter
reversed, the amount of interest which would have accrued on the amount so
reversed and the reduction of the principal amount deemed not to have been made
(at the non-default rate of interest due thereon) shall be added to the amount
of such Holdings Guaranteed Obligations and such interest shall be immediately
due and payable without any further action on the part of any Person.

(c) Holdings’ failure to pay the principal amount of the Holdco Guaranteed
Obligations on the first Business Day after the Principal Payment Date, less any
Borrower Distributions actually received as of 11:59 p.m. on the Principal
Payment Date, shall constitute a Holdco Guaranty Breach, and upon the occurrence
of a Holdco Guaranty Breach the full amount of the Holdco Guaranteed Obligations
shall be immediately due and payable, without regard to any credit described in
paragraph 3(b) above; provided that in no event shall the Guaranteed Parties
receive more than payment in the full amount of the Holdco Guaranteed
Obligations, and the Guaranteed Parties shall immediately turn over to Holdings
any amounts received from Holdings in excess of the Holdco Guaranteed
Obligations (other than, for the avoidance of doubt, any consideration that has
been taken into account in determining that the Holdco Guaranteed Obligations
have been irrevocably paid in full, including non-cash consideration valued in
accordance with paragraph 4).

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(d) Upon a Holdco Guaranty Breach, the full amount of the Holdco Guaranteed
Obligations shall be immediately due and payable, without regard to any credit
described in paragraph 3(b) above, and the Trustee and any Guaranteed Party
shall be permitted to immediately seek to enforce any remedies under this
Agreement or applicable law; provided that in no event shall the Guaranteed
Parties receive more than payment in the full amount of the Holdco Guaranteed
Obligations, and the Guaranteed Parties shall immediately turn over to Holdings
any amounts received from Holdings in excess of the Holdco Guaranteed
Obligations (other than, for the avoidance of doubt, any consideration that has
been taken into account in determining that the Holdco Guaranteed Obligations
have been irrevocably paid in full, including non-cash consideration valued in
accordance with paragraph 4).

(e) A Holdco Covenant Breach shall constitute an “event of default” under the
Holdco Guaranteed Loans and the Indenture.

(f) For the avoidance of doubt, with respect to any Retained Proceeds, (i) no
Retained Proceeds shall be subject to any turn-over to Holdings, (ii) no
Retained Proceeds shall be deemed a Borrower Distribution and (iii) in
determining whether Holdco Guaranteed Obligations have been paid in full, no
Retained Proceeds shall be (A) taken into account for purposes of valuing any
Borrower Distributions (with all Borrower Distributions not constituting cash
being valued in accordance with paragraph 4 and not subject to adjustment
thereafter) or (B) applied to further reduce the amount of outstanding Holdco
Guaranteed Obligations. For purposes of this paragraph 3(f), “Retained Proceeds”
shall mean anything received on account of, or in exchange for, any non-cash
Retained Distribution. “Retained Distributions” shall mean all Borrower
Distributions that are received by the Guaranteed Parties and that are not
subject to a turn-over to Holdings pursuant to the last sentence of the
definition of “Borrower Distributions” or paragraph 3(c) or paragraph 3(d)
hereof.

4. Valuation of Borrower Distributions.

(a) Borrower Plan. The value of Borrower Distributions (other than cash)
received in connection with a Borrower Plan shall equal the value of such
property as determined by or ascribed in the Borrower Plan on the date the
Borrower Plan is confirmed by the bankruptcy court.

(b) Borrower Distributions in Chapter 7. The value of Borrower Distributions
(other than cash) received in connection with a case under chapter 7 of the
Bankruptcy Code shall equal the value of such property as agreed by Borrower and
Noteholders holding First Lien Notes representing a majority of the principal
balance of all outstanding First Lien Notes of each issue of First Lien Notes.
If Borrower and Noteholders are unable to agree to a value of such consideration
within 10 Business Days of receipt by Noteholders of such consideration,
Borrower and the Trustee shall submit the dispute to binding arbitration for the
determination of such value. The determination of such value will be decided by
binding arbitration pursuant to the [Commercial Arbitration Rules promulgated by
the American Arbitration Association] before a single arbitrator who shall
conduct the arbitration in New York, New York and who shall apply

--------------------------------------------------------------------------------

New York law. Borrower and the Trustee shall each submit a written proposed
value of such consideration (which submissions shall contain such party’s
computation of such valuation and reasonable supporting materials) not later
than 10 days following the engagement of the arbitrator. The arbitrator shall
have the authority only to choose one of the two values submitted as the final
value of such consideration. Borrower and the Trustee shall instruct the
Arbitrator to issues its decision within 15 days of the parties’ submissions of
value.

(c) Borrower Distributions in Out of Court Restructuring. The value of Borrower
Distributions (other than cash) received in connection with an out of court
restructuring shall equal the value of such property as agreed by Borrower and
Noteholders holding First Lien Notes representing a majority of the principal
balance of all outstanding First Lien Notes of each issue of First Lien Notes.
If Borrower and Noteholders are unable to agree to a value of such consideration
within 10 Business Days of consummation of such restructuring or reorganization,
Borrower and the Trustee shall submit the dispute to binding arbitration for the
determination of such value in accordance with the arbitration process described
in paragraph 4(b).

(d) Borrower Distributions in Foreclosure. The value of Borrower Distributions
(other than cash) received in connection with the consummation of a foreclosure
proceeding shall equal the value of such property as agreed by Borrower and
Noteholders holding First Lien Notes representing a majority of the principal
balance of all outstanding First Lien Notes of each issue of First Lien Notes .
If Borrower and Noteholders are unable to agree to a value of such consideration
within 10 Business Days of consummation of such foreclosure, Borrower and the
Trustee shall submit the dispute to binding arbitration for the determination of
such value in accordance with the arbitration process described in paragraph
4(b).

5. No Limitations, Etc. (a) (a) Except for termination or release of Holdings’
obligations hereunder as expressly provided for in paragraph 27 and subject to
paragraph 3, the obligations of Holdings hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Holdco Guaranteed Obligations, the Holdco Guaranteed Secured Obligations or
otherwise (other than defense of payment or performance upon the payment in full
of all Holdco Guaranteed Obligations and the Holdco Guaranteed Secured
Obligations). Without limiting the generality of the foregoing, subject to
paragraph 3, the obligations of Holdings hereunder shall not be discharged or
impaired or otherwise affected by:

(i) any rescission, waiver, amendment or modification of, or any release from
any of the terms or provisions of, any Loan Document or any other agreement;

(ii) the failure to perfect any security interest in, or the exchange,
substitution, release or any impairment of, any security held by the Trustee or
any other Secured Party for the Holdco Guaranteed Obligations or the Holdco
Guaranteed Secured Obligations;

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(iii) any default, failure or delay, willful or otherwise, in the performance of
the Holdco Guaranteed Obligations or the Holdco Guaranteed Secured Obligations;

(iv) any other act or omission that may or might in any manner or to any extent
vary the risk of Holdings or otherwise operate as a discharge of Holdings as a
matter of law or equity (other than the payment in full in cash of all the
Holdco Guaranteed Obligations and the Holdco Guaranteed Secured Obligations );

(v) any illegality, lack of validity or lack of enforceability of any Holdco
Guaranteed Obligation or any of the Holdco Guaranteed Secured Obligations;

(vi) any change in the corporate existence, structure or ownership of the
Borrower, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower or its assets or any resulting release or
discharge of any Holdco Guaranteed Obligation or any Holdco Guaranteed Secured
Obligation (other than the payment in full in cash of all of the Holdco
Guaranteed Obligations and the Holdco Guaranteed Secured Obligations);

(vii) the existence of any claim, set-off or other rights that Holdings may have
at any time against the Borrower, the Trustee, or any other corporation or
person, whether in connection herewith or any unrelated transactions, provided
that nothing herein will prevent the assertion of any such claim by separate
suit or compulsory counterclaim following the payment in full of all Holdco
Guaranteed Obligations and the Holdco Guaranteed Secured Obligations; and

(viii) any other circumstance (including without limitation, any statute of
limitations) or any existence of or reliance on any representation by the
Trustee that might otherwise constitute a defense to, or a legal or equitable
discharge of, the Borrower or Holdings or any other guarantor or surety.

Subject to paragraph 3, Holdings expressly authorizes the Trustee on behalf of
the Secured Parties to take and hold security for the payment and performance of
the Holdco Guaranteed Secured Obligations, to exchange, waive or release any or
all such security (with or without consideration), to enforce or apply such
security and direct the order and manner of any sale thereof in their sole
discretion or to release or substitute any one or more other guarantors or
obligors upon or in respect of the Holdco Guaranteed Secured Obligations, all
without affecting the obligations of Holdings hereunder.

(b) To the fullest extent permitted by applicable law, subject to paragraph 3,
Holdings waives any defense based on or arising out of any defense of any other
Loan Party or the unenforceability of the Holdco Guaranteed Obligations or the
Holdco Guaranteed Secured Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any other Loan Party, other than
the payment in full in cash of all the Holdco Guaranteed Obligations and the
Holdco Guaranteed Secured Obligations (other than contingent or unliquidated
obligations or liabilities). Subject to paragraph 3, the Trustee and the other
Secured Parties may, at their election, foreclose on any security held by one or
more of them by one or

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more judicial or nonjudicial sales, accept an assignment of any such security in
lieu of foreclosure, compromise or adjust any part of the Holdco Guaranteed
Obligations or the Holdco Guaranteed Secured Obligations, make any other
accommodation with any other Loan Party or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of Holdings hereunder except to the extent the Holdco
Guaranteed Obligations and the Holdco Guaranteed Secured Obligations (other than
contingent or unliquidated obligations or liabilities) have been paid in full in
cash. To the fullest extent permitted by applicable law, subject to paragraph 3,
Holdings waives any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of Holdings
against any other Loan Party, as the case may be, or any security.

6. Reinstatement. Holdings agrees that its guarantee and pledges of Collateral
hereunder shall continue to be effective or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any Holdco Guaranteed Obligation
or any Holdco Guaranteed Secured Obligation is rescinded or must otherwise be
restored by the Trustee or any other Secured Party upon the bankruptcy or
reorganization of the Borrower or any other Loan Party or otherwise. For the
avoidance of doubt, the bankruptcy, insolvency, or dissolution of, or the
commencement of any case or proceeding under any bankruptcy, insolvency, or
similar law in respect of, either the Borrower or any of its subsidiaries shall
(i) not require Holdings to make any payment under this Agreement until all of
the conditions in paragraph 3 (to the extent otherwise applicable) have been
satisfied and (ii) not constitute a Holdco Event of Default hereunder.

7. Indemnity, Subrogation and Subordination.

(a) Indemnity and Subrogation. In addition to all such rights of indemnity and
subrogation as Holdings may have under applicable law (but subject to paragraph
7(b)), the Borrower agrees that (i) in the event a payment shall be made by
Holdings under this Agreement in respect of any Holdco Guaranteed Obligation,
the Borrower shall indemnify Holdings for the full amount of such payment and
Holdings shall be subrogated to the rights of the person to whom such payment
shall have been made to the extent of such payment and (ii) in the event any
assets of Holdings shall be sold pursuant to this Agreement or any other
Security Document to satisfy in whole or in part a Holdco Guaranteed Obligation,
the Borrower shall indemnify Holdings in an amount equal to the greater of the
book value or the fair market value of the assets so sold. Notwithstanding the
above, Holdings shall not exercise any rights which it may have acquired by way
of subrogation under this Agreement, by any payment made hereunder or otherwise,
nor shall Holdings seek any indemnification or reimbursement from Borrower in
respect of payments made by Holdings hereunder, unless and until all of the
Holdco Guaranteed Obligations and all of the Holdco Guaranteed Secured
Obligations (other than in respect of claims owed to Holdings) shall have been
paid in full and if any payment shall be made to Holdings on account of such
subrogation or reimbursement rights at any time when the Holdco Guaranteed
Obligations or the Holdco Guaranteed Secured Obligations shall not have been
finally and irrevocably paid and discharged in full, all such amounts so paid
shall forthwith be paid to the Trustee to be credited and applied against the
Holdco Guaranteed Obligations or the Holdco Guaranteed Secured Obligations, as
appropriate. If, pursuant to applicable law, Holdings, by payment or otherwise,
becomes subrogated to all or any of the rights of the Trustee

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or the Guaranteed Parties under any of the Holdco Guaranteed Obligations or the
Secured Parties under any of the Holdco Guaranteed Secured Obligations, the
rights of the Trustee or the Guaranteed Parties or the Secured Parties to which
Holdings shall be subrogated shall be accepted by Holdings “as is” and without
any representations or warranty of any kind by the Trustee or the Guaranteed
Parties or the Secured Parties, express or implied, with respect to the
legality, value, validity or enforceability of any of such rights, or the
existence, availability, value, merchantability, or fitness for any particular
purpose of any collateral and shall be without recourse to the Trustee or the
Guaranteed Parties or the Secured Parties.

