Exhibit 10.2

EXECUTION VERSION

INVESTMENT AND EXCHANGE AGREEMENT (SPONSORS)

INVESTMENT AND EXCHANGE AGREEMENT (SPONSORS), dated as of June 3, 2010 (this
“Agreement”), among HARRAH’S ENTERTAINMENT, INC., a Delaware corporation
(“HET”), Harrah’s BC, Inc., a Delaware corporation and wholly-owned subsidiary
of HET (“BondCo”), APOLLO MANAGEMENT VI, L.P., on behalf of certain affiliated
investment funds (collectively, “Apollo”), and TPG CAPITAL, L.P., on behalf of
certain affiliated investment funds (collectively, “TPG”; collectively with
Apollo, “Sponsors”).

WHEREAS, Harrah’s Operating Company, Inc., a wholly-owned subsidiary of HET
(“HOC”), has outstanding, among other things, indebtedness in the form of 5.625%
Senior Notes due 2015, 6.5% Senior Notes due 2016 and 5.75% Senior Notes due
2017 (collectively, the “Subject Bonds”);

WHEREAS, BondCo currently owns approximately $854 million in aggregate principal
amount of Subject Bonds as set forth on Schedule I, which were acquired by
BondCo through tender offers and/or repurchases;

WHEREAS, each Sponsor currently owns approximately $52,517,000 in aggregate
principal amount of Subject Bonds (for the avoidance of doubt, an aggregate
principal amount equal to $105,033,000 between both Sponsors) as set forth on
Schedule I (collectively, the “Existing Sponsor Bonds”);

WHEREAS, Sponsors desire to purchase from BondCo, and each of HET and BondCo
desire that BondCo sell to Sponsors, the aggregate principal amount of Subject
Bonds held by BondCo set forth on Schedule I (collectively, the “Additional
Sponsor Bonds,” and together with the Existing Sponsor Bonds, the “Sponsor
Bonds”), in the respective maturities and for the purchase price set forth on
Schedule I (“Bond Purchase Price”);

WHEREAS, the sale of the Additional Sponsor Bonds by BondCo to the Sponsors will
be registered under the Securities Act (as defined below) pursuant to the Bond
Registration Statement (as defined below) and the Prospectus (as defined below);

WHEREAS, Sponsors desire to exchange, and HET desires to allow the exchange of,
the Sponsor Bonds for voting common stock, $0.01 par value per share, of HET
(“New Voting Stock”) at the Applicable Exchange Ratio (as defined below), upon
the terms and subject to the conditions set forth herein, including receipt of
any required gaming and other regulatory approvals (but not, for the avoidance
of doubt, the effectiveness of a registration statement registering the resale
of shares of New Voting Stock pursuant to the Investor Agreement, as defined
below).

WHEREAS, certain investment funds and accounts managed by Paulson & Co. Inc., a
Delaware corporation (collectively, “Investor”), currently own $177,925,000 in
aggregate principal amount of Subject Bonds (collectively, the “Existing
Investor Bonds”);

 

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WHEREAS, concurrently with Sponsors’ purchase of the Additional Sponsor Bonds,
and pursuant to the Investor Agreement (as defined below), Investor will
purchase from BondCo (the “Additional Investor Bond Purchase”) the aggregate
principal amount of Subject Bonds held by BondCo set forth on Schedule I
(collectively, the “Additional Investor Bonds,” and together with the Existing
Investor Bonds, the “Investor Bonds”), in the respective maturities set forth on
Schedule I, and all at the Bond Purchase Price.

WHEREAS, Investor desires to exchange the Investor Bonds for New Voting Stock
(the “Investor Exchange”) at the Applicable Exchange Ratio, upon the terms and
subject to the conditions set forth in the Investor Agreement, including receipt
of any required gaming and other regulatory approvals, and the effectiveness of
a registration statement registering the resale by the Investor pursuant to the
Securities Act of such shares of New Voting Stock and shares of New Voting Stock
that may be issued in exchange for Additional Investor Bonds (the
“Registration”);

WHEREAS, to effect the exchange of Subject Bonds for New Voting Stock, (i) HET
will transfer to BondCo shares of New Voting Stock, and (ii) BondCo will
exchange the same for Subject Bonds from Investor and Sponsors at the Exchange
Ratio and as otherwise described herein, and in a manner expected to be exempt
from registration under United States securities laws (the “Exchange”);

WHEREAS, upon and subject to receipt of the Regulatory Approvals, and prior to
and in connection with the Registration (with respect to Investor only) and the
Exchange, HET will effect the Reclassification (as defined below);

WHEREAS, if the Regulatory Approvals are not obtained on or prior to the
Regulatory Termination Date (as defined below), the Exchange will not be
consummated, and no Subject Bonds will be exchanged for New Voting Stock or any
other security;

NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, HET, BondCo and
Sponsors hereby agree as follows:

ARTICLE 1

DEFINED TERMS; INTERPRETATION

1.1 Defined Terms. As used herein, the following terms have the respective
meanings set forth below:

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person, and the term “control” (including the
terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.

“Applicable Exchange Ratio” means the exchange ratio set forth on Schedule I.

 

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“Bond Registration Statement” means the Registration Statement on Form S-1 of
HET and HOC, SEC file number 333-163368, as originally declared effective by the
SEC on December 17, 2009, as amended through the date hereof.

“Closing Date” means the date on which the Closing occurs.

“Consents” means all consents, waivers, approvals, requirements, allowances,
novations, authorizations, declarations, filings, registrations and
notifications.

“Contract” means any binding agreement, contract or instrument, including any
loan, note, bond, mortgage, indenture, guarantee, deed of trust, license,
franchise, commitment, lease, franchise agreement, letter of intent, memorandum
of understanding or other obligation, and any amendments thereto.

“Exchange Act” the U.S. Securities Exchange Act of 1934, as amended.

“Governmental Entity” means, in any jurisdiction, any (i) federal, state, local,
foreign or international government; (ii) court, arbitral or other tribunal;
(iii) governmental or quasi-governmental authority of any nature (including any
political subdivision, instrumentality, branch, department, official or entity);
or (iv) agency, commission, authority or body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.

