Exhibit 10.1

Execution Version

 

 

HARRAH’S OPERATING COMPANY, INC.

as Issuer

and the Note Guarantors named herein

10.75% Senior Notes due 2016

10.75% / 11.5% Senior Toggle Notes due 2018

 

 

INDENTURE

Dated as of February 1, 2008

 

 

U.S. Bank National Association,

as Trustee

 

 

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TABLE OF CONTENTS

 

 

         Page

ARTICLE 1

 

DEFINITIONS AND INCORPORATION BY REFERENCE

 

SECTION 1.01.   Definitions    1 SECTION 1.02.   Other Definitions    35 SECTION
1.03.   Incorporation by Reference of Trust Indenture Act    37 SECTION 1.04.  
Rules of Construction    37

ARTICLE 2

 

THE NOTES

SECTION 2.01.   Amount of Notes    38 SECTION 2.02.   Form and Dating    39
SECTION 2.03.   Execution and Authentication    39 SECTION 2.04.   Registrar and
Paying Agent    40 SECTION 2.05.   Paying Agent to Hold Money in Trust    41
SECTION 2.06.   Holder Lists    41 SECTION 2.07.   Transfer and Exchange    41
SECTION 2.08.   Replacement Notes    42 SECTION 2.09.   Outstanding Notes    42
SECTION 2.10.   Temporary Notes    43 SECTION 2.11.   Cancellation    43 SECTION
2.12.   Defaulted Interest    43 SECTION 2.13.   CUSIP Numbers, ISINs, Etc.   
43 SECTION 2.14.   Calculation of Principal Amount of Notes    43 SECTION 2.15.
  Mandatory Disposition Pursuant to Gaming Laws    44

ARTICLE 3

 

REDEMPTION

SECTION 3.01.   Redemption    44 SECTION 3.02.   Applicability of Article    44
SECTION 3.03.   Notices to Trustee    44 SECTION 3.04.   Selection of Notes to
Be Redeemed    45 SECTION 3.05.   Notice of Optional Redemption    45 SECTION
3.06.   Effect of Notice of Redemption    46 SECTION 3.07.   Deposit of
Redemption Price    46 SECTION 3.08.   Notes Redeemed in Part    46

 

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ARTICLE 4

 

COVENANTS

SECTION 4.01.   Payment of Notes    46 SECTION 4.02.   Reports and Other
Information    47 SECTION 4.03.   Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock    48 SECTION 4.04.  
Limitation on Restricted Payments    54 SECTION 4.05.   Dividend and Other
Payment Restrictions Affecting Subsidiaries    60 SECTION 4.06.   Asset Sales   
62 SECTION 4.07.   Transactions with Affiliates    64 SECTION 4.08.   Change of
Control    67 SECTION 4.09.   Compliance Certificate    69 SECTION 4.10.  
Further Instruments and Acts    69 SECTION 4.11.   Future Note Guarantors    69
SECTION 4.12.   Liens    69 SECTION 4.13.   [Reserved]    69 SECTION 4.14.  
Maintenance of Office or Agency    70 SECTION 4.15.   Covenant Suspension    70

ARTICLE 5

 

SUCCESSOR COMPANY

SECTION 5.01.   When Issuer May Merge or Transfer Assets    71

ARTICLE 6

 

DEFAULTS AND REMEDIES

SECTION 6.01.   Events of Default    74 SECTION 6.02.   Acceleration    75
SECTION 6.03.   Other Remedies    76 SECTION 6.04.   Waiver of Past Defaults   
76 SECTION 6.05.   Control by Majority    76 SECTION 6.06.   Limitation on Suits
   76 SECTION 6.07.   Rights of the holders to Receive Payment    77 SECTION
6.08.   Collection Suit by Trustee    77 SECTION 6.09.   Trustee May File Proofs
of Claim    77 SECTION 6.10.   Priorities    77 SECTION 6.11.   Undertaking for
Costs    78 SECTION 6.12.   Waiver of Stay or Extension Laws    78

ARTICLE 7

 