(b) Subordination. Notwithstanding any provision of this Agreement to the
contrary, all rights of Holdings under paragraph 7(a) and all other rights of
indemnity, contribution or subrogation of Holdings under applicable law or
otherwise shall be fully subordinated to the payment in full in cash of the
Holdco Guaranteed Obligations and the Holdco Guaranteed Secured Obligations
(other than contingent or unliquidated obligations or liabilities).

8. Information. Holdings assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower and each other
Loan Party, and of all other circumstances bearing upon the risk of nonpayment
of the Holdco Guaranteed Obligations and the Holdco Guaranteed Secured
Obligations and the nature, scope and extent of the risks that Holdings assumes
and incurs hereunder, and agrees that none of the Trustee or the other
Guaranteed Parties or other Secured Parties will have any duty to advise
Holdings of any information known to the Trustee or the other Guaranteed Parties
or other Secured Parties or any of them regarding such circumstances or risks.

9. [Reserved].

10. Pledge, Grant of Security Interest. Holdings hereby transfers and grants to
the Trustee, for the benefit of the Secured Parties, a first-priority security
interest in all of Holdings’ right, title and interest in the Collateral, as
collateral security for the Holdco Guaranteed Secured Obligations.

11. Powers; Endorsements. Concurrently with the delivery to the Trustee of each
certificate representing Pledged Equity, Holdings shall deliver an undated stock
power covering such certificate, duly executed in blank by Holdings.
Concurrently with the delivery to the Trustee of each promissory note or other
instrument representing Pledged Debt Securities, Holdings shall deliver an
undated note power, duly executed in blank by Holdings.

12. Representations and Warranties. Holdings represents and warrants to the
Secured Parties that as of the date hereof:

(a) The Pledged Equity includes all of the issued and outstanding Equity
Interests of the Borrower and the other Subsidiaries of Holdings listed on
Schedule III hereto issued to Holdings and in each case represents the
percentage of the outstanding Equity Interests of the Borrower and such other
Subsidiaries indicated on such Schedule III.

(b) All the shares of Pledged Equity have been duly and validly issued and are
fully paid and nonassessable.

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(c) Holdings is the record and beneficial owner of, and has good title to, the
Pledged Securities to be pledged by Holdings, free of any and all Liens or
options in favor of, or claims of, any other Person, except the Lien created by
this Agreement and by the Second Lien Guaranty and Pledge Agreement.

(d) Upon delivery of any certificates or promissory notes or other instruments
representing Pledged Securities duly endorsed in blank and the completion of the
filings specified on Schedule I hereto, the Lien granted pursuant to this
Agreement constitutes a valid, perfected and enforceable first priority Lien on
the Collateral in which a security interest may be perfected by filing a
financing statement under the Uniform Commercial Code in favor of the Trustee
or, with respect to such certificates, notes or other instruments, by control by
the Trustee, in each case for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing and subject to any Liens existing on the date hereof or arising by
operation of law.

(e) On the date hereof, Holdings’ jurisdiction of organization, organizational
identification number from the jurisdiction of organization (if any), Federal
Taxpayer Identification Number, and the location of Holdings’ chief executive
office or sole place of business, are as specified on Schedule IV.

(f) Holdings (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (ii) has the power and
authority, and the legal right, to own and operate its property, lease the
property it operates as lessee and conduct the business in which it is currently
engaged, (iii) is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure so to qualify, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on Holdings.

(g) Holdings has the power and authority to make, deliver and perform this
Agreement and has taken all necessary organizational action to authorize the
execution, delivery and performance of this Agreement. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, other than (i) the
filing of Uniform Commercial Code financing statements and (ii) in respect of
Gaming Laws. This Agreement has been duly executed and delivered on behalf of
Holdings. This Agreement constitutes a legal, valid and binding obligation of
Holdings enforceable against Holdings in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).

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(h) The execution, delivery and performance of this Agreement by Holdings
(i) will not violate any applicable requirement of law or any contractual
obligation of Holdings where any such violation, individually or in the
aggregate, would reasonably be expected to have a material adverse effect on
Holdings and (ii) will not result in, or require, the creation or imposition of
any Lien on any of their respective properties pursuant to any requirement of
law or any such contractual obligation (other than the Liens in favor of the
Secured Parties and the Liens securing the Second Lien Guaranty and Pledge
Agreement).

(i) On the Closing Date:

(A) immediately after giving effect to the transactions that occur on the
Closing Date, (i) the fair value of the assets of Holdings, at a fair valuation,
will exceed the debts and liabilities, direct, subordinated, contingent or
otherwise, of Holdings; (ii) the present fair saleable value of the property of
Holdings will be greater than the amount that will be required to pay the
probable liability of Holdings on its debts and other liabilities, direct,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) Holdings will be able to pay its debts and
liabilities, direct, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) Holdings will not have
unreasonably small capital with which to conduct the businesses in which it is
engaged as such businesses are now conducted and are proposed to be conducted
following the Closing Date; and

(B) immediately after giving effect to the transactions that occur on the
Closing Date, Holdings does not intend to, and Holdings does not believe that it
will, incur debts beyond its ability to pay such debts as they mature, taking
into account the timing and amounts of cash to be received by it and the timing
and amounts of cash to be payable on or in respect of its Indebtedness.

13. Covenants. Holdings covenants and agrees with the Trustee for the benefit of
the Secured Parties that, from and after the date of this Agreement until the
date of its termination pursuant to paragraph 27(a):

(a) If Holdings shall, as a result of its ownership of the Collateral, become
entitled to receive or shall receive any certificate (including, without
limitation, any certificate representing a dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), promissory note or
other instrument, option or rights, whether in addition to, in substitution of,
as a conversion of, or in exchange for any of the Collateral, or otherwise in
respect thereof, subject to applicable Gaming Laws, Holdings shall promptly
deliver the same forthwith to the Trustee in the exact form received, duly
indorsed by Holdings to the Trustee, if required, together with an undated power
or endorsement, as appropriate, covering such certificate, note or instrument
duly executed in blank by Holdings, to be held by the Trustee, subject to the
terms hereof, as additional collateral security for the Holdco Guaranteed
Secured Obligations. Any sums paid upon or in respect of the Collateral upon the
liquidation or dissolution of a Pledged Entity shall

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be paid over to the Trustee to be held by it hereunder as additional collateral
security for the Holdco Guaranteed Secured Obligations, and in case any
distribution of capital shall be made on or in respect of the Collateral or any
property shall be distributed upon or with respect to the Collateral pursuant to
the recapitalization or reclassification of the capital of a Pledged Entity or
pursuant to the reorganization thereof, the property so distributed shall be
delivered to the Trustee to be held by it hereunder as additional collateral
security for the Holdco Guaranteed Secured Obligations.

(b) At any time and from time to time, upon the written request of the Trustee,
and at the sole expense of Holdings, Holdings will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Authorized Representative may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted.

(c) Holdings agrees to pay, and to save the Trustee and the Secured Parties
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.

(d) Holdings agrees promptly (and in any event within 10 days thereof, or such
longer period of time as may be agreed by the Trustee) to notify the Trustee in
writing of any change (i) in its legal name, (ii) in its identity or type of
organization or corporate structure, (iii) in its Federal Taxpayer
Identification Number or organizational identification number or (iv) in its
jurisdiction of organization. Holdings agrees promptly to provide the Trustee
with certified organizational documents reflecting any of the changes described
in the immediately preceding sentence. Holdings agrees not to effect or permit
any change referred to in the first sentence of this paragraph (a) unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Trustee to continue at all times following such change
to have a valid, legal and perfected first priority security interest in all the
Collateral, for the benefit of the Secured Parties.

(e) Subject to the rights of Holdings hereunder to dispose of Collateral,
Holdings shall, at its own expense, use commercially reasonable efforts to
defend title to the Collateral against all persons and to defend the security
interest of the Trustee, for the benefit of the Secured Parties, in the
Collateral and the priority thereof against any Lien that is not permitted
hereunder.

(f) Holdings agrees, at its own expense, to execute, acknowledge, deliver and
cause to be duly filed all such further instruments and documents and take all
such actions as the Trustee may from time to time reasonably request to better
assure, preserve, protect and perfect the security interest and the rights and
remedies created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement and the granting of
the security interest and the filing of any financing statements or other
documents in connection herewith or therewith.

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(g) (i) No holder of the Borrower’s bank or bond debt outstanding on the Closing
Date or incurred thereafter (other than the Holdco Guaranteed Obligations
hereunder and the Holdco Guaranteed Secured Obligations hereunder) or any holder
of any other Indebtedness3 guaranteed by Holdings shall receive a guaranty from
Holdings of such debt that includes terms more favorable to such holder
(including any additional collateral for such guaranty) than the guaranty of the
Holdco Guaranteed Obligations outstanding on the Closing Date provided by
Holdings hereunder, nor (ii) shall any holder of Indebtedness of another person
have pledged to it by Holdings as collateral therefor any asset directly owned
by Holdings which is not also pledged as Collateral for the guaranty provided by
Holdings hereunder (on terms for such pledge at least as favorable to the
Secured Parties hereunder as to such holder) (any such case an “MFN Guaranty”),
unless, in any such case, in the case of (i) above, the Holdco Guaranteed
Obligations outstanding on the Closing Date are simultaneously provided with
guaranty terms (including any additional collateral for such guaranty)
substantially consistent with such more favorable terms, or, in the case of
(ii) above, the Holdco Guaranteed Secured Obligations outstanding on the Closing
Date are simultaneously provided with a pledge on substantially consistent terms
of such collateral as Collateral hereunder. It is understood and agreed that the
terms of the Second Lien Guaranty and Pledge Agreement in effect on the Closing
Date are not more favorable to the holders thereof than the terms of the
guaranty and the collateral pledge hereunder; provided, that any amendment or
modification of such Second Lien Guaranty and Pledge Agreement after the Closing
Date shall be subject to the provisions of this paragraph (g), to the extent
otherwise applicable. If Holdings enters into any such MFN Guaranty in violation
of this paragraph (g), then, without waiving any default arising as a result of
the failure thereof or any rights or remedies of the Trustee or the other
Secured Parties with respect thereto, this Agreement shall automatically be
deemed amended to the extent necessary (x) in the case of (i) above, to include
such more favorable terms (including any additional collateral for such
guaranty) set forth in such MFN Guaranty or (y) in the case of (ii) above, to
provide a pledge on substantially consistent terms of such collateral as
additional Collateral hereunder.

(h) [NTD: Remaining covenants to be incorporated based on the Covenants Term
Sheet attached hereto.]