“Indebtedness” means, as to any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of any property or services (other than
trade payables incurred in the ordinary course of such Person’s business),
(c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to any property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations of such Person,
(f) all obligations of such Person, contingent or otherwise, as an account party
or applicant under acceptance, letter of credit, surety bond or similar
facilities, (g) all guaranteed obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (f) above and (h) all
obligations of the kind referred to in clauses (a) through (g) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien, security interest or encumbrance on any
property owned by such Person, whether or not such Person has assumed or become
liable for the payment of such obligation. The Indebtedness of any Person shall
include, without duplication, the Indebtedness of any other Person to the extent
such Person is liable therefor.

“Investor Agreement” means that certain Investment and Exchange Agreement, dated
as of the date hereof, among Investor, HET and BondCo.

“Law” means all laws, principles of common law, statutes, constitutions,
treaties, rules, regulations, ordinances, codes, rulings, orders, decisions,
subpoenas, verdicts and licenses of all Governmental Entities.

 

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“Material Adverse Effect” means a material adverse effect on (x) the business,
assets, liabilities, properties, results of operations or financial condition of
HET and its Subsidiaries, taken as a whole; provided, however, that in no event
shall any of the following constitute a Material Adverse Effect: (i) any
occurrence, condition, change, event or effect resulting from or relating to
changes in general economic or financial market conditions, except in the event,
and only to the extent, that such occurrence, condition, change, event or effect
has had a disproportionate effect on HET and its Subsidiaries, taken as a whole,
as compared to other Persons engaged in the gaming industry, (ii) any
occurrence, condition, change, event or effect that affects the gaming industry
generally (including regulatory changes affecting the gaming industry
generally), except in the event, and only to the extent, that such occurrence,
condition, change, event or effect has had a disproportionate effect on HET and
its Subsidiaries, taken as a whole, as compared to other Persons engaged in the
gaming industry, (iii) the outbreak or escalation of hostilities involving the
United States, the declaration by the United States of war or the occurrence of
any natural disasters and acts of terrorism, except in the event, and only to
the extent, of any damage or destruction to or loss of HET’s or its
Subsidiaries’ physical properties, (iv) any occurrence, condition, change, event
or effect resulting from or relating to the announcement or pendency of the
Transactions, (v) any change in generally accepted accounting principles, or in
the interpretation thereof, as imposed upon HET, its Subsidiaries or their
respective businesses or any change in Law, or in the interpretation thereof,
except in the event, and only to the extent, that such occurrence, condition,
change, event or effect has had a disproportionate effect on HET and its
Subsidiaries, taken as a whole, as compared to other Persons engaged in the
gaming industry or (vi) any occurrence, condition, change, event or effect
resulting from compliance by HET and its Subsidiaries with the terms of this
Agreement and each other agreement in connection herewith and therewith;
(y) solely for purposes of the condition set forth in Section 5.2(c)(ii)(C), the
ability of HET or BondCo to consummate the Transactions, other than the sale of
the Additional Sponsor Bonds to Sponsors; or (z) solely for purposes of the
condition set forth in Section 6.2(c), the ability of HET or BondCo to
consummate the sale of the Additional Sponsor Bonds to Sponsors.

“Permits” means all Consents, licenses, permits, certificates, authorizations,
registrations, waivers, variances, exemptions, franchises and other approvals
issued, granted, given, required or otherwise made available by any Governmental
Entity.

“Person” means an individual, firm, corporation (including any non-profit
corporation), partnership, limited liability company, joint venture, associate,
trust, Governmental Entity or other entity or organization.

“Prospectus” means HOC’s Prospectus, dated as of May 24, 2010, SEC file number
333-163368, relating to the Subject Bonds.

“Recapitalization” means any reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other substantially similar
transaction.

“Reclassification” means the reclassification of HET’s existing non-voting and
voting common stock such that the existing voting stock is cancelled, and the
existing non-voting common stock is converted into New Voting Stock.

 

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“Regulatory Approvals” means all Permits, findings of suitability, franchises
and entitlements issued or issuable by any Regulatory Authority or under any
Regulatory Law which are necessary to permit the consummation of the Exchange
(including the Reclassification and the issuance of New Voting Stock).

“Regulatory Authority” means any Governmental Entity with regulatory control or
jurisdiction over the ownership or conduct of lawful gaming or gambling or
otherwise applicable to HET and its Subsidiaries.

“Regulatory Law” means any federal, state, local or foreign Law, Permit,
registration, finding of suitability, approval or other authorization (including
any condition or limitation placed thereon) governing or relating to gaming and
the conduct of gaming activities and other operations of HET and its
Subsidiaries (including all Laws relating to related regulated activities such
as liquor, cabaret, horse racing and the like).

“Regulatory Termination Date” means, if the Regulatory Approvals have not been
obtained by such date, the nine (9) month anniversary of the date of submission
of the Required Regulatory Filings (as defined below) (for the avoidance of
doubt, with the result that any Subject Bonds then held by Sponsors will not be
exchanged for New Voting Stock or any other security).

“Relevant Casino” means any casino owned by HET or any of its Subsidiaries
within the continental United States that has aggregate gaming floor space
greater than or equal to 25,000 square feet.

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

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
joint venture or other legal entity of which such Person (either alone or
through or together with any other subsidiary), (i) owns, directly or
indirectly, more than fifty percent (50%) of the stock or other equity
interests, (ii) has the power to elect a majority of the board of directors or
similar governing body or (iii) has the power to direct the business and
policies.

A Person is deemed to have effected a “Transfer” of a security if such Person
directly or indirectly (i) sells, offers to sell, pledges, encumbers,
hypothecates, grants an option or engages in any short sale with respect to,
transfers or disposes of such security or any interest in such security to any
Person, (ii) enters into an agreement or commitment contemplating the possible
sale of, pledge of, encumbrance of, grant of an option with respect to, transfer
of or disposition of such security or any interest therein to any Person, or
(iii) reduces such Person’s beneficial ownership of, or interest in, such
security.

1.2 Other Interpretive Provisions. The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms. The words
“hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a
whole and not to any particular provision of this Agreement; and any subsection,
Section, Exhibit, Annex and Schedule references are to those of this Agreement
unless otherwise specified. The term “including” is not limiting and means
“including without limitation.” The word “or” is not exclusive. The captions and
headings

 

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of this Agreement are for convenience of reference only and shall not affect the
interpretation of this Agreement. Whenever the context requires, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms.

ARTICLE 2

PURCHASE OF ADDITIONAL SPONSOR BONDS

2.1 Purchase. Upon the terms and subject to the conditions of this Agreement, at
the Closing (as defined below), each Sponsor, severally and not jointly, shall
purchase and accept from BondCo, and BondCo shall sell, assign, transfer and
deliver to each Sponsor, such Sponsor’s respective Additional Sponsor Bonds,
free and clear of all encumbrances.