TRUSTEE

SECTION 7.01.   Duties of Trustee    78 SECTION 7.02.   Rights of Trustee    79
SECTION 7.03.   Individual Rights of Trustee    81 SECTION 7.04.   Trustee’s
Disclaimer    81 SECTION 7.05.   Notice of Defaults    81 SECTION 7.06.  
Reports by Trustee to the Holders    81 SECTION 7.07.   Compensation and
Indemnity    82

 

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         Page SECTION 7.08.   Replacement of Trustee.    83 SECTION 7.09.  
Successor Trustee by Merger    83 SECTION 7.10.   Eligibility; Disqualification
   84 SECTION 7.11.   Preferential Collection of Claims Against the Issuer    84

ARTICLE 8

 

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.

  Discharge of Liability on Notes; Defeasance    84

SECTION 8.02.

  Conditions to Defeasance    85

SECTION 8.03.

  Application of Trust Money    86

SECTION 8.04.

  Repayment to Issuer    86

SECTION 8.05.

  Indemnity for U.S. Government Obligations    87

SECTION 8.06.

  Reinstatement    87

ARTICLE 9

 

AMENDMENTS AND WAIVERS

SECTION 9.01.

  Without Consent of the Holders    87

SECTION 9.02.

  With Consent of the Holders    88

SECTION 9.03.

  Compliance with Trust Indenture Act    89

SECTION 9.04.

  Revocation and Effect of Consents and Waivers    89

SECTION 9.05.

  Notation on or Exchange of Notes    90

SECTION 9.06.

  Trustee to Sign Amendments    90

SECTION 9.07.

  Payment for Consent    90

SECTION 9.08.

  Additional Voting Terms; Calculation of Principal Amount    90

ARTICLE 10

 

[RESERVED]

 

ARTICLE 11

 

GUARANTEES

SECTION 11.01.

  Guarantees    91

SECTION 11.02.

  Limitation on Liability    93

SECTION 11.03.

  Successors and Assigns    94

SECTION 11.04.

  No Waiver    94

SECTION 11.05.

  Modification    94

SECTION 11.06.

  Execution of Supplemental Indenture for Future Note Guarantors    94

SECTION 11.07.

  Non-Impairment    95

 

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ARTICLE 12

 

[RESERVED]

ARTICLE 13

 

MISCELLANEOUS

SECTION 13.01.   Trust Indenture Act Controls    95 SECTION 13.02.   Notices   
95 SECTION 13.03.   Communication by the Holders with Other Holders    96
SECTION 13.04.   Certificate and Opinion as to Conditions Precedent    96
SECTION 13.05.   Statements Required in Certificate or Opinion    96 SECTION
13.06.   When Notes Disregarded    96 SECTION 13.07.   Rules by Trustee, Paying
Agent and Registrar    97 SECTION 13.08.   Legal Holidays    97 SECTION 13.09.  
GOVERNING LAW    97 SECTION 13.10.   No Recourse Against Others    97 SECTION
13.11.   Successors    97 SECTION 13.12.   Multiple Originals    97 SECTION
13.13.   Table of Contents; Headings    97 SECTION 13.14.   Indenture Controls
   97 SECTION 13.15.   Severability    97 SECTION 13.16.   Intercreditor
Agreement    97 Appendix A   –   Provisions Relating to Initial Notes,
Additional Notes and Exchange Notes    EXHIBIT INDEX    Exhibit A-1    –   Form
of Initial Cash Pay Note    Exhibit A-2    –   Form of Initial Toggle Note   
Exhibit B-1     –   Form of Cash Pay Exchange Note    Exhibit B-2     –   Form
of Toggle Exchange Note    Exhibit C        –   Form of Transferee Letter of
Representation    Exhibit D        –   Form of Supplemental Indenture   

 

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CROSS-REFERENCE TABLE

 

TIA Section

   Indenture
Section

310 (a)(1)

   7.10

       (a)(2)

   7.10

       (a)(3)

   N.A.

       (a)(4)

   N.A.

       (b)

   7.08; 7.10

       (c)

   N.A.

311 (a)

   7.11

       (b)

   7.11

       (c)

   N.A.