14. Dividends; Voting Rights; Interest Payments. Unless a Holdco Event of
Default shall have occurred and be continuing and subject to paragraph 3 above,
Holdings shall be permitted (i) to receive and retain, subject to the Trustee’s
security interest in such Proceeds, and (ii) to utilize, if not in violation of
this Agreement, free and clear of the Lien of this Agreement, all distributions
made in respect of the Pledged Equity and to exercise all voting and other
consensual rights and powers inuring to an owner of such Pledged Equity,
provided, that such rights and powers shall not be exercised in any manner that
could materially and adversely affect the rights and remedies of any of the
Trustee or the other Secured Parties under this Agreement, the Indenture or any
other Loan Document or the ability of the Trustee or other Secured Parties to
exercise the same.

 

3  NTD: To be defined as in the covenants of the definitive Guaranty and Pledge
Agreement.

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15. Rights of the Secured Parties and the Trustee. (a) If a Holdco Event of
Default shall occur and be continuing, subject to applicable Gaming Laws,
(i) the Trustee shall have the right to receive any and all distributions paid
in respect of the Pledged Equity and make application thereof to the Holdco
Guaranteed Secured Obligations in a manner consistent with paragraph 16(b)
(other than cash distributions made to Holdings permitted by Section [6.06(b)]4
of the Credit Agreement], without duplication, which such distributions may be
received and retained by Holdings), subject to the Trustee’s security interest
in such Proceeds) and (ii) all shares of the Pledged Equity shall be registered
in the name of the Trustee or its nominee, and the Trustee or its nominee may
thereafter exercise (A) all voting and other consensual rights and powers
pertaining to such shares of the Pledged Equity at any meeting of the board of
directors of the Borrower or the applicable Pledged Entity or otherwise and
(B) any and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to such shares of the Pledged Equity as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Equity upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the organizational structure of the Borrower or the applicable Pledged Entity,
or upon the exercise by Holdings or the Trustee of any right, privilege or
option pertaining to such shares of the Pledged Equity, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Equity
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it and except for
its gross negligence or willful misconduct, but the Trustee shall have no duty
to Holdings to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.

(b) Neither the Trustee nor any Secured Party shall be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, except to the extent that such failure constitutes gross
negligence or willful misconduct, nor shall the Trustee be under any obligation
to sell or otherwise dispose of any Collateral upon the request of Holdings or
any other Person or, subject to paragraph 3, to take any other action whatsoever
with regard to the Collateral or any part thereof.

16. Remedies.

(a) In the event of a Holdco Event of Default, in addition to any and all other
rights and remedies at law or in equity, the Trustee shall have the right to
specific performance and injunctive or other equitable relief in respect of its
rights under this Agreement, and all such rights and remedies shall be
cumulative. The parties hereto agree that the remedies at law for any such
breach or threatened breach, including monetary damages, are inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.

(b) If a Holdco Event of Default shall occur and be continuing, subject to
paragraph 3, the Trustee, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the Holdco
Guaranteed Secured

 

4 

[NTD: Reference to tax/overhead distribution carveout in OpCo Credit Agreement.]

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Obligations, all rights and remedies of a secured party under the New York UCC
or applicable law. Subject to paragraph 3, the Trustee, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon
Holdings, the Borrower, or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any exchange
or broker’s board or office of the Trustee or any Secured Party or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Trustee or any Secured Party shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in Holdings, which right or
equity is hereby waived or released. The Trustee shall hold any Proceeds
hereunder for the benefit of the Secured Parties as collateral security for the
Holdco Guaranteed Secured Obligations (whether matured or unmatured), and/or the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, may then or at any time thereafter, in the sole discretion
of the Trustee, be applied by the Trustee against the Holdco Guaranteed Secured
Obligations then due and owing, subject to the provisions of Holdco
Intercreditor Agreement.5

To the extent permitted by applicable law, subject to paragraph 3, Holdings
waives all claims, damages and demands it may acquire against the Trustee or any
Secured Party arising out of the lawful exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 calendar days before such sale or other disposition.

17. Registration Rights; Private Sales. (a) If the Trustee shall determine to
exercise its right to sell any or all of the Pledged Equity pursuant to
paragraph 16(b) hereof, and if in the opinion of the Trustee it is necessary or
advisable to have the Pledged Equity or that portion thereof to be sold,
registered under the provisions of the Securities Act of 1933, as amended (the
“Securities Act”), subject to applicable Gaming Laws, Holdings will use its
commercially reasonable efforts to take or to cause the applicable Pledged
Entities to take such action and prepare, distribute and/or file such documents,
as required or advisable in the reasonable opinion of counsel for the Trustee to
permit the public sale of such Pledged Equity.

(b) Holdings recognizes that the Trustee may be unable to effect a public sale
of any or all the Pledged Equity by reason of certain prohibitions contained in
the Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers that will be obliged to agree, among other

 

 

5 

Holdco Intercreditor Agreement to include relevant waterfall provisions.

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things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Holdings acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Trustee shall be under no
obligation to delay a sale of any of the Pledged Equity for the period of time
necessary to permit a Pledged Entity to register such securities for public sale
under the Securities Act, or under applicable state securities laws, even if
such Pledged Entity would agree to do so.

(c) Holdings further agrees to use its commercially reasonable efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Equity pursuant to this paragraph 17
valid and binding and in compliance with any and all other applicable
Requirements of Law. Holdings will bear all costs and expenses of carrying out
its obligations under this paragraph 17. Holdings acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
paragraph 17 only and that such failure would not be adequately compensable in
damages and, therefore, agrees that its agreements contained in this paragraph
17 may be specifically enforced.

18. Limitation on Duties Regarding Collateral. The Trustee’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Trustee deals with similar
securities and property for its own account. Neither the Trustee nor any Secured
Party nor their respective directors, officers, employees or agents shall be
liable to Holdings for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so (except to the extent the same
constitutes gross negligence or willful misconduct) or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Holdings or otherwise.

19. Powers Coupled with an Interest. All authorizations and agencies herein
contained with respect to the Collateral are irrevocable and powers coupled with
an interest.

20. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

21. Paragraph Headings; Interpretation. The paragraph headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
Whenever the words “include”, “includes” or “including” are used in this
Agreement they shall be deemed followed by the words “without limitation”.

22. No Waiver; Cumulative Remedies. Neither the Trustee nor any Secured Party
shall by any act (except by a written instrument pursuant to paragraph 23
hereof) be deemed to have waived any right or remedy hereunder. No failure to
exercise, nor any delay in exercising, on the part of the Trustee or any Secured
Party any right, power or privilege

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hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Trustee or such Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.

23. Waivers and Amendments; Successors and Assigns; Governing Law. None of the
terms or provisions of this Agreement may be amended, supplemented or otherwise
modified except by a written instrument executed by Holdings, the Trustee, with
the consent of parties holding a majority in aggregate principal amount of First
Lien Notes of each issue of First Lien Notes (as determined giving effect to
paragraph 38). This Agreement shall be binding upon the successors and assigns
of Holdings and shall inure to the benefit of the Trustee and the Secured
Parties and their respective permitted successors and assigns. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE OF LAW PRINCIPLES.

24. Notices. Notices by the Trustee to Holdings or the Borrower may be given to
such person at its address or transmission number and in the manner as set forth
in Section [9.01(a) of the Indenture] (whether or not then in effect) and all
notices to any holder of obligations under any Other Holdco Guaranteed
Agreements, at its address set forth in the Other Holdco Guaranteed Party
Consent or in the Holdco Intercreditor Agreement, as such address may be changed
by written notice to the Trustee and the Borrower.

25. Holdco Covenant Breach. In the event the Trustee, or Noteholders holding not
less than 25% of the principal amount of the outstanding First Lien Notes of any
issue of First Lien Notes if such Noteholders instruct the Trustee to act and
the Trustee fails to act (or irrevocably confirm that it will so act within the
instructed time period) as so instructed within 1 business day of receipt of
such instruction (as applicable, the “Notice Party”) provides notice to Holdings
of a purported Holdco Event of Default hereunder (other than any failure by
Holdings to make any payment required hereunder, as to which this paragraph 25
shall not apply), Holdings shall have 10 Business Days from the date of such
notice (the “Default Notice”) to inform the Notice Party that Holdings has made
a good faith determination that no such Holdco Event of Default has occurred
(such purported Holdco Event of Default, the “Disputed Default”). If the Notice
Party determines in good faith that such Disputed Default is valid
notwithstanding Holdings’ determination and elects (or is instructed by
Noteholders holding not less than 25% of the outstanding principal amount of the
outstanding Notes of any issue of First Lien Notes) to pursue such Disputed
Default, then Holdings and the Notice Party shall submit to binding arbitration
for a determination of whether the Disputed Default is a Holdco Event of Default
hereunder. The determination of whether such Disputed Default is a Holdco Event
of Default will be decided by binding arbitration pursuant to the [Commercial
Arbitration Rules promulgated by the American Arbitration Association] before a
single arbitrator who shall be mutually acceptable to Holdings and the Notice
Party and who shall conduct the arbitration in New York, New York and who shall
apply New York law. If the arbitrator determines that the Disputed Default is
not a Holdco Event of Default, the Default Notice delivered by the Notice

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Party will be null and void. If the arbitrator determines that the Disputed
Default is a valid Holdco Event of Default (an “Arbitration Decision”), then the
Default Notice will be valid as of the original date of delivery of such Default
Notice. Holdings agrees that during the pendency of any arbitration proceeding
under this paragraph 25, Holdings shall not consummate, and shall cause its
subsidiaries not to consummate, any transaction that is the subject of such
proceeding, or any substantially similar transaction, until the conclusion of
such arbitration proceeding. A breach by Holdings of this paragraph shall not be
subject to the dispute mechanism of this paragraph.

26. Authority of Trustee. Holdings acknowledges that the rights and
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the
Trustee and the Secured Parties, be governed by the Indenture, the Holdco
Intercreditor Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Trustee and Holdings,
the Trustee shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and
neither Holdings nor the Borrower shall be under any obligation, or entitlement,
to make any inquiry respecting such authority.

27. Termination or Release. (a) Subject to paragraph 6 hereof, this Agreement,
the pledges and guarantees made herein, the Liens in the Collateral created
hereby and all other security interests granted hereby, shall automatically
terminate and/or be released all without delivery of any instrument or
performance of any act by any party, and all rights to the Collateral shall
revert to Holdings, as of the date when all the Holdco Guaranteed Obligations,
with respect to the guaranty by Holdings, and the date when all the Holdco
Guaranteed Secured Obligations, with respect to the pledge, liens and all other
obligations (in each case other than contingent or unliquidated obligations or
liabilities not then due) have been paid in full in cash.

(b) (i) Upon any sale or other transfer by Holdings of any Collateral that is
not prohibited by this Agreement, or (ii) upon the effectiveness of any written
consent to the release of the security interest granted hereby in any Collateral
by the Trustee, with the consent of Noteholders holding a majority in aggregate
principal amount of outstanding First Lien Notes of each issue of First Lien
Notes (determined giving effect to paragraph 38), and, after the termination of
the Indenture and the Holdco Intercreditor Agreement, [any equivalent provision
of any applicable Other Holdco Guaranteed Agreement], the security interest in
such Collateral shall be automatically released, all without delivery of any
instrument or performance of any act by any party.

(c) In connection with any termination or release pursuant to paragraph (a) or
(b) of this paragraph 27, the Trustee shall execute and deliver to Holdings, at
Holdings’ expense, all documents that Holdings shall reasonably request to
evidence such termination or release (including, without limitation, UCC
termination statements), and will duly assign and transfer to Holdings, such of
the Pledged Equity that may be in the possession of the Trustee and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. Any execution and delivery of documents pursuant to this paragraph 27
shall be without recourse to or warranty by the Trustee.