2.2 Consideration. At the Closing, in consideration for the sale of the
Additional Sponsor Bonds, each Sponsor shall pay or cause to be paid to BondCo
or its designee the cash purchase price set forth on Schedule I, by wire
transfer of immediately available funds to an account or accounts previously
designated by BondCo to Sponsors.

2.3 Closing. The consummation of the purchase and sale of the Additional Sponsor
Bonds (the “Closing”) shall take place at the offices of O’Melveny & Myers LLP,
Times Square Tower, 7 Times Square, New York, NY 10036 (or at any other location
agreed upon by the parties hereto) on the business day (or on such other date as
is agreed to among the parties) on which the satisfaction or waiver of the
conditions set forth in Article 6 (other than any conditions that by their terms
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such conditions) is obtained, which shall in no event be less than fifteen
(15) business days following the date hereof.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF HET AND BONDCO

Except as otherwise disclosed or incorporated by reference in the SEC Filings
(as defined below) or Prospectus, each of HET and BondCo, jointly and severally,
represents and warrants, as of the date hereof and as of the Closing Date, to
each Sponsor as follows:

3.1 Organization, Power and Authority. Each of HET and BondCo is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of HET and BondCo has all requisite corporate power and
authority to execute, deliver and perform the terms of this Agreement and to
consummate the transactions contemplated by this Agreement (collectively, the
“Transactions”) and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.

3.2 Subsidiaries. Each of BondCo and HOC are wholly-owned Subsidiaries of HET.

3.3 Due Execution; Enforceability. This Agreement has been duly and validly
executed and delivered by each of HET and BondCo and constitutes the legal,
valid and binding obligation of each of HET and BondCo, enforceable against each
of them in accordance with its terms, subject to bankruptcy, insolvency or other
similar laws of general application affecting creditors’ rights and general
principles of equity.

 

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3.4 No Conflicts. Neither the execution and delivery by HET or BondCo of this
Agreement, the compliance by HET or BondCo with the terms and conditions hereof,
nor the consummation by HET or BondCo of the Transactions will (i) violate,
result in a breach of, or constitute a default under their respective
certificates of incorporation or bylaws, (ii) violate, result in a breach of, or
constitute a default under (with or without notice or lapse of time, or both),
in each case in any material respect, any Contract, judgment, order or decree to
which HET, HOC or BondCo is a party or is otherwise bound or give to others any
material rights or interests (including rights of purchase, termination,
cancellation or acceleration) under any such agreement or instrument or
(iii) assuming all Regulatory Approvals have been obtained and are effective,
conflict with or violate in any material respect any applicable Laws (including
Regulatory Laws).

3.5 Ownership. BondCo is the sole, lawful owner of record and beneficially of
the Additional Sponsor Bonds, and has good and marketable title to the
Additional Sponsor Bonds, free and clear of any encumbrances. At the Closing,
BondCo will transfer, and HET will cause BondCo to transfer, to each Sponsor
good and marketable title to such Sponsor’s respective Additional Sponsor Bonds,
free and clear of all encumbrances. There are no contracts or other agreements
between or among BondCo, HOC, HET and any other Person that would conflict with,
restrict or prohibit BondCo’s ability to transfer the Additional Sponsor Bonds
to Sponsors as described herein. Without limiting the generality of the
foregoing, except as provided herein, neither BondCo nor HET has pledged,
hypothecated or granted any security interest in the Additional Sponsor Bonds or
entered into any purchase, participation, option, call or put agreement or
arrangement with respect to the Additional Sponsor Bonds.

3.6 Consents. Except for the Regulatory Approvals, no consents, approvals,
permits, orders or authorizations of, exemptions, reviews or waivers by, or
notices, reports, filings, declarations or registrations with, any Governmental
Entity, Regulatory Authority or of, by or with any other Person are required to
be made or obtained by HET or any of its Subsidiaries in connection with the
execution, delivery and performance by HET and its Subsidiaries of this
Agreement or the consummation of the Transactions, other than those that,
individually or in the aggregate, are not material. Except for the Regulatory
Approvals, and approvals necessary for the Registration and listing on a
national securities exchange, no consents, approvals, permits, orders or
authorizations of, exemptions, reviews or waivers by, or notices, reports,
filings, declarations or registrations with, any Governmental Entity, Regulatory
Authority or of, by or with any other Person are required to be made or obtained
by HET or any of its Subsidiaries in connection with the execution, delivery and
performance by HET and its Subsidiaries of the transactions contemplated by the
Investor Agreement, other than those that, individually or in the aggregate, are
not material.

3.7 Capitalization. As of the date hereof, HET has 60,560,806.86 shares of
non-voting common stock, $0.01 par value per share, issued and outstanding, all
of which were validly issued, fully paid and non-assessable

3.8 Intentionally Omitted.

 

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3.9 No Impairment.

(a) The Additional Sponsor Bonds were duly authorized, validly issued and are
outstanding under the indentures governing such Subject Bonds. The Additional
Sponsor Bonds and the Credit Documents (as defined below) constitute binding
obligations of HOC, enforceable against HOC in accordance with their respective
terms, subject to bankruptcy, insolvency or other similar laws of general
application affecting creditors’ rights and general principles of equity.

(b) BondCo has not given its consent to change, nor has it waived, any material
term or provision of any indenture, note, guaranty, security agreement or other
agreement governing or executed and delivered in connection with the Additional
Sponsor Bonds (collectively, the “Credit Documents”), including with respect to
the amount or time of any payment of principal or the rate or time of any
payment of interest.

(c) BondCo has not engaged in any acts or conduct or made any omissions that
will result in any Sponsor receiving proportionately less in payments or
distributions under, or less favorable treatment (including the timing of
payments or distributions) for, the Additional Sponsor Bonds than is received by
other holders of Subject Bonds.

(d) BondCo is not a party to, or bound by, any Contract that would materially
and adversely affect any Sponsor’s rights and remedies under the Additional
Sponsor Bonds or this Agreement.

(e) HOC is not in material violation of or in default under, and no event has
occurred or exists that, with notice or lapse of time or both, would constitute
a default under, any provision of the Credit Documents.