312 (a)

   2.06

       (b)

   13.03

       (c)

   13.03

313 (a)

   7.06

       (b)(1)

   N.A.

       (b)(2)

   7.06

       (c)

   7.06

       (d)

   4.02; 4.09

314 (a)

   4.02; 4.09

       (b)

   N.A.

       (c)(1)

   13.04

       (c)(2)

   13.04

       (c)(3)

   N.A.

       (d)

   N.A.

       (e)

   13.05

       (f)

   4.10

315 (a)

   7.01

       (b)

   7.05

       (c)

   7.01

       (d)

   7.01

       (e)

   6.11

316 (a)(last sentence)

   13.06

       (a)(1)(A)

   6.05

       (a)(1)(B)

   6.04

       (a)(2)

   N.A.

       (b)

   6.07

317 (a)(1)

   6.08

       (a)(2)

   6.09

       (b)

   2.05

318 (a)

   13.01

N.A. Means Not Applicable.

Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.

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INDENTURE dated as of February 1, 2008 among HARRAH’S OPERATING COMPANY, INC., a
Delaware corporation (the “Issuer”), the Note Guarantors (as defined herein) and
U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”).

Each party agrees as follows for the benefit of the other parties and for the
equal and ratable benefit of the holders of (i) $4,932,417,000 aggregate
principal amount of the Issuer’s 10.75% Senior Notes due 2016 issued on the date
hereof (the “Cash Pay Notes”), (ii) $1,402,583,000 aggregate principal amount of
the Issuer’s 10.75%/11.5% Optional PIK Interest Senior Notes due 2018 issued on
the date hereof (the “Toggle Notes” and, together with the Cash Pay Notes, the
“Initial Notes”), (iii) Exchange Notes issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement or pursuant to an effective
registration statement under the Securities Act (the “Exchange Notes”) and
(iv) Additional Notes issued from time to time as either Initial Notes or
Exchanges Notes (together with the Initial Notes and any Exchange Notes, the
“Notes”):

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. Definitions.

“Acquired Indebtedness” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is
merged, consolidated or amalgamated with or into or became a Restricted
Subsidiary of such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.

“Acquisition” means the acquisition by Affiliates of the Sponsors of
substantially all of the outstanding shares of capital stock of Harrah’s
Entertainment, Inc., pursuant to the Merger Agreement.

“Acquisition Documents” means the Merger Agreement and any other document
entered into in connection therewith, in each case as amended, supplemented or
modified from time to time prior to the Issue Date or thereafter.

“Additional Notes” means Cash Pay Notes or Toggle Notes issued under the terms
of this Indenture subsequent to the Issue Date.

“Affiliate” of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,” “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.

“Applicable Premium” means, with respect to any Note on any applicable
redemption date, the greater of:

(1) 1% of the then outstanding principal amount of the Note; and

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(2) the excess of:

(a) the present value at such redemption date of (i) the redemption price of the
Note at February 1, 2012 (in the case of the Cash Pay Notes) and February 1,
2013 (in the case of the Toggle Notes) (such redemption price being set forth in
Paragraph 5 of the applicable Note) plus (ii) all required interest payments (in
the case of the Toggle Notes, calculated based on the cash interest rate payable
on the Toggle Notes) due on the Note through February 1, 2012 (in the case of
the Cash Pay Notes) and February 1, 2013 (in the case of the Toggle Notes)
(excluding accrued but unpaid interest), computed using a discount rate equal to
the Treasury Rate as of such redemption date plus 50 basis points; over

(b) the then outstanding principal amount of the Note.