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28. Financing Statements. Holdings hereby irrevocably authorizes the Trustee at
any time and from time to time to file in any relevant jurisdiction any initial
financing statements with respect to the Collateral or any part thereof and
amendments thereto that contain the information required by Article 9 of the New
York UCC of each applicable jurisdiction for the filing of any financing
statement or amendment, including (i) whether Holdings is an organization, the
type of organization and any organizational identification number issued to
Holdings and (ii) a description of collateral that describes such property in
any other manner as the Trustee may reasonably determine is necessary or
advisable to ensure the perfection of the security interest in the Collateral.

29. Commercial Tort Claims. If Holdings shall at any time hold or acquire a
Commercial Tort Claim in an amount reasonably estimated (by Holdings) to exceed
$[5,000,000], Holdings shall promptly notify the Trustee thereof in a writing
signed by Holdings, including a summary description of such claim or if Trustee
shall at any time notify Holdings of the existence of such a Commercial Tort
Claim, Holdings shall grant to the Trustee in writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement.

30. Compliance with Gaming Laws. Notwithstanding anything to the contrary set
forth in this Agreement or any other Loan Document, the Trustee, on behalf of
the Secured Parties, acknowledges and agrees that:

(a) the exercise of its rights and remedies under this Agreement is subject to
the mandatory provisions of the Gaming Laws;

(b) the pledge of the Pledged Equity, and any restrictions on the transfer of
and agreements not to encumber the Pledged Equity or other equity securities of
a Pledged Entity, pursuant to this Agreement and any other Loan Documents, are
subject to the prior approval of the Nevada and Iowa Gaming Authorities,
respectively, and this Agreement, the pledge of the Pledged Equity and any
future amendment hereof will not be effective without the prior approval of such
Nevada and Iowa Gaming Authorities, which Holdings shall use its commercially
reasonable efforts to obtain, and no certificates evidencing the Pledged Equity
may be delivered to the Trustee until such approval has been obtained;

(c) in the event that the Trustee exercises one or more of the remedies set
forth in this Agreement with respect to the Pledged Equity, including without
limitation, foreclosure or transfer of any interest therein (except back to
Holdings), the exercise of voting and consensual rights, and any other resort to
or enforcement of the security interest in the Collateral, such action will
require the separate and prior approval of the Nevada and Iowa Gaming
Authorities unless such licensing requirement is waived thereby;

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(d) the Trustee, and any custodial agent of Trustee in the State of Nevada or in
the State of Iowa, will be required to comply with the conditions, if any,
imposed by the Nevada and Iowa Gaming Authorities, respectively, in connection
with their approval of the pledge granted hereunder, and the requirements that
the Trustee or its custodial agent maintain the certificates evidencing the
Pledged Equity at a location in Nevada designated to the Nevada Gaming
Authorities, and that the Trustee or its custodial agent permit agents or
employees of the Nevada Gaming Authorities to inspect such certificates upon
request during normal business hours;

(e) neither the Trustee nor any custodial agent of the Trustee will be permitted
to surrender possession of any Pledged Equity to any person other than Holdings
without the prior approval of the Nevada and Iowa Gaming Authorities or as
otherwise permitted by the Gaming Laws;

(f) any approval of the Nevada and Iowa Gaming Authorities of this Agreement, or
any amendment hereto, does not constitute approval, either express or implied,
of the Trustee to take any actions provided for in this Agreement, for which
separate approval by the Nevada and Iowa Gaming Authorities may be required by
the Gaming Laws; and

(g) the Trustee, the Secured Parties and their respective successors and assigns
are subject to being called forward by the Nevada and Iowa Gaming Authorities,
in their sole and absolute discretion, for licensing or a finding of suitability
in order to remain entitled to the benefits of this Agreement and the other Loan
Documents.

31. Limitation on Rights and Remedies of Trustee and Holdings. Notwithstanding
anything in this Agreement to the contrary, the Trustee, on behalf of the
Secured Parties, and Holdings agree that they shall comply with all applicable
laws and all applicable rules and regulations of the Illinois Gaming Authority,
including Illinois Gaming Laws, in connection with their exercise of rights and
remedies hereunder, including, without limitation, foreclosure or transfer of
any interest in the Pledged Equity (except back to Holdings) or voting (or
otherwise taking control of) any interest in the Pledged Equity. As and when
required, the Trustee, on behalf of the Secured Parties, shall seek and obtain
all approvals, licenses and consents from the Illinois Gaming Authority required
in connection with the exercise of any right or remedy prior to the exercise
thereof.

32. Counterparts. This Agreement may be executed in any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. Delivery of an executed signature page
of this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.

33. Subject to Holdco Intercreditor Agreement. Notwithstanding anything herein
to the contrary, after the entry into a Holdco Intercreditor Agreement (i) the
liens and security interests granted on Collateral to the Trustee pursuant to
this Agreement are expressly subject to the Holdco Intercreditor Agreement and
(ii) the exercise of any right or remedy by the Trustee with respect to
Collateral is subject to the limitations and provisions of the Holdco
Intercreditor Agreement. In the event of any conflict between the terms of the
Holdco Intercreditor Agreement and the terms of this Agreement with respect to
Collateral, the terms of the Holdco Intercreditor Agreement shall govern.

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34. [Holdco Guarantee of Other Guaranteed Obligations. On or after the date
hereof and so long as such obligations are permitted to be guaranteed by
Holdings pursuant to paragraph 13(    ) of this Agreement, Holdings may from
time to time designate obligations in respect of Indebtedness to be guaranteed
and, if applicable, secured on a pari passu basis with the Holdco Guaranteed
Obligations as Holdco Guaranteed Other Obligations hereunder by delivering to
the Trustee and each Authorized Representative (a) a certificate signed by a
Responsible Officer of Holdings (i) identifying the obligations so designated
and the aggregate principal amount or face amount thereof on such date and the
Guaranteed Amount in respect thereof, (ii) stating that such obligations are
designated as Holdco Guaranteed Other Obligations for purposes hereof,
(iii) representing that such designation of such obligations as Holdco
Guaranteed Other Obligations complies with the terms of this Agreement and
(iv) specifying the name and address of the Authorized Representative for such
obligations and (b) a fully executed Other Holdco Guaranteed Party Consent (in
the form attached as Exhibit I). The Trustee and each Authorized Representative
agree that upon the satisfaction of all conditions set forth in the preceding
sentence, the Trustee shall act as agent under and subject to the terms of the
Security Documents for the benefit of all Secured Parties, including without
limitation, any Secured Parties that hold any such Holdco Guaranteed Other
Secured Obligations, and the Trustee and each Authorized Representative agree to
the appointment, and acceptance of the appointment, of the Trustee as agent for
the holders of such Holdco Guaranteed Other Secured Obligations as set forth in
each Other Holdco Guaranteed Party Consent and agree, on behalf of itself and
each Secured Party it represents, to be bound by this Agreement and the Holdco
Intercreditor Agreement.

Notwithstanding anything to the contrary herein or in any Loan Document,
Holdings and the Trustee may, without the consent of any Guaranteed Party, enter
into a supplemental agreement (which may take the form of an amendment, an
amendment and restatement or a supplement of this Agreement) for the limited
purpose of identifying and including such additional obligations as Other Holdco
Guaranteed Obligations and/or Other Holdco Guaranteed Secured Obligations. In
addition, each party hereto agrees that Authorized Representatives of any class
of Holdco Guaranteed Obligations and/or Holdco Guaranteed Secured Obligations,
may enter into intercreditor agreements (or similar arrangements) with
Authorized Representatives of other classes of Holdco Guaranteed Obligations
and/or Holdco Guaranteed Secured Obligations governing the rights, benefits and
privileges as among such classes, as the case may be, in respect of the Holdco
Guaranteed Obligations, including as to application of proceeds of the Holdco
Guaranteed Obligations, voting rights and other terms, in each case so long as
the terms thereof do not violate or conflict with the provisions of this
Agreement.]

35. Application of Gaming Laws. This Agreement and the Other Holdco Guaranteed
Agreements are subject to Gaming Laws. Without limiting the foregoing, the
Secured Parties acknowledge that (i) they are subject to the jurisdiction of the
Gaming Authorities and Liquor Authorities, in their discretion, for licensing,
qualification or findings of suitability or to file or provide other
information, and (ii) all rights, remedies and powers in or under this Agreement
and the Other Holdco Guaranteed Agreements, including with respect to the
Collateral and the ownership and operation of facilities, may be subject to the
jurisdiction of the Gaming Authorities and Liquor Authorities, and may be
exercised only to the extent that the exercise thereof does not violate any
applicable provisions of the Gaming Laws and Liquor Laws and only to the extent
that required approvals, if any, (including prior approvals) are obtained from
the relevant Gaming Authorities and Liquor Authorities.

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36. WAIVER OF JURY TRIAL.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH 36.

37. Jurisdiction, Consent to Service of Process.

(a) Each of the parties hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the exclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in the Borough of
Manhattan, and any appellate court from any thereof (collectively, “New York
Courts”), in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined only in
such New York State or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement in the courts of any
jurisdiction, except that Holdings agrees that (a) it will not bring any such
action or proceeding in any court other than New York Courts (it being
acknowledged and agreed by the parties hereto that any other forum would be
inconvenient and inappropriate in view of the fact that more of the Guaranteed
Parties who would be affected by any such action or proceeding have more
contacts with the State of New York than any other jurisdiction), and (b) in any
such action or proceeding brought against Holdings in any other court, it will
not assert any cross-claim, counterclaim or setoff, or seek any other
affirmative relief, except to the extent that the failure to assert the same
will preclude Holdings from asserting or seeking the same in the New York
Courts.

(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York Courts.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

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(c) Each party hereto irrevocably consents to service of process in the manner
provided for notices in [Section 9.01 of the Indenture] or any equivalent
provision of any Other Holdco Guaranteed Agreement. Nothing in this Agreement
will affect the right of any party hereto to serve process in any other manner
permitted by applicable law.

38. For purposes of determining the requisite consent of Noteholders necessary
under paragraphs 23 and 27(b) of this Agreement, or any Majority Lender Consent
pursuant to the covenants described in the Covenants Term Sheet attached hereto,
any Holdco Guaranteed Loans or any class of Borrower’s first lien debt, as the
case may be, held by Holdings, the Borrower or any other Loan Party or any
Affiliate of any of the foregoing shall be disregarded in such determination at
any time.

39. Notwithstanding anything else to the contrary, in the event that Rule 3-10
(“Rule 3-10”) or Rule 3-16 (“Rule 3-16”) of Regulation S-X under the Securities
Act, as amended, modified or interpreted by the Securities Exchange Commission
(“SEC”), would require (or is replaced with another rule or regulation, or any
other law, rule or regulation is adopted, which would require) the filing with
the SEC (or any other Governmental Authority) of separate financial statements
of any Subsidiary of Holdings that is not a direct Subsidiary of Holdings as of
the Effective Date, and, with respect to any Person that becomes a direct
Subsidiary of Holdings following the Effective Date or is formed by Holdings
following the Effective Date, is not a Significant Subsidiary (as defined in
Regulation S-X), due to the fact that such Person’s Equity Interests secure any
Holdco Guaranteed Obligations affected thereby, then the Equity Interests of
such Subsidiary (the “Regulation S-X Excluded Collateral”) will automatically be
deemed not to be part of the Collateral securing such Holdco Guaranteed
Obligations affected thereby, but only to the extent necessary to not be subject
to such requirement and only for so long as required to not be subject to such
requirement. In such event, this Agreement may be amended or modified, without
the consent of any Secured Party, to the extent necessary to release the Lien on
the Regulation S-X Excluded Collateral in favor of the Trustee with respect only
to the relevant Holdco Guaranteed Obligations. In the event that Rule 3-10 or
Rule 3-16 is amended, modified or interpreted by the SEC to permit (or is
re-placed with another rule or regulation, or any other law, rule or regulation
is adopted, which would permit) any Regulation S-X Excluded Collateral to secure
the applicable Holdco Guaranteed Obligations in excess of the amount then
pledged without the filing with the SEC (or any other Governmental Authority) of
separate financial statements of such Person, then the Equity Interests of such
Person will automatically be deemed to be a part of the Collateral for the
relevant Holdco Guaranteed Obligations. For the avoidance of doubt and
notwithstanding anything to the contrary in this Agreement, nothing in this
paragraph shall limit the pledge of such Equity Interests and other securities
from securing the Holdco Guaranteed Obligations that are not in respect of
securities subject to regulation by the SEC.