3.10 Company Reports and Financial Statements.

(a) HET and each of its Subsidiaries has filed or furnished, as applicable, all
forms, filings, registrations, submissions, statements, certifications, reports
and documents required to be filed or furnished by it with the SEC under the
Exchange Act or the Securities Act (collectively, “SEC Filings”) since
December 31, 2007 (the SEC Filings since December 31, 2007 and through the date
hereof, including any amendments thereto, the “Company Reports”). As of their
respective dates (or, if amended prior to the date hereof, as of the date of
such amendment), each of the Company Reports, as amended, complied as to form in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act, and any rules and regulations promulgated thereunder
applicable to the Company Reports. As of their respective dates (or, if amended
prior to the date hereof, as of the date of such amendment), the Company Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading.

(b) HET’s consolidated financial statements (including, in each case, any notes
thereto) contained in the Company Reports were prepared (i) in accordance with
generally accepted accounting principles in the United States of America
(“GAAP”) applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto or, in the case of interim consolidated
financial statements, where information and footnotes contained in

 

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such financial statements are not required under the rules of the SEC to be in
compliance with GAAP) and (ii) in compliance as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and in each case such consolidated financial statements
fairly presented, in all material respects, the consolidated financial position,
results of operations, changes in stockholder’s equity and cash flows of HET and
its consolidated Subsidiaries as of the respective dates thereof and for the
respective periods covered thereby (subject, in the case of unaudited
statements, to normal year-end adjustments which were not, individually or in
the aggregate, material to HET and its consolidated Subsidiaries taken as a
whole).

3.11 Insolvency. Neither HET nor any of its Subsidiaries has, within the five
(5) years prior to the date hereof, taken any steps to seek protection pursuant
to any bankruptcy law, nor does HET or any of its Subsidiaries have any actual
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so. Neither HET nor any of its Subsidiaries is, or will be
as a result of the consummation of the Transactions, Insolvent (as defined
below). BondCo has no liabilities other than those arising under this Agreement.
“Insolvent” means, with respect to any Person, (i) that such Person’s financial
condition is such that the sum of such Person’s Indebtedness is greater than all
of such Person’s property at a fair valuation, (ii) that such Person intended to
incur, or believed that it would incur, Indebtedness that would be beyond such
Person’s ability to pay as such Indebtedness matured or (iii) that such Person
was engaged in a business or a transaction, or was about to engage in business
or a transaction, for which any property remaining with such Person was an
unreasonably small capital.

3.12 No Default. Neither HET nor any of its Subsidiaries are in default, nor has
there been an event of default, and no event has occurred or exists that, with
notice or lapse of time or both, would constitute such an event of default, with
respect to (i) the Credit Agreement dated as of January 28, 2008, as amended by
the Amendment and Waiver dated as of June 3, 2009 and the Incremental Facility
Amendment dated as of September 26, 2009 (the “Credit Agreement”), among HET (as
successor in interest to Hamlet Merger Inc.), HOC, Bank of America, N.A., as
administrative agent and collateral agent, and the other parties party thereto,
(ii) the Real Estate Facility (as defined in the Credit Agreement), (iii) the
11.25% senior secured notes due 2017 issued by HOC, (iv) the 10.00%
second-priority senior secured notes due 2015 and 10.00% second-priority senior
secured notes due 2018 issued by HOC on December 24, 2008, (v) the 10.00%
second-priority senior secured notes due 2018 issued by HOC on April 15, 2009,
(vi) the 12.75% second-priority senior secured notes due 2018 issued by HOC,
(vii) the 10.75% senior notes due 2016 and the 10.75%/11.5% senior toggle notes
due 2018 issued by HOC, (viii) that certain term loan agreement dated as of
July 31, 2009, among Chester Downs and Marina, LLC, Citibank, N.A. and the
lenders party thereto, (ix) that certain amended and restated loan agreement,
dated as of February 19, 2010, among PHW Las Vegas, LLC and Wells Fargo Bank,
N.A., (x) the 5.375% Senior Notes due 2013 issued by HOC; (xi) the 5.625% Senior
Notes due 2015 issued by HOC; (xii) the 6.500% Senior Notes due 2016 issued by
HOC; (xiii) the 5.750% Senior Notes due 2017 issued by HOC and (xiv) any other
Indebtedness of HET or any of its Subsidiaries in excess of $100,000,000
(collectively, the “Material Indebtedness”).

 

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SPONSORS

Each Sponsor, severally and not jointly, represents and warrants, as of the date
hereof and as of the Closing Date, to each of HET and BondCo as follows:

4.1 Power and Authority. Such Sponsor is duly organized, validly existing and in
good standing under the laws of the state of its organization. Such Sponsor has
all requisite limited partnership power and authority to execute, deliver and
perform the terms of this Agreement and to consummate the Transactions and has
taken all necessary limited partnership action to authorize the execution,
delivery and performance of this Agreement.

4.2 Due Execution; Enforceability. This Agreement has been duly and validly
executed and delivered by such Sponsor and constitutes the legal, valid and
binding obligation of such Sponsor, enforceable against such Sponsor in
accordance with its terms, subject to bankruptcy, insolvency or other similar
laws of general application affecting creditors’ rights and general principles
of equity.

4.3 No Conflicts; Consents. Neither the execution and delivery by such Sponsor
of this Agreement, the compliance by such Sponsor with the terms and conditions
hereof, nor the consummation by such Sponsor of the Transactions will
(i) violate, result in a breach of, or constitute a default under their
respective certificates of limited partnership or bylaws, if any, (ii) violate,
result in a breach of, or constitute a default under (with or without notice or
lapse of time, or both), in each case in any material respect, any agreement,
instrument, judgment, order or decree to which such Sponsor is a party or is
otherwise bound or give to others any material rights or interests (including
rights of purchase, termination, cancellation or acceleration) under any such
agreement or instrument or (iii) assuming all Regulatory Approvals have been
obtained and are effective, conflict with or violate in any material respect any
applicable Laws (including Regulatory Laws). The execution, delivery and
performance of this Agreement by such Sponsor and the consummation of the
Transactions do not and will not require any Permit of, or filing with or
notification to, any Governmental Entity except, as applicable, (i) Regulatory
Approvals and (ii) requirements under the Exchange Act and the rules and
regulations promulgated thereunder.

4.4 Ownership. Such Sponsor is the lawful owner of record and beneficially of
such Sponsor’s respective Existing Sponsor Bonds, and has good and marketable
title to such Sponsor’s respective Existing Sponsor Bonds, free and clear of any
encumbrances, except for encumbrances created by this Agreement. There are no
contracts or other agreements between or among such Sponsor and any other Person
that would conflict with, restrict or prohibit such Sponsor’s ability to
exchange such Sponsor’s respective Existing Sponsor Bonds as described herein.