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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed and delivered as of the date first above written.

 

CAESARS ENTERTAINMENT CORPORATION By:  

 

  Name:   Title:

 

Accepted and Agreed:

[_________________________________]

 

By:  

 

Name:   Title:   By:  

 

Name:   Title:  

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SCHEDULE I

To Guaranty and Pledge Agreement

FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS

UCC Financing statement describing the Collateral filed with the Delaware
Secretary of State naming Caesars Entertainment Corporation as debtor and the
Trustee as secured party.

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Exhibit I

to Guaranty and Pledge Agreement

[Form of]

OTHER HOLDCO GUARANTEED PARTY CONSENT

[Name of Other Holdco Guaranteed Party]

[Address of Other Holdco Guaranteed Party]

[Date]

 

 

  

 

  

 

  

 

  

The undersigned is the Authorized Representative for Persons wishing to become
Guaranteed Parties (the “New Guaranteed Parties”) under the Guaranty and Pledge
Agreement dated as of [                        ] (as heretofore amended and/or
supplemented, the “Guaranty and Pledge Agreement” (terms used without definition
herein have the meanings assigned to such term in the Guaranty and Pledge
Agreement)) among Caesars Entertainment Corporation and
[                        ], as Collateral Agent (the “Trustee”).

In consideration of the foregoing, the undersigned hereby:

(i) [represents that the Authorized Representative has been duly authorized by
the New Guaranteed Parties to become a party to the Holdco Intercreditor
Agreement on behalf of the New Guaranteed Parties under that [DESCRIBE OPERATIVE
AGREEMENT] (the “New Guaranteed Obligation”) and to act as the Authorized
Representative for the New Guaranteed Parties;

(ii) designates the New Guaranteed Obligation as Holdco Guaranteed Other
Obligations [and Holdco Guaranteed Other Secured Obligations] under the Guaranty
and Pledge Agreement;

(iii) acknowledges that the Authorized Representative has received a copy of the
Guaranty and Pledge Agreement and the Holdco Intercreditor Agreement;

(iv) appoints and authorizes the Trustee to take such action as agent on its
behalf and on behalf of all other Guaranteed Parties and to exercise such powers
under the Guaranty and Pledge Agreement and the Holdco Intercreditor Agreement
as are delegated to the Trustee by the terms thereof, together with all such
powers as are reasonably incidental thereto;

(v) accepts and acknowledges the terms of the Holdco Intercreditor Agreement
applicable to it and the New Guaranteed Parties and agrees to serve as
Authorized Representative for the New Guaranteed Parties with respect to the New

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Guaranteed Obligations and agrees on its own behalf and on behalf of the New
Guaranteed Parties to be bound by the terms thereof applicable to holders of
Holdco Guaranteed Other Obligations, with all the rights and obligations of a
Guaranteed Party [and Secured Party] thereunder and bound by all the provisions
thereof as fully as if it had been a Guaranteed Party [and a Secured Party] on
the effective date of the Holdco Intercreditor Agreement and agrees that its
address for receiving notices pursuant to the Guaranty and Pledge Agreement and
the Holdco Intercreditor Agreement shall be as follows:

[Address]

(vi) confirms the authority of the Trustee to enter into such agreements on its
behalf and on behalf of the New Guaranteed Parties and agrees on its own behalf
and on behalf of the New Guaranteed Parties to be bound by the terms thereof
applicable to it and the New Guaranteed Parties as fully as if it had been a
party to each such agreement on behalf of itself and the New Guaranteed Parties.

The Trustee, by acknowledging and agreeing to this Other Holdco Guaranteed Party
Consent, accepts the appointment set forth in clause (iii) above.

THIS OTHER GUARANTEED PARTY CONSENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

-2-

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EXHIBIT A

Caesars Entertainment Corporation

Guaranty and Pledge Agreement Covenants1

 

Covenants:   The following covenants will apply to Holdings (and, in the case of
the Affiliate Asset Sale Covenant, the restricted payment covenant set forth in
section 2 below and the affiliate transaction covenant set forth in section 6
below, the direct and indirect subsidiaries of Holdings), subject to certain
customary exceptions and qualifications to be agreed:   1. Limitation on
non-ordinary course dispositions of assets by Holdings (with the definition of
“ordinary course” as set forth on Schedule II hereto), with carveouts permitting
the non-ordinary course disposition of assets subject to (i) Holdings’ receipt
of fair market value (as reasonably determined in good faith by a responsible
officer of Holdings and in the event of any disposition, any series of similar
or related dispositions, any related dispositions or substantially
contemporaneous similar transactions with a fair market value in excess of $10
million, approved by 100% of the independent members of Holdings’ board of
directors), (ii) no default or event of default under the Holdco guaranteed
obligations, (iii) at least 75% of the proceeds consisting of cash or cash
equivalents (which, only if the Opco Debt Reduction Amount is equal to or
greater than $1,000 million, shall include certain customary designated non-cash
consideration) and (iv) in the case of any disposition, any series of similar or
related dispositions, any related dispositions or substantially contemporaneous
similar dispositions with a fair market value (as reasonably determined in good
faith by a responsible officer of Holdings) in excess of $100 million, the
receipt by Holdings of a customary fairness opinion (with the fairness opinion
to be provided by an Approved Opinion Provider (as set forth on Schedule I
attached hereto) or other appraiser reasonably satisfactory to the Trustee).
(For the avoidance of doubt, for purposes of determining whether a Holdco
Covenant Breach has occurred and for purposes of the Dispute Mechanism, in all
cases under the Guaranty and Pledge Agreement, including all of the covenants in
this Exhibit A, with respect to any dispute regarding “fair market value” any
references to “(as reasonably determined in good faith by a responsible officer
of Holdings)” (or substantially similar language) shall be disregarded and no
deference, presumption or shift in the burden of proof shall be given or applied
to any such determination by such responsible officer.)

 

1  All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the form of Guaranty and Pledge Agreement to which this
Exhibit is attached.

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In addition, (i) non-ordinary course dispositions (with the definition of
“ordinary course” as set forth on Schedule II hereto) of assets by Holdings (or
any direct or indirect subsidiary of Holdings) to Affiliates of Holdings (other
than (x) any disposition, series of similar or related dispositions, any related
dispositions or substantially contemporaneous similar dispositions of assets on
“arms-length terms” (as defined below) with a fair market value (as reasonably
determined in good faith by a responsible officer of Holdings) of $10 million or
less or (y) dispositions to Holdings or to subsidiaries of Holdings so long as,
in the case of subsidiaries, no Affiliate of Holdings has any debt or equity
interest (except its indirect interest through Holdings and except any debt
investments that have been issued in market transactions2 and for which
Affiliates do not hold more than 25% of the outstanding principal amount of such
class of debt or all debt of such subsidiary in the aggregate) in any such
subsidiary and in each case which subsidiaries shall be bound by the Affiliate
Asset Sale Covenant) shall not be permitted without the prior consent of the
Noteholders holding a majority in aggregate principal amount of the First Lien
Notes of each issue of First Lien Notes outstanding (“Majority Lender
Consent”)3, (ii) 100% of the net cash proceeds of any non-ordinary course
disposition of assets by Holdings constituting Collateral (other than any
disposition, series of similar or related dispositions, any related dispositions
or substantially contemporaneous similar dispositions generating less than $5
million of net cash proceeds) (such proceeds “Collateral Proceeds”) shall be
deposited into a Controlled Account and (iii) with respect to any non-cash
proceeds of any dispositions of assets by Holdings to subsidiaries of Holdings
(a) such proceeds received by Holdings shall constitute additional Collateral
under the Guaranty and Pledge Agreement and (b) such non-cash proceeds shall be
in the form of a promissory note or other debt obligation, and any such
obligation owing to Holdings shall be secured by a first priority lien in favor
of Holdings in the asset so disposed of by Holdings. The covenant described in
clause (i) of this paragraph is referred to as the “Affiliate Asset Sale
Covenant”.

 

Notwithstanding the foregoing, Ordinary Course Asset Sales (as defined on
Schedule II hereto) shall be permitted, subject to Section 6 below.

  2. Limitations on direct or indirect restricted payments to equity holders of
Holdings (with, for the avoidance of doubt, no limitations on restricted
payments to Holdings or any of its subsidiaries), which shall only permit the
making of restricted payments to equityholders of Holdings (directly by Holdings
or indirectly by subsidiaries of Holdings) in an aggregate amount not to exceed
$5 million.  

 

2  [To be defined as purchases in registered public offerings, under Rule 144A
or in broadly syndicated loan transactions, and at the market secondary market
purchases for actively traded securities or loans, in transactions where the
price is contemporaneously reported or made available.]

3  NTD: Form of second lien guaranty to refer to majority of principal amount of
OpCo second lien debt.

 

2

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3. Limitations on indebtedness, which shall include (i) a general basket in an
aggregate principal amount of $500 million; provided that in the event any
material indebtedness (defined to mean indebtedness in an aggregate principal
amount greater than $10 million) incurred under this basket becomes due prior to
scheduled maturity (with all its originally applicable grace periods having
expired) and any agent or trustee (or lender, noteholder or other party with the
legal right to do so) shall commence the exercise of remedies with respect
thereto and such exercise shall not have been enjoined or stayed, such
acceleration and actions shall constitute a Holdco Guaranty Breach,
(ii) additional indebtedness that may be incurred at any time in an aggregate
principal amount not to exceed the Opco Debt Reduction Amount (solely in respect
of Opco first lien debt) available at such time, (iii) an additional basket in
an aggregate principal amount of $1,500 million that may be used in connection
with the Restructuring (with no more than $450 million of such basket available
to be secured on a first priority pari passu basis with the Holdco Guaranteed
Obligations and, with respect to any other amount, any unused amount thereof
shall be unavailable after the Closing Date) and (iv) additional indebtedness
incurred at any time so long as 100% of the net cash proceeds of any such
indebtedness shall be promptly applied to reduce, pro rata (based on seniority
of payment and security), outstanding Opco debt that was outstanding on the
Closing Date.

 

The definition of “indebtedness” of Holdings shall include any indebtedness of
Opco or any other person for which Holdings provides a guaranty (including a
guaranty of collection).

 

4. Limitation on loans and investments, which shall:

 

If the Opco Debt Reduction Amount is less than or equal to $1,000 million:
(i) include a general basket for investments in an outstanding amount not to
exceed the greater of $500 million and 2.5% of consolidated total assets,
(ii) include a basket for investments in similar businesses in an outstanding
amount not to exceed the greater of $250 million and 2.0% of consolidated total
assets and (iii) permit additional investments in joint ventures not to exceed
the greater of $250 million and 2.0% of consolidated total assets.

 

If the Opco Debt Reduction Amount is greater than $1,000 million: (i) include a
general basket for investments in an outstanding amount not to exceed the
greater of $1,000 million and 5.0% of consolidated total assets, (ii) include a
basket for investments in similar businesses in an outstanding amount not to
exceed the greater of $500 million and 4.0% of consolidated total assets and
(iii) permit additional investments in joint ventures not to exceed the greater
of $500 million and 4.0% of consolidated total assets (which increased baskets,
for the avoidance of doubt, shall replace and not be in addition to the baskets
described in the preceding sentence).