4.5 Investment Representations. Such Sponsor is an “accredited investor” (as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act) and
a “qualified institutional buyer” (as defined in Rule 144A promulgated under the
Securities Act) and has generally such knowledge and experience in business and
financial matters and with respect to investments in securities of privately
held companies so as to enable such Sponsor to understand and evaluate the risks
and benefits of its investment in the Additional Sponsor Bonds (and, by virtue
of such Sponsor’s agreement to effect the exchange of the same as described
herein, the New Voting Stock). HET has provided such Sponsor with such
disclosure with respect to the

 

10

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operations, business prospects and condition (financial or otherwise) of HET and
its Subsidiaries as was requested by such Sponsor in order for such Sponsor to
have made a voluntary and informed investment decision to acquire the Additional
Sponsor Bonds (and, by virtue of such Sponsor’s agreement to effect the exchange
of the same as described herein, the New Voting Stock).

4.6 No Additional Representations. Except as expressly set forth herein, neither
HET nor BondCo makes any representation or warranty, or extends any warranties
of any kind, express or implied. Without limiting the foregoing, neither HET nor
BondCo makes any representation or warranty with respect to any projections,
forecasts or forward looking information provided to Sponsors, if any.

ARTICLE 5

COVENANTS

5.1 Gaming Regulatory Matters. Promptly following the date hereof, but not later
than sixty (60) days following the date hereof, HET shall prepare or cause to be
prepared, and shall submit or cause to be submitted, all required initial
applications and documents (collectively, the “Required Regulatory Filings”) in
connection with obtaining, and shall otherwise use its reasonable best efforts
to obtain, including by pursuing any ordinary-course or customary and typical
rights of appeal (provided that, notwithstanding the foregoing, in no event
shall HET or any HET Party (as defined below) in its reasonable judgment be
required to take any action, or to refrain from taking any action, that would be
reasonably likely to interfere with or be adverse or damaging to HET’s ongoing
relationship with any Regulatory Authority), the Regulatory Approvals. Each of
HET and Sponsors shall comply with the terms and conditions of all such
Regulatory Approvals and shall promptly and in good faith respond to, and cause
their respective officers, managers, directors and Affiliates to promptly and in
good faith respond to, all requests for information by any Regulatory Authority
in connection with such applications and otherwise to cooperate in good faith
with each other and such Regulatory Authorities.

5.2 Exchange.

(a) Intentionally Omitted.

(b) Consummation of Exchange. As promptly as practicable following the date on
which the conditions set forth in Section 5.2(c) below are satisfied, (i) each
Sponsor shall cause to be validly and irrevocably tendered for exchange in the
Exchange such Sponsor’s respective Sponsor Bonds (including, for the avoidance
of doubt, the Existing Sponsor Bonds and the Additional Sponsor Bonds) and
(ii) BondCo shall, and HET shall cause BondCo to, consummate the Exchange by
exchanging Subject Bonds for New Voting Stock as set forth herein.

 

11

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(c) Conditions to Exchange.

(i) Conditions to the Obligations of Each Party. The respective obligations of
Sponsors, HET and BondCo to consummate the Exchange are subject to the
satisfaction or waiver, at or before the consummation of the Exchange, of each
of the following conditions:

(A) No Injunctions, Illegality or Litigation. No Law or temporary restraining
order, preliminary or permanent injunction or other judgment, writ, decree or
judicial or administrative orders issued by any Governmental Entity shall have
been adopted, promulgated, issued or threatened that would, and there shall not
be pending any proceeding that would (if adversely determined), prohibit,
prevent or render unlawful the consummation of the Exchange; and

(B) Regulatory Approvals; Reclassification; Registration. The Regulatory
Approvals (other than the Registration) shall have been obtained and not
revoked; and the Reclassification shall have been effected.

(ii) Conditions to the Obligation of Sponsors. The obligation of Sponsors to
consummate the Exchange is further subject to the satisfaction or waiver, at or
before the closing of the Exchange, of the following conditions:

(A) subject to Section 5.2(c)(ii)(K), the representations and warranties of HET
and BondCo set forth in this Agreement shall be true and correct on and as of
the date hereof and on and as of the date of the consummation of the Exchange
(except to the extent any such representation and warranty speaks as of a
specific date, in which event such representation and warranty shall be true and
correct as of such specific date), except for such failures to be true and
correct (without regard to qualification or exceptions contained therein as to
materiality) that would not, individually or in the aggregate, be “material” to
the investment decision of a reasonable investor making an investment decision
in respect of the Transactions, and Sponsors shall have received a certificate
of an executive officer of HET to such effect. For purposes of the foregoing,
“material” means, with respect to the failure of any representations and
warranties of HET and BondCo to be true and correct, that there is a substantial
likelihood that a reasonable investor would attach importance to such failure in
determining whether to exchange Subject Bonds for New Voting Stock. For the
avoidance of doubt, the failure of any of the representations and warranties of
HET and BondCo to be true and correct need not result in a Material Adverse
Effect in order to be deemed “material” for purposes of this
Section 5.2(c)(ii)(A);

(B) each and all of the covenants and agreements of HET and BondCo to be
performed or complied with prior to the date of the consummation of the Exchange
shall have been performed and complied with in all material respects, and
Sponsors shall have received a certificate of an executive officer of HET to
such effect;

(C) no Material Adverse Effect shall have occurred;

(D) no gaming license necessary for the operation of any Relevant Casino shall
have been revoked or suspended;

(E) no voluntary or involuntary bankruptcy proceedings shall have been
initiated, and there is no intent to initiate voluntary bankruptcy proceedings,
and

 

12

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none of HET nor any of its Subsidiaries shall have any actual knowledge or
reason to believe that any of its or their creditors intend to initiate
involuntary bankruptcy proceedings, in each case with respect to HET or any of
its material Subsidiaries;

(F) no default or event of default under any Credit Document or Material
Indebtedness shall have occurred, except for any defaults or events of default
that have been properly cured in accordance with the terms of the applicable
Credit Document or Material Indebtedness, as the case may be;

(G) (i) the Investor Exchange shall have been consummated or shall be
consummated substantially simultaneously with the Exchange and (ii) as to either
Sponsor, the Exchange by the other Sponsor shall have been consummated or shall
be consummated simultaneously with the Exchange by the referent Sponsor;

(H) except as contemplated in connection with the Transactions, no change in
HET’s capital structure shall have occurred that would have a Material Adverse
Effect;

(I) no merger, consolidation, change of control or other reorganization of HET
or any of its material Subsidiaries shall have occurred that would have a
Material Adverse Effect;

(J) the terms of the Exchange that are applicable to Sponsors shall be at least
as favorable to Sponsors as the terms of any Alternative Exchange that are
applicable to any other Person, taken as a whole; and

(K) notwithstanding Section 5.2(c)(ii)(A), the representations and warranties of
HET and BondCo set forth in Sections 3.9(e) and 3.12 shall be true and correct
on and as of the date hereof and on and as of the date of the consummation of
the Exchange.