 

Notwithstanding the foregoing, the baskets referred to above will not be
available to make any investment that would be used to directly or indirectly
fund any restricted payments or for any transactions with Affiliates except to
the extent otherwise permitted under the covenant set forth in section 6 below.

 

3

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  In addition, the subsidiaries of Holdings that are subject to restrictive
covenants under debt agreements on the Closing Date will be required to comply
with the investment covenants in such debt agreements from and after the Closing
Date, with no material amendment, forbearance or waiver thereof after the
Closing Date that is adverse to the interests of the Guaranteed Parties without
Majority Lender Consent.   5. Limitations on liens, which shall provide for the
ability of Holdings to incur (i) pari passu liens under the Guaranty and Pledge
Agreement to secure guarantees of indebtedness permitted by the debt covenant
contained in Section 3 (subject to the limitations therein and to customary
inter-creditor agreements reasonably satisfactory to the Trustee) and (ii) liens
junior to the liens that have been granted to the Trustee for the benefit of the
Secured Parties (subject to customary subordination and inter-creditor
agreements reasonably satisfactory to the Trustee).   6. Limitation on
transactions with Affiliates; provided, that, (i) all such transactions shall be
on “arms-length terms” (as defined below), (ii) any transaction, series of
similar or related transactions, any related transactions or substantially
contemporaneous similar transactions with a fair market value (as reasonably
determined in good faith by a responsible officer of Holdings) in excess of $5
million shall require, prior to consummation of the transaction, delivery to the
Trustee by the chief financial officer of Holdings of a certificate describing
the terms of such transactions or series of related transactions and certifying
that such transactions or series of similar or related transactions is on
“arms-length terms” and has been unanimously approved by the independent members
of the board of directors of Holdings, (iii) with respect to any transaction,
series of similar or related transactions, any related transactions or
substantially contemporaneous similar transactions with a fair market value (as
reasonably determined in good faith by a responsible officer of Holdings) in
excess of $10 million, Holdings shall be required, prior to consummation of the
transaction, to obtain a customary fairness opinion to be provided by an
Approved Opinion Provider or another appraiser reasonably satisfactory to the
Trustee, (iv) with respect to any transaction, series of similar or related
transactions, any related transactions or substantially contemporaneous similar
transactions with a fair market value (as reasonably determined in good faith by
a responsible officer of Holdings) in excess of $10 million, such transactions
or series of transactions shall be subject to the Dispute Mechanism (as defined
below), (v) no management or other fees may be paid to a Sponsor and (vi) no
transaction, series of similar or related transactions, any related transactions
or substantially contemporaneous similar transactions (1) with any Sponsor with
a fair market value (as reasonably determined in good faith by a responsible
officer of Holdings) in excess of $10 million or (2) with any other Affiliate
with a fair market value (as reasonably determined in good faith by a
responsible officer of Holdings) in excess of $50 million, shall be permitted
without Majority Lender Consent.

 

4

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With respect to any Affiliate transaction, series of similar or related
transactions, any related transactions or substantially contemporaneous similar
transactions for which the chief financial officer of Holdings has delivered a
certificate pursuant to clause (ii) above but for which no fairness opinion is
intended to be provided pursuant to clause (iii) above, the Trustee (or
Noteholders holding at least 25% of the principal amount of the outstanding
First Lien Notes of each issue of First Lien Notes) may, within 10 business days
of receipt of such certificate of the chief financial officer referred to above,
provide to Holdings a written notice (a “$10 Million Objection Notice”) stating
that the Trustee (or Noteholders, as the case may be) has reasonably determined
in good faith that such transactions or series of similar or related
transactions has a fair market value in excess of $10 million, in which case
Holdings shall be required to provide as promptly as practicable an opinion from
an Approved Opinion Provider to the effect that such transactions or series of
similar or related transactions either (A) does not have a fair market value in
excess of $10 million or (B) otherwise complies with the standards set forth in
clause (iii) of the immediately preceding sentence and is subject to the Dispute
Mechanism. Holdings will not consummate the subject transaction until either (1)
the Trustee (or Noteholders, as the case may be) has not provided the $10
Million Objection Notice within the 10 business day period set forth above or
(2) if the Trustee (or Noteholders, as the case may be) has provided the $10
Million Objection Notice within such 10 business day period, such opinion has
been provided and, if it is subject to the Dispute Mechanism, it has complied
with the Dispute Mechanism.

 

The “Dispute Mechanism” shall mean that, with respect to any Affiliate
transaction for which the Dispute Mechanism applies, the following shall occur:

 

(i) Holdings shall provide at least ten (10) business days’ advance written
notice to the Trustee of the terms of such proposed transaction;

 

(ii) the Trustee shall have the right to provide notice to Holdings that it
objects to the proposed transaction within ten (10) business days of its receipt
of such notice, (or if the Trustee has been instructed by Noteholders holding at
least 25% in aggregate principal amount of the outstanding First Lien Notes of
each issue of First Lien Notes to provide such notice and the Trustee has not
provided such notice within 1 day of such instruction, by such Noteholders) (the
“Objection Notice”), and such notice states that the Trustee or the Noteholders
has made a reasonable determination in good faith that such transaction does not
comply with the requirements set forth herein for Affiliate transactions (and
the reason for such determination) and that such objection is supported by
Noteholders holding at least 25% in aggregate principal amount of the
outstanding First Lien Notes of each issue of First Lien Notes;4

 

4  NTD: Form of second lien guaranty to refer to 25% of the outstanding second
lien notes.

 

5

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(iii) if the Trustee (or Noteholders acting in accordance with clause (ii)
above) do not deliver an Objection Notice within such ten (10) business day
period, then Holdings may consummate such transaction;

 

(iv) if the Trustee or Noteholders, as applicable, timely delivers an Objection
Notice to Holdings within such ten (10) business day period then, at the option
of Holdings, either:

 

(a) Holdings may decline to consummate such transaction;

 

(b) Holdings may consummate such transaction, subject to the prior modification
to the terms thereof that remedies the objections thereto raised in the
Objection Notice; or

 

(c) Holdings may submit the terms of the transaction to an arbitrator reasonably
satisfactory to Holdings and the Trustee for a determination of whether the
transaction is on “arms-length terms” (with such arbitration mechanics to be
consistent with those set forth in the Guaranty and Pledge Agreement);

 

(v) if the arbitrator determines that the transaction complies with the
requirements set forth herein for Affiliate transactions, Holdings may
consummate such transaction.

 

(vi) If the arbitrator determines that the transaction does not comply with the
requirements set forth herein for Affiliate transactions, Holdings may (1)
decline to consummate such transaction or (2) consummate such transaction,
subject to the prior modification to the terms thereof that remedies the
objections thereto raised by the arbitrator (to the extent the arbitrator
concludes the reason for such determination).

 

For the avoidance of doubt, the foregoing limitations shall apply to, among
other transactions with affiliates, the sale, issuance or repurchase of any
indebtedness by Holdings or by any direct or indirect subsidiary of Holdings to
or from any Affiliate (other than in a market transaction in which an Affiliate
participates on the same terms as third parties).

 

In addition, as set forth in section 1 above, dispositions of assets by Holdings
(or any direct or indirect subsidiary of Holdings) to Affiliates of Holdings
shall be subject to the Affiliate Asset Sale Covenant.

 

Notwithstanding the foregoing, Ordinary Course Affiliate Transactions, (as
defined on Schedule II hereto), to the extent not otherwise prohibited by
sections 1 through 5 above, shall not be prohibited by this section 6; provided,
however, that with respect to any transaction, series

 

6

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of similar or related transactions, any related transactions or substantially
contemporaneous similar transactions that constitute an Ordinary Course
Affiliate Transaction, including Ordinary Course Asset Sales involving an
Affiliate, with a fair market value (as reasonably determined in good faith by a
responsible officer of Holdings) in excess of $25 million, such transaction
shall be subject to the Dispute Mechanism.

 

In addition, each direct and indirect subsidiary of Holdings will be subject to
this affiliate transaction covenant, which will apply to any transaction between
any such subsidiary and any Affiliate of such subsidiary (other than those
transactions solely between and among Holdings and its subsidiaries, so long as,
in the case of subsidiaries, no Affiliate of Holdings has any debt or equity
interest (except its indirect interest through Holdings and except any debt
investments that have been issued in a market transaction and for which
Affiliates do not hold more than 25% of the outstanding principal amount of such
class of debt or all debt of such subsidiary in the aggregate) in such
subsidiary and which subsidiaries shall be bound by this affiliate transaction
covenant).

 

Affiliate transaction reporting: Holdings shall comply with all disclosures
required by Item 404 of Regulation SK (Transactions with certain related
persons, promoters and certain control persons), regardless of whether Holdings
is otherwise subject to such disclosure obligations under law.

 

“arms-length terms” shall mean that:

 

(1) with respect to any transaction involving Holdings, such transaction (a) is
fair to Holdings from a financial point of view and (b) (if there are comparable
transactions between or with unrelated persons publicly available or otherwise
known to Holdings) is on terms that are no less favorable to Holdings than those
that could have been obtained in a comparable transaction by Holdings with an
unrelated person; and

 

(2) with respect to any transaction involving a subsidiary of Holdings, such
transaction (a) is fair to such subsidiary from a financial point of view and
(b) (if there are comparable transactions between or with unrelated persons
publicly available or otherwise known to such subsidiary) is on terms that are
no less favorable to such subsidiary than those that could have been obtained in
a comparable transaction by such subsidiary with an unrelated person.

 

“Affiliate” shall mean, with respect to any person or “group” (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended), any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person or group.
For purposes of this definition, “control” (including, with correlative
meanings, the terms “controlling,”

 

7

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“controlled by” and “under common control with”), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person, whether
through the ownership of voting securities, by agreement or otherwise. In
addition and without limiting the foregoing, (a) the Sponsors shall be
considered Affiliates of Holdings at all times, (b) any person in which any
other person, or other persons acting together as a group (within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended),
individually or taken together, owns directly or indirectly, 25% or more of the
equity interests of such person (either directly or through Equity Equivalents
and whether or not voting) shall be deemed to be controlled by such other person
or persons acting together as a group; provided however that with respect to any
shareholder or group of shareholders of Holdings other than a Sponsor or an
Affiliate of a Sponsor, such shareholders shall not be considered to control
Holdings for purposes of this clause (b) solely by reason of such percentage
ownership unless (i) such person or group files a Schedule 13D disclosing its
ownership and, if applicable, status as a group and (ii) the Sponsors do not own
more of the outstanding voting interests of the equity of Holdings and (c) any
portfolio company of a Sponsor that satisfies the criteria of an “Affiliate” set
forth in this definition will be considered an Affiliate.

 

“Equity Equivalents” shall mean (w) all warrants and options (including any
contingent purchase, convertible debt, exchangeable shares, put, or stock
subject to forfeiture), whether or not presently convertible, exchangeable or
exercisable, (x) other agreements to directly or indirectly purchase (regardless
of whether it is contingent or otherwise not currently exercisable), subscribe
for or otherwise acquire any interest in any equity or any other Equity
Equivalents referred to in clause (w) or (y), whether or not presently
convertible, exchangeable or exercisable, (y) any other equity interest
reportable or disclosable on Schedule 13D and (z) similar equity-like interests.

 

“Sponsor” shall mean each of (i) Apollo and (ii) TPG, for so long as either
Apollo or TPG, individually or taken together, owns, directly or indirectly, 10%
or more of the outstanding voting stock of, or other voting interest in,
Holdings or any one or more direct or indirect wholly-owned subsidiaries of
Holdings. The Sponsors shall be considered Affiliates of Holdings at all times.

 

“Apollo” shall mean, collectively, Apollo Global Management, Inc., Apollo
Management VI, L.P. and its affiliated co-investment partnerships and their
respective Affiliates (other than any “portfolio company”).

 

“TPG” shall mean, collectively, TPG Capital, L.P., TPG Partners V, L.P. and its
affiliated co-investment partnerships and their respective Affiliates (other
than any “portfolio company”).

 

7. Holdings shall be obligated to deposit (i) all Excess Cash and (ii) all
Collateral Proceeds into one or more Controlled Accounts. “Excess Cash” means
all balance sheet cash of Holdings (excluding, for the avoidance of doubt, any
“cage cash” or any cash that is subject to restriction by bona fide requirements
of non-Affiliate third parties that are not intended to restrict cash for the
purpose of avoiding this covenant) in excess of $150 million. A “Controlled
Account” shall mean a deposit account or securities account of Holdings that is
subject to a control agreement in favor of the Trustee sufficient to grant a
perfected security interest in such account to the Trustee for the benefit of
the Secured Parties. Prior to the occurrence of a Holdco Event of Default there
shall be no restriction on Holdings’ use or withdrawal of any amounts on deposit
in any Controlled Account (subject, however, to the covenants set forth herein).
For the avoidance of doubt, no other control agreements shall be required with
respect to any bank accounts of Holdings other than Controlled Accounts.

 

8

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8. Holdings shall comply with all NASDAQ listing requirements with respect to
independent directors, regardless of whether Holdings is subject to such
requirements.

 

9. Other reporting: Customary SEC-compliant annual, quarterly and periodic
reporting regardless of whether Holdings is otherwise subject to such reporting
obligations under law. To the extent not otherwise publicly reported, Holdings
will also, on a quarterly basis, provide to Trustee for distribution to the
Guaranteed Parties a report containing all material terms of all non-ordinary
course dispositions of assets by Holdings with a fair market value in excess of
$10 million, if any.

  General:   Each covenant shall be exclusive as to the subject matter thereof
and no basket set forth in one covenant shall be applied to permit any
transaction otherwise prohibited or limited by any other covenant.  

Defined Terms:

 

“Opco Debt Reduction Amount” shall, at any time, be an amount equal to (i) the
amount by which the principal amount of Opco debt that was outstanding on the
Closing Date has been permanently reduced after the Closing Date and on or prior
to such time minus (ii) the amount, if any, by which the principal amount of
Opco debt has been increased after the Closing Date and on or prior to such
time.

 

“Ordinary Course Affiliate Transactions” will be defined in a manner consistent
with the definition set forth on Schedule II hereto.

 

“Ordinary Course Asset Sales” will be defined in a manner consistent with the
definition set forth on Schedule II hereto.

 

9

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SUBJECT TO JOINT INTERESTS – PRIVILEGED & CONFIDENTIAL

FOR DISCUSSION PURPOSES ONLY

F.R.E. 408 SETTLEMENT DISCUSSIONS

Schedule I

List of Approved Opinion Providers

 

  •   Citibank

 

  •   Credit Suisse

 

  •   Deutsche Bank

 

  •   Bank of America Merrill Lynch

 

  •   JPMorgan

 

  •   Goldman Sachs

 

  •   Morgan Stanley

 

  •   Barclays

 

  •   Duff & Phelps

 

  •   Valuation Research Corporation

 

  •   Houlihan Lokey

 

  •   Moelis

 

  •   Murray Devine

 

  •   Alix Partners

 

  •   Centerview

 

  •   Blackstone

 

  •   Evercore

 

  •   Lazard

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SUBJECT TO JOINT INTERESTS – PRIVILEGED & CONFIDENTIAL

FOR DISCUSSION PURPOSES ONLY

F.R.E. 408 SETTLEMENT DISCUSSIONS

Schedule II

Definitions

“Ordinary Course Affiliate Transactions” shall include:

(i) any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, customary employment
arrangements, or customary equity purchase agreements, stock options or stock
ownership plans, in each case in the ordinary course of business and for the
benefit of employees of Holdings and/or its subsidiaries on arms-length terms
and approved in good faith by 100% of the independent members of the board of
directors of Holdings;

(ii) customary loans or advances to employees or consultants of Holdings or any
of the subsidiaries of Holdings permitted by the [Investment Covenant], made in
the ordinary course of business, and on arms-length terms (which if in excess of
$5 million shall be approved in good faith by 100% of the independent members of
the board of directors of Holdings);

(iii) the payment of customary fees, reasonable out-of-pocket costs and
indemnities to directors, officers, consultants and employees of Holdings or a
subsidiary in the ordinary course of business on arms-length terms (which if in
excess of $5 million shall be approved in good faith by 100% of the independent
members of the board of directors of Holdings);

(iv) (A) any employment agreements entered into by Holdings or any subsidiary of
Holdings in the ordinary course of business, (B) any subscription agreement or
similar agreement pertaining to the repurchase of equity interests pursuant to
customary put/call rights or similar rights with employees, officers or
directors, and (C) any customary employee compensation, benefit plan or
arrangement, any health, disability or similar insurance plan which covers
employees, and any reasonable employment contract and transactions pursuant
thereto, in each case on arms-length terms (which if in excess of $5 million
shall be approved in good faith by 100% of the independent members of the board
of directors of Holdings);

(v) the purchase or sale of goods, equipment, products, parts and services
entered into in the ordinary course of business in a manner consistent with past
practice on arms-length terms (which if in excess of $5 million shall be
approved in good faith by 100% of the independent members of the board of
directors of Holdings);

(vi) transactions with joint ventures for the purchase or sale of goods,
equipment, products, parts and services entered into in the ordinary course of
business on arms-length terms (which if in excess of $5 million shall be
approved in good faith by 100% of the independent members of the board of
directors of Holdings);

(vii) the issuance, sale or transfer of equity interests of Holdings (which if
in excess of $5 million shall be approved in good faith by 100% of the
independent members of the board of directors of Holdings);

(viii) customary compensation payments, loans (or cancellation of loans) or
advances to employees or consultants made in the ordinary course of business and
on arms-length terms that are (i) approved in good faith by a majority of the
disinterested directors of the board of directors of Holdings, (ii) made in
compliance with applicable law and (iii) otherwise permitted by the [Investment
Covenant];

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(ix) transactions with customers, clients, suppliers, or purchasers or sellers
of goods or services, in each case in the ordinary course of business on
arms-length terms that are fair to Holdings and any subsidiary of Holdings
(which if in excess of $5 million shall be approved in good faith by 100% of the
independent members of the board of directors of Holdings); or

(x) transactions undertaken in good faith (in the reasonable opinion of a
responsible officer of Holdings) solely for the purpose of materially improving
the consolidated tax efficiency of Holdings and its subsidiaries (provided that
such transactions, individually or taken as a whole, are not materially adverse
to Holdings and its subsidiaries or to the interests of the Noteholder).

“Ordinary Course Asset Sales” shall include:

(i) a disposition of cash or cash equivalents or dispositions of obsolete,
damaged or worn out property or equipment, in each case in the ordinary course
of business;

(ii) any disposition in the ordinary course of business of assets of Holdings or
any subsidiary or issuance or sale of Equity Interests of any subsidiary, which
assets or Equity Interests so disposed or issued have an aggregate fair market
value (as reasonably determined in good faith by a responsible officer of
Holdings) of less than $10 million;

(iii) the lease, license, easement, assignment, sublease or sublicense of any
real or personal property, in each case in the ordinary course of business;

(iv) any sale of inventory or other assets, in each case in the ordinary course
of business;

(v) any grant in the ordinary course of business of any license of patents,
trademarks, know-how or any other intellectual property;

(vi) any swap of assets, or lease, assignment or sublease of any real or
personal property, in exchange for services (including in connection with any
outsourcing arrangements) of comparable or greater value or usefulness to the
business of Holdings and the subsidiaries as a whole, as determined in good
faith by Holdings, in each case in the ordinary course of business;

(vii) foreclosure or any similar action with respect to any property or other
asset of Holdings or any of the subsidiaries, with respect to liens permitted to
be incurred under this Agreement;

(viii) dispositions, in the ordinary course of business, of receivables in
connection with the compromise, settlement or collection thereof in the ordinary
course of business or in bankruptcy or similar proceedings and exclusive of
factoring or similar arrangements; or

(ix) any surrender or waiver of contract rights or the settlement, release,
recovery on or surrender of contract, tort or other claims of any kind, in each
case in the ordinary course of business.

 

2

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Annex VII

Ownership Limit Waiver Agreement

 

32

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OWNERSHIP LIMIT WAIVER AGREEMENT

This OWNERSHIP LIMIT WAIVER AGREEMENT (this “Agreement”) is made and entered
into as of [DATE], by and between [REIT], a Maryland corporation (the
“Company”), and [NAMES OF INVESTOR] (“Investor”). Capitalized terms used in this
Agreement that are not otherwise defined shall have the meanings given to them
in the [REIT Charter] of the Company (the “Charter”), dated as of [the date
hereof].

RECITALS

WHEREAS, the Company is adopting the Charter;

WHEREAS, pursuant to the [NAME OF PLAN] (the “Plan”), Investor shall own certain
Shares in the Company;

WHEREAS, the Company expects to elect to be taxed as a real estate investment
trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”);

WHEREAS, to help the Company maintain its status as a REIT, the Charter imposes
certain limitations on the ownership of the Company’s Shares while the Company
has elected to qualify as a REIT under the Code;

WHEREAS, [PROVISION] of the Charter contains a general restriction prohibiting
any Person from owning more than a specified percentage (currently set at 9.8%)
of the value or number of shares, whichever is more restrictive, of the
outstanding shares of any class or series of Capital Stock of the Company (the
“Ownership Limit”); and

WHEREAS, pursuant to [PROVISION] of the Charter, the Company’s Board is
permitted to waive the Ownership Limit with respect to a record owner or
transferee of Shares if certain conditions are satisfied (an “Ownership Limit
Waiver”);

NOW, THEREFORE, this Agreement is intended to create an Ownership Limit Waiver
with respect to Investor.

AGREEMENT

1. REPRESENTATIONS AND COVENANTS OF INVESTOR

Beginning upon the date hereof and during any period that Investor owns
(Beneficially, Constructively, or otherwise) Shares in excess of the Ownership
Limit, Investor represents and warrants as follows:

1.1 Investor acknowledges its understanding that the representations and
warranties contained herein are made in order to obtain an exception for
Investor to the Ownership Limit set forth in [PROVISION] of the Charter.

1.2 Investor acknowledges its understanding that this exception to the Ownership
Limit is only being granted to Investor and not to any other Person.

1.3 Investor is not an individual for purposes of Section 542(a)(2) of the Code
(determined after taking into account Section 856(h) of the Code).

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1.4 No Person who is treated as an individual under Section 542(a)(2) of the
Code (determined after taking into account Section 856(h) of the Code) that is a
direct or indirect owner of Investor Beneficially Owns, or in the future will
Beneficially Own, as a result of Investor’s Shares, Shares in excess of the
Ownership Limit.

1.5 Investor does not Constructively Own an interest in [OPCO TENANT] (“Tenant”)
that (i) is greater than [2.4]% (within the meaning of Section 856(d)(2)(B) of
the Code and the Treasury Regulations promulgated thereunder) in Tenant (the
“Percentage Limit”)1 or (ii) would cause a Related Tenant Event.