(d) Other Exchanges. From the date hereof until the termination of this
Agreement, if HET offers to any Person to exchange any Subject Bonds for New
Voting Stock or other capital stock of HET (an “Alternative Exchange”) on terms
that are more favorable, taken as a whole, to such Person than the terms of the
Exchange are to Sponsors, then HET will promptly disclose such terms of such
Alternative Exchange to Sponsors and Sponsors will then have the right to
receive the rights, benefits and obligations of all of such terms of such
Alternative Exchange with respect to the Exchange (to the extent not then
consummated).

5.3 Public Disclosure. From the date of this Agreement until the Closing or
termination hereof, the parties shall cooperate in good faith to jointly prepare
all press releases and public announcements pertaining to the Transactions
(including any Current Report on Form 8-K pursuant to the Exchange Act reporting
the execution of this Agreement and/or consummation of the Exchange), and no
party shall issue or otherwise make any public announcement pertaining to the
Transactions without the prior consent of HET (in the case of Sponsors) or
Sponsors (in the case of HET or BondCo), except as required, on the advice of
legal counsel, by Law, Regulatory Authorities (including filings in connection
with obtaining the Regulatory Approvals) or the requirements of a securities
exchange (a “Compelled Disclosure”). Each party will not

 

13

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unreasonably withhold approval from the others with respect to any press release
or public announcement. If any party, after consultation with its legal counsel,
determines that it is required to make any Compelled Disclosure, it shall, to
the extent permitted by Law, at a reasonable time before making any such
Compelled Disclosure, consult with the other parties regarding such Compelled
Disclosure and give the other parties reasonable time to comment on such
Compelled Disclosure in advance of such issuance and shall only include in any
such Compelled Disclosure such information that is legally required to be
disclosed upon the advice of legal counsel (and may not refer to the other party
absent the other party’s prior opportunity to review and comment on the portions
of such Compelled Disclosure referring to such party). This provision will not
apply to communications by any party to its legal counsel, accountants and other
professional advisors.

5.4 Transfer Restrictions.

(a) From the date hereof until the termination of this Agreement, neither
Sponsor shall, directly or indirectly, cause or permit to be effected any
Transfer of Subject Bonds directly or indirectly owned by such Sponsor, except
(a) in connection with the Exchange and (b) to any Affiliate thereof. The
foregoing restriction is expressly agreed to preclude engaging in any hedging or
other transaction that is designed to or that reasonably could be expected to
lead to or result in a sale or disposition of Subject Bonds even if such Subject
Bonds would be disposed of by someone other than Sponsors. Such prohibited
hedging or other transactions would include any short sale or any purchase, sale
or grant of any right (including any put or call option) with respect to any of
such Sponsor’s Subject Bonds or with respect to any security that includes,
relates to, or derives any significant part of its value from such Subject
Bonds.

(b) Notwithstanding the foregoing, the provisions of this Section 5.4 shall
terminate and be of no further force and effect, upon (w) the initiation of, or
written intent to initiate, voluntary or involuntary bankruptcy with respect to
HET or any of its material Subsidiaries, (x) the occurrence of a default, event
of default or material breach under any Credit Document or any Material
Indebtedness, (y) any material breach of this Agreement by HET or BondCo that
remains uncured (if curable) for more than thirty (30) days after HET’s receipt
of written notice specifying such alleged breach (a termination upon expiration
of such thirty (30) day period in this clause (y) being referred to as a “Breach
Termination”) or (z) the expiration of the five (5) day period following HET’s
receipt of written notice from either Sponsor to such effect, which notice is
delivered subsequent to HET’s provision to Sponsors of a copy of a written
communication from an applicable Regulatory Authority that contains an express
denial of any Regulatory Approval (a “Denial Letter”), which denial purports to
be, and is (including at the expiration of such five (5) day notice period),
final, non-appealable and not susceptible to cure or redress through a change in
the transactions as contemplated herein, which change would not be material to a
reasonable private equity investor; provided, that, for purposes of the
foregoing clause (z), HET shall provide Sponsors with a copy of any Denial
Letter promptly following receipt of the same. Nothing in this Section 5.4 shall
constitute or permit any alteration in the parties’ respective obligations under
this Agreement.

(c) If the provision of the Investor Agreement equivalent to this Section 5.4,
or any amendment to such provision, is more favorable to Investor in any respect
than the provisions of this Section 5.4 with respect to Sponsors, then HET will
promptly disclose such more favorable provision to Sponsors and Sponsors will
then have the right to receive the rights and benefits of such more favorable
provision.

 

14

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5.5 SEC Filings. HET shall timely file, or cause to be timely filed, all SEC
Filings.

ARTICLE 6

CONDITIONS TO CLOSING

6.1 Conditions to the Obligations of Each Party. The respective obligations of
Sponsors, HET and BondCo to consummate the Closing are subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:

(a) No Injunctions, Illegality or Litigation. No Law or temporary restraining
order, preliminary or permanent injunction or other judgment, writ, decree or
judicial or administrative orders issued by any Governmental Entity shall have
been adopted, promulgated, issued or threatened that would, and there shall not
be pending any proceeding that would (if adversely determined), prohibit,
prevent or render unlawful the consummation of the Closing.

6.2 Conditions to the Obligations of Sponsors. The obligation of each Sponsor to
consummate the Closing is further subject to the satisfaction or waiver, at or
before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of HET
and BondCo set forth in this Agreement that are qualified as to materiality
shall be true and correct in all respects, and those that are not so qualified
shall be true and correct in all material respects, on and as of the date hereof
and on and as of the Closing Date as though made on and as of the Closing Date
(except to the extent any such representation and warranty speaks as of a
specific date, in which event such representation and warranty shall be true and
correct as of such specific date), and each Sponsor shall have received a
certificate of an executive officer of HET to such effect.