1.6 Investor will not acquire an interest in any Person that would (i) cause
Investor to Constructively Own an interest in Tenant that is equal to or in
excess of the Percentage Limit or (ii) cause Investor to Constructively Own an
interest in any proposed tenant of the Company or its Subsidiaries (other than
the Tenant), whose name and information the Manager has provided to Investor no
less than [thirty (30)] Business Days prior to execution of a lease with such
tenant that is equal to or in excess of the Percentage Limit or (iii) cause a
Related Tenant Event; provided, however, that if Investor holds an interest in
any Person (other than the Tenant) that, taking into account interests held by
other owners of Shares that have entered into waivers of the Ownership Limit,
would result in a Related Tenant Event (computed without regard to [Section 2.2
of the Appendix to the Charter]) if the Company were to enter into a lease with
a proposed tenant (other than the Tenant), the Company will not enter into a
lease with such proposed tenant without the prior consent of Investor. Any
information provided pursuant to clause (ii) of this Section 1.6 shall be held
strictly confidential and Investor shall refrain from buying or selling any
securities of the Company until the earlier of (x) the substance of the
information provided in clause (ii) is publicly disclosed (without violation of
this sentence by Investor or its affiliates), (y) the Company reasonably agrees
that the information does not constitute material, non-public information or (z)
the Company notifies Investor that the proposed lease transaction has been
terminated (and the Company agrees to notify Investor promptly in the event such
proposed lease transaction has been terminated). For purposes of this Section
1.6, the Percentage Limit may be increased with the consent of the Company, such
consent not to be unreasonably withheld.

1.7 Investor covenants that, after the date hereof, it will immediately notify
the Company of any date on which the foregoing representations and warranties
are no longer true and correct in all respects.

1.8 Investor understands that any breach of a representation, warranty or
covenant provided in this Agreement will automatically cause the waiver
contemplated by Section 2 hereof granted by the Company to be revoked.

1.9 No later than [ten (10)] Business Days prior to acquiring an interest in any
Person that would increase the amount that Investor Constructively Owns in
Tenant or any other tenant, Investor shall provide the Manager with information
as to the interest in Tenant or such other tenant that Investor would
Constructively Own following such proposed acquisition, and the Manager will
promptly, but no later than within [five (5)] Business Days inform Investor
whether such acquisition would cause a Related Tenant Event (based on ownership
information in Tenant or such other tenant previously provided to it by other
owners of Shares that have entered into waivers of the Ownership Limit). Within
[five (5)] Business Days after Manager has provided Investor with information
regarding a proposed tenant pursuant to Section 1.6(ii) hereof, Investor shall
provide Manager with information as to the interest in such proposed tenant that
Investor Constructively Owns, and the Manager will within [five (5)] Business
Days thereafter inform Investor whether leasing to such proposed tenant would
cause a Related Tenant Event (based on ownership information in such proposed
tenant provided to it by other owners of Shares that have entered into waivers
of the Ownership Limit).

2. WAIVER OF THE OWNERSHIP LIMIT FOR INVESTOR

Based on the above representations, warranties and covenants, and in order to
induce the Investor to acquire the Shares, the Company, effective as of the date
hereof, confirms and agrees for the benefit of Investor that (i) it has
irrevocably waived (subject to any changes required to reflect changes in the
Ownership Limit pursuant to Section 2.9 of the [Appendix to the Charter]) the
Ownership Limit with respect to Investor with respect to any Shares by its Board
having duly adopted a resolution in the form attached to this Agreement as
Exhibit A and there having been established an irrevocable Ownership Limit
Waiver with respect to, subject only to the continuing accuracy of the
representations and covenants of Investor herein and to any changes required to
reflect changes in the Ownership Limit pursuant to Section 2.9 of the [Appendix
to the Charter] and (ii) any affiliate of Investor may enter into an Ownership
Limit Waiver Agreement with the same terms as set forth herein.

 

 

1 A different Percentage Limit may be agreed to between the Company and an
Investor.

 

2

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3. MISCELLANEOUS

3.1 All questions concerning the construction, validity and interpretation of
this Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Maryland, without giving effect to any choice of
law or conflict of law provision (whether of the State of Maryland or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Maryland.

3.2 This Agreement may be signed by the parties in separate counterparts, each
of which when so signed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.

 

3

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Each of the parties has caused this Ownership Limit Waiver Agreement to be
signed by its duly authorized officers as of the date set forth in the
introductory paragraph of this Agreement.

 

[NAME OF COMPANY]

 

 

Name:

Title:

Signature Page to Ownership Limit Waiver Agreement

--------------------------------------------------------------------------------

[NAME OF INVESTOR]

 

 

Name:

Title:

Signature Page to Ownership Limit Waiver Agreement

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EXHIBIT A

OWNERSHIP LIMIT WAIVER RESOLUTION

In accordance with [PROVISION] of the [REIT Charter] of the Company (the
“Charter”), the Board of Directors hereby determines that, effective upon the
execution of an ownership limit waiver agreement in substantially the form
attached hereto as Exhibit A (the “Ownership Limit Waiver Agreement”):

1. The Board of Directors waives, effective as of the date hereof, the Ownership
Limit (as defined in the Charter) with respect to the Shares (as defined in the
Charter) held by Investor (as defined in the Ownership Limit Waiver Agreement).

2. If at any time,

(a) a Person (as defined in the Charter) who is treated as an individual for
purposes of Section 542(a)(2) of the Internal Revenue Code of 1986, as amended
(the “Code”) (determined after taking into account Section 856(h) of the Code)
would be considered to Beneficially Own (as defined in the Charter), as a result
of Investor’s Shares, Shares in excess of the Ownership Limit by reason of the
ownership of Shares in excess of the Ownership Limit by the Person receiving the
Ownership Limit Waiver (as defined in the Ownership Limit Waiver Agreement)
granted under this resolution; or

(b) the ownership of Shares in excess of the Ownership Limit by the Person
receiving the Ownership Limit Waiver granted under this resolution shall result
in the Company failing to qualify as a real estate investment trust under the
Code;

then the Ownership Limit Waiver shall be rescinded immediately and without prior
notice, and Shares Beneficially Owned by such Person shall be treated as is
provided by [PROVISION] of the Charter.

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SECRETARY’S CERTIFICATE

The undersigned, the Secretary of [NAME OF COMPANY], a Maryland corporation (the
“Company”), does hereby certify that attached hereto as Exhibit A is a true,
correct and complete copy of resolutions duly adopted by the Board of Directors
of the Company, which resolutions are in full force and effect as of the date
hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this [DATE].

 

[NAME OF COMPANY]

 

 

Name:

Title: Secretary

 

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Exhibit C

[INTENTIONALLY OMITTED]

 

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Exhibit D

Milestones

The failure to comply with any of the following Milestones will result in a
Creditor Termination Event under Section 8 of this Agreement:

 

1. The Company shall commence the Chapter 11 Cases in the Bankruptcy Court on or
after January 15, 2015, but no later than January 20, 2015; provided, however,
that any holding by the Bankruptcy Court that January 12, 2015 is the petition
date with respect to any of the Chapter 11 Cases shall not be a failure to
comply with this Milestone.

 

2. Within 5 Business Days after the Petition Date, an order approving the
interim use of cash collateral, on the terms and conditions substantially
consistent with those set forth in the Cash Collateral Stipulation, shall have
been entered by the Bankruptcy Court;

 

3. Within 75 days after the Petition Date, the Company shall have obtained entry
by the Bankruptcy Court of an order approving the use of cash collateral on a
final basis on terms and conditions substantially consistent with those set
forth in the Cash Collateral Stipulation.

 

4. By the earlier of December 15, 2015, and 10 days after the filing with the
Bankruptcy Court of the final report in respect of the investigation as detailed
in the Order Granting in Part and Denying in Part Motion to Appoint Examiner
(Dkt. No. 675) (the “Examiner Report”), the Company shall have filed a motion
with the Bankruptcy Court seeking approval and assumption of the Backstop
Commitment Agreement (the “Backstop Assumption Motion”), in form, scope and
substance reasonably satisfactory to the Requisite Consenting Creditors (as
evidenced by their written approval, which approval may be conveyed in writing
by counsel including by electronic mail) and the Company.

 

5. By the earlier of February 15, 2016, and 60 days after the filing with the
Bankruptcy Court of the Examiner Report, the Company shall have obtained entry
by the Bankruptcy Court of (a) an order approving the Disclosure Statement,
(b) an order approving solicitation procedures in relation to the Plan and
Disclosure Statement, and (c) an order granting the Backstop Assumption Motion
in its entirety; in each case materially consistent with the Restructuring Term
Sheet and otherwise in in form, scope and substance reasonably satisfactory to
the Requisite Consenting Creditors (as evidenced by their written approval,
which approval may be conveyed in writing by counsel including by electronic
mail) and the Company.

 

6. By the earlier of May 15, 2016, and 90 days after the Bankruptcy Court’s
approval of the Disclosure Statement, the Company shall have obtained entry by
the Bankruptcy Court of an order confirming the Plan that is materially
consistent with the Restructuring Term Sheet and otherwise reasonably
satisfactory to the Requisite Consenting Creditors (as evidenced by their
written approval, which approval may be conveyed in writing by counsel including
by electronic mail) and the Company (the “Confirmation Order”).

 

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7. By the earlier of July 15, 2016, and 60 days after the Confirmation Order has
been entered by the Bankruptcy Court (the “Outside Date”), the Effective Date
shall have occurred.

*        *        *         *        *

 

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Exhibit E

Transfer Agreement

PROVISION FOR TRANSFER AGREEMENT

The undersigned (“Transferee”) (a) hereby acknowledges that it has read and
understands the Fourth Amended & Restated Restructuring Support and Forbearance
Agreement, dated as of              (the “Agreement”),1 by and among the Caesars
Parties and each of the Consenting Creditors party thereto, (b) desires to
acquire the Claims described below (the “Transferred Claims”) from one of the
Restructuring Support Parties (the “Transferor”) and (c) hereby irrevocably
agrees to be bound by the terms and conditions of the Agreement to the same
extent Transferor was thereby bound with respect to the Transferred Claims, and
shall be deemed a Consenting Creditor for all purposes under the Agreement,
including with respect to any election made such Transferor with respect to any
Put Option applicable to the OpCo New Common Stock that has been exercised by
such Transferor. To the extent the Transferred Claims are Forbearance Fee First
Lien Bond Claims, Transferee shall be considered a Forbearance Fee Party for all
purposes under the Agreement, unless a Notice of Retention of RSA Forbearance
Fee substantially in the form of Exhibit F to the Agreement is delivered to CEC.

The Transferee hereby specifically and irrevocably agrees (i) to be bound by the
terms and conditions of the [First Lien Indentures / Credit Agreement] and the
Agreement, to the same extent applicable to the Transferred Claims, (ii) to be
bound by the vote of the Transferor if cast prior to the effectiveness of the
transfer of the Transferred Claims, except as otherwise provided in the
Agreement and (iii) that each of the Parties shall be an express third-party
beneficiary of this Provision for Transfer Agreement and shall have the same
recourse against the Transferee under the Agreement as such Party would have had
against the Transferor with respect to the Transferred Claims.

Date Executed:        ,

 

Print name of Transferee

 

Name: Title: Address:  

 

 

 

Attention:  

 

Telephone:  

 

Facsimile:  

 

 

1  Capitalized terms not used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.

 

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Principal Amount Held Claim2    Amount                                 

 

2  Specify type and indicate whether Claims are Forbearance Fee First Lien Bond
Claims.

 

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Exhibit F

Notice of Retention of RSA Forbearance Fee

The RSA Forbearance Fees payable in respect of $[            ] of First Lien
Bond Claims (such amount, the “Retained RSA Forbearance Fee”) shall be payable
by CEC to the Transferor in accordance with the Restructuring Term Sheet,
notwithstanding the transfer of such First Lien Bond Claims to the undersigned
Transferee.

For the avoidance of doubt, upon delivery of this notice to CEC by either the
Transferor or the Transferee, CEC shall pay the Retained RSA Forbearance Fee in
accordance with the terms of the Restructuring Term Sheet to the Transferor and
shall not be required to pay such amounts to the Transferee, notwithstanding the
transfer of the First Lien Bond Claims to the undersigned Transferee.

Date Executed:        ,

 

Print name of Transferor

 

Name: Title: Address:  

 

 

 

Attention:  

 

Telephone:  

 

Facsimile:  

 

 

Print name of Transferee

 

Name: Title: Address:  

 

 

 

Attention:  

 

Telephone:  

 

Facsimile:  

 

 

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