(b) Performance of Obligations. Each and all of the covenants and agreements of
HET and BondCo to be performed or complied with prior to the date hereof
pursuant to this Agreement shall have been performed and complied with in all
material respects, and each Sponsor shall have received a certificate of an
executive officer of HET to such effect.

(c) No Material Adverse Effect. No Material Adverse Effect shall have occurred.

(d) Revocation or Suspension. No gaming license necessary for the operation of
any Relevant Casino shall have been revoked or suspended.

(e) Bond Purchases.

(i) The Additional Investor Bond Purchase pursuant to the Investor Agreement
shall have been consummated or shall be consummated substantially simultaneously
with the Closing; and

 

15

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(ii) as to either Sponsor, the purchase by the other Sponsor of such Sponsor’s
respective Additional Sponsor Bonds pursuant to this Agreement shall have been
consummated or shall be consummated substantially simultaneously with the
Closing.

(f) Closing Deliveries. At the Closing, HET and BondCo shall deliver, or shall
cause to be delivered to each Sponsor:

(i) Evidence of the transfer to such Sponsor, in book-entry form, of legal and
beneficial title to such Sponsor’s respective Additional Sponsor Bonds,
registered in such names and in such denominations as set forth in instructions
of such Sponsor delivered to HET three (3) days prior to Closing; and

(ii) such other documents as such Sponsor may reasonably request in accordance
herewith to consummate the Closing.

(g) No Bankruptcy. No voluntary or involuntary bankruptcy proceedings shall have
been initiated, and there is no intent to initiate voluntary bankruptcy
proceedings, and none of HET nor any of its Subsidiaries shall have any actual
knowledge or reason to believe that any of its or their creditors intend to
initiate involuntary bankruptcy proceedings, in each case with respect to HET or
any of its material Subsidiaries.

(h) Defaults. No default or event of default under any Credit Document or
Material Indebtedness shall have occurred, except for any defaults or events of
default that have been properly cured in accordance with the terms of the
applicable Credit Document or Material Indebtedness, as the case may be.

6.3 Conditions to the Obligations of HET and BondCo. The respective obligations
of HET and BondCo to consummate the Closing are further subject to the
satisfaction or waiver, at or before the Closing, of each of the following
conditions:

(a) Representations and Warranties. The representations and warranties of
Sponsors set forth in this Agreement that are qualified as to materiality shall
be true and correct in all respects, and those that are not so qualified shall
be true and correct in all material respects, on and as of the date hereof and
on and as of the Closing Date as though made on and as of the Closing Date
(except to the extent any such representation and warranty speaks as of a
specific date, in which event such representation and warranty shall be true and
correct as of such specific date).

(b) Performance of Obligations. Each and all of the covenants and agreements of
Sponsors to be performed or complied with prior to the date hereof pursuant to
this Agreement shall have been performed and complied with in all material
respects.

(c) Consideration. Sponsors shall have paid the purchase price as provided in
Section 2.2.

 

16

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ARTICLE 7

TERMINATION

7.1 Termination. This Agreement (a) may be terminated by mutual consent in
writing of each of HET, BondCo and Sponsors, or (b) shall terminate on the
earlier to occur of (x) the Regulatory Termination Date or (y) a Breach
Termination, but in any event not later than eleven (11) months after the date
hereof.

7.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 7.1, this Agreement shall become void and have no effect,
without any liability or obligation on the part of any party hereto or their
respective Affiliates, officers, directors or stockholders, other than this
Section 7.2, Article 8 and Article 9, which shall survive such termination.
Notwithstanding the foregoing, upon a Breach Termination, the covenants and
agreements contained herein that relate to the New Voting Stock shall survive in
accordance with their terms with respect to those shares of New Voting Stock, if
any, then held by Sponsors.

ARTICLE 8

SURVIVAL

All representations and warranties of HET and BondCo under this Agreement shall
not survive the Closing. The covenants and agreements of HET and BondCo under
this Agreement that are intended to be performed following the Closing shall
survive the Closing in accordance with their terms.

ARTICLE 9

GENERAL

9.1 Entire Agreement. This Agreement contains all of the agreements, covenants,
terms, conditions and representations and warranties agreed upon by the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations, correspondence, undertakings,
representations, warranties and communications of any kind between the parties
and their representatives, whether oral or written, respecting such subject
matter.

9.2 Amendment and Waivers. This Agreement may be modified, supplemented or
amended only by a written instrument executed by HET, BondCo and Sponsors.
Waiver by a party of any breach of or failure to comply with any provision of
this Agreement by another party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement. No waiver of any
such breach or failure of any term of this Agreement shall be effective unless
in a written notice signed by the waiving party and delivered to the affected
party in accordance with Section 9.8.

9.3 Successors and Assigns. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective legal
representatives, successors and assigns; provided, that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of each other party hereto.

 

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9.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within the State of Delaware. Each party also
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America located in the State of Delaware for any actions, suits or proceedings
arising out of or relating to this Agreement and the Transactions (and each
party agrees not to commence any action, suit or proceeding relating thereto
except in such courts, and further agree that service of any process, summons,
notice or document by U.S. registered mail to its principal mailing address
shall be effective service of process for any action, suit or proceeding brought
against it in any such court). Each party hereby irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the Transactions in the courts of the State of
Delaware or the United States of America located in the State of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.

9.5 Counterparts; Effectiveness. This Agreement may be executed and delivered
(including by electronic or 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.

9.6 Severability. If a court of competent jurisdiction rules that any provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, the parties agree that this Agreement shall be
considered severable and divisible, and a reviewing court shall have the
authority to amend or “blue pencil” this Agreement so as to make it fully valid
and enforceable.

9.7 Expenses. All fees and expenses incurred in connection with the Transactions
shall be the responsibility of the respective party incurring such fees and
expenses.

9.8 Notices. All notices and other communications provided for or permitted
hereunder shall be in writing and shall be made by (a) United States registered
or certified mail (return receipt requested), postage prepaid, in an envelope
properly sealed, (b) a facsimile transmission where written acknowledgment of
receipt of such transmission is received and a copy of the transmission is
mailed with postage prepaid or (c) a nationally recognized overnight delivery
service, in each case as follows:

 

(a)    if to HET or BondCo:   

Harrah’s Entertainment, Inc.

  

Harrah’s BC, Inc.

  

One Caesars Palace Drive

  

Las Vegas, Nevada 89109

  

Facsimile: (702) 407-6418

  

Attention: General Counsel

 

18

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

 

   O’Melveny & Myers LLP   

Times Square Tower

  

7 Times Square

  

New York, NY 10036

  

Facsimile:

 

(212) 326-2061

  

Attention:

 

John Scott, Esq.

(b)

  

if to Apollo:

   Apollo Management VI, L.P.   

9 West 57th Street, 43rd Floor

  

New York, NY 10019

  

Facsimile:

 

(914) 694-8067

  

Attention:

 

David Sambur

(c)

  

if to TPG:

  

TPG Capital, L.P.

  

301 Commerce Street, Suite 3300

  

Fort Worth, TX 76102

  

Facsimile:

 

(817) 871-4010

  

Attention:

 

Ron Cami

  

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

  

Cleary Gottlieb Steen & Hamilton LLP

  

One Liberty Plaza

  

New York, NY 10006

  

Facsimile:

 

(212) 225-3999

  

Attention:

 

Paul J. Shim, Esq.

9.9 Remedies; Limitations.

(a) The parties agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of HET and BondCo, on the one hand, and
Sponsors, on the other hand, will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement. The parties agree to waive in any action for
specific performance of any such obligation (other than in connection with any
action for a temporary restraining order) the defense that a remedy at law would
be adequate.

(b) The sole and exclusive remedy for breaches of representations and warranties
set forth herein shall be the respective right to refuse to consummate one or
more Transactions, as applicable, in accordance with and subject to the
conditions precedent set forth herein.

 

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(c) Notwithstanding anything to the contrary herein, in any action, suit, claim
or other proceeding hereunder or otherwise in connection with the Transactions,
whether pursuant to claims under contract, tort, indemnification or any other
theory, no party shall seek or be entitled to, and each party hereby knowingly
and expressly disclaims the right to assert or receive, damages other than
direct damages. In furtherance of the foregoing, the parties expressly disclaim,
and shall not be entitled to recover, any indirect, incidental, special,
exemplary, punitive or consequential damages or any damages measured by or based
on diminution of value, lost profits, a multiple of earnings and/or future value
of the New Voting Stock or equity interests of HET in the event Subject Bonds
are not exchanged for New Voting Stock or equity interests of HET as set forth
herein.

* * * * *

 

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

 

HARRAH’S ENTERTAINMENT, INC. By:  

/s/ Jonathan Halkyard

Name:   Title:   HARRAH’S BC, INC. By:  

/s/ Jonathan Halkyard

Name:   Title:   APOLLO MANAGEMENT VI, L.P. By:   AIF VI Management, LLC, its
general partner By:  

/s/ Laurie Medley

Name:   Laurie Medley Title:   Vice President TPG CAPITAL, L.P. By:   Tarrant
Capital, LLC, its general partner By:  

/s/ Clive Bode

Name:   Clive Bode Title:   Vice President

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SCHEDULE I

SUBJECT BONDS OWNED BY BONDCO

 

Maturity

   Percentage
of Total     Principal
amount owned
($000s)    Coupon  

2015

   39.8 %    339,922    5.625 % 

2016

   25.0 %    213,118    6.5 % 

2017

   35.2 %    300,902    5.75 %               

TOTAL

   100.0 %    853,942   

EXISTING SPONSOR BONDS

 

Maturity

   Principal
amount owned
($000s)    Coupon  

2015

     29,486    5.625 % 

2016

     5,701    6.5 % 

2017

     17,330    5.75 % 

TOTAL PER SPONSOR (approximate):

     52,517   

TOTAL FOR SPONSORS:

   $ 105,033,000   

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ADDITIONAL SPONSOR BONDS; BOND PURCHASE PRICE

Each Sponsor shall purchase 50% of the total principal amount by maturity set
forth under the heading “Additional Sponsor Bonds ($000s)”, and shall pay the
total set forth opposite “Total per Sponsor” under the heading “Total Purchase
Price ($)” below.

 

Maturity

   Percentage
of Total     Additional
Sponsor Bonds
($000s)    Bond
Purchase
Price   Cash Purchase
Price ($)    Accrued
Interest
($)1    Total
Purchase
Price ($)

2015

   39.8 %    120,625    $ 66.0   79,612,500    433,496   

2016

   25.0 %    75,627    $ 66.0   49,913,820    314,062   

2017

   35.2 %    106,778    $ 66.0   70,473,480    1,415,550                      
  

TOTAL

   100.0 %    303,030    $

 
 

66.0

(weighted
average)

  199,999,800    2,163,108    202,162,908          

Total per Sponsor: $101,081,454

APPLICABLE EXCHANGE RATIO

$1.00 principal amount of Subject Bonds is exchangeable for 0.01 share of New
Voting Stock (giving pro forma effect to the Reclassification) plus an amount of
New Voting Stock in respect of any accrued but unpaid interest on such Subject
Bond up to, but not including, the settlement date at the same rate as the
Applicable Exchange Ratio; provided, however, if, between the date of this
Agreement and the date on which the Exchange is effected, the outstanding shares
of HET’s existing non-voting common stock shall have been changed into or
exchanged for a different number or kind of shares or securities as a result of
any Recapitalization, a reasonable, appropriate and proportionate adjustment
(based on weighted average) shall be made to the Applicable Exchange Ratio by
the board of directors of HET in good faith. For the avoidance of doubt, the
Applicable Exchange Ratio is based on the par value of the Subject Bonds plus
any accrued and unpaid interest on the Subject Bonds included in the Bond
Purchase Price.

 

 

1

Accrued interest shown assumes settlement date of 6/24/10. To be adjusted
accordingly if settlement occurs on a different date.

 

2

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ADDITIONAL INVESTOR BONDS

 

Maturity

   Percentage
of Total     Additional
Investor Bonds
($000s)    Bond
Purchase
Price   Cash Purchase
Price ($)    Accrued
Interest
($)2    Total
Purchase
Price ($)

2015

   39.8 %    211,905    $ 66.0   139,857,300    761,534   

2016

   25.0 %    132,856    $ 66.0   87,684,960    551,721   

2017

   35.2 %    187,580    $ 66.0   123,802,800    2,486,738                      
  

TOTAL

   100.0 %    532,341    $

 
 

66.0

(weighted
average)

  351,345,060    3,799,993    355,145,053

 

2

Accrued interest shown assumes settlement date of 6/24/10. To be adjusted
accordingly if settlement occurs on a different date.

 

3