“Asset Sale” means:

(1) the sale, conveyance, transfer or other disposition (whether in a single
transaction or a series of related transactions) of property or assets
(including by way of a Sale/ Leaseback Transaction) outside the ordinary course
of business of the Issuer or any Restricted Subsidiary of the Issuer (each
referred to in this definition as a “disposition”) or

(2) the issuance or sale of Equity Interests (other than directors’ qualifying
shares and shares issued to foreign nationals or other third parties to the
extent required by applicable law) of any Restricted Subsidiary (other than to
the Issuer or another Restricted Subsidiary of the Issuer) (whether in a single
transaction or a series of related transactions),

in each case other than:

(a) a disposition of Cash Equivalents or Investment Grade Securities or
obsolete, damaged or worn out property or equipment in the ordinary course of
business;

(b) the disposition of all or substantially all of the assets of the Issuer in a
manner permitted pursuant to Section 5.01 or any disposition that constitutes a
Change of Control;

(c) any Restricted Payment or Permitted Investment that is permitted to be made,
and is made, under Section 4.04;

(d) any disposition of assets of the Issuer or any Restricted Subsidiary or
issuance or sale of Equity Interests of any Restricted Subsidiary, which assets
or Equity Interests so disposed or issued have an aggregate Fair Market Value
(as determined in good faith by the Issuer) of less than $50.0 million;

(e) any disposition of property or assets, or the issuance of securities, by a
Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a
Restricted Subsidiary of the Issuer to a Restricted Subsidiary of the Issuer;

(f) any exchange of assets (including a combination of assets and Cash
Equivalents) for assets related to a Similar Business of comparable or greater
market value or usefulness to the business of the Issuer and its Restricted
Subsidiaries as a whole, as determined in good faith by the Issuer;

 

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(g) foreclosure or any similar action with respect to any property or other
asset of the Issuer or any of its Restricted Subsidiaries;

(h) any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary;

(i) the lease, assignment or sublease of any real or personal property in the
ordinary course of business;

(j) any sale of inventory or other assets in the ordinary course of business;

(k) any grant in the ordinary course of business of any license of patents,
trademarks, know-how or any other intellectual property;

(l) in the ordinary course of business, 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 the Issuer and its Restricted
Subsidiaries as a whole, as determined in good faith by the Issuer;

(m) a transfer of accounts receivable and related assets of the type specified
in the definition of “Receivables Financing” (or a fractional undivided interest
therein) by a Receivables Subsidiary in a Qualified Receivables Financing;

(n) any financing transaction with respect to property built or acquired by the
Issuer or any Restricted Subsidiary after the Issue Date, including any
Sale/Leaseback Transaction or asset securitization permitted by this Indenture;

(o) any disposition in connection with the Post-Closing CMBS Transaction;

(p) dispositions in connection with Permitted Liens;

(q) any disposition of Capital Stock of a Restricted Subsidiary pursuant to an
agreement or other obligation with or to a Person (other than the Issuer or a
Restricted Subsidiary) from whom such Restricted Subsidiary was acquired or from
whom such Restricted Subsidiary acquired its business and assets (having been
newly formed in connection with such acquisition), made as part of such
acquisition and in each case comprising all or a portion of the consideration in
respect of such sale or acquisition;

(r) any disposition made pursuant to an Operations Management Agreement;

(s) the sale of any property in a Sale/Leaseback Transaction within six months
of the acquisition of such property;

(t) dispositions 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; and

(u) any surrender or waiver of contract rights or the settlement, release,
recovery on or surrender of contract, tort or other claims of any kind.

“Bank Indebtedness” means any and all amounts payable under or in respect of the
Credit Agreement and the other Credit Agreement Documents as amended, restated,
supplemented, waived, replaced, restructured, repaid, refunded, refinanced or
otherwise modified from time to time (including after

 

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termination of the Credit Agreement), including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.

“Board of Directors” means, as to any Person, the board of directors or
managers, as applicable, of such Person (or, if such Person is a partnership,
the board of directors or other governing body of the general partner of such
Person) or any duly authorized committee thereof.

“Business Day” means a day other than a Saturday, Sunday or other day on which
banking institutions are authorized or required by law to close in New York
City.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock or shares;

(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;

(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized and reflected as a liability on a
balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Capitalized Software Expenditures” means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities) by a Person and
its Restricted Subsidiaries during such period in respect of purchased software
or internally developed software and software enhancements that, in conformity
with GAAP, are or are required to be reflected as capitalized costs on the
consolidated balance sheet of such Person and such Restricted Subsidiaries.

“Cash Equivalents” means:

(1) U.S. dollars, pounds sterling, euros, the national currency of any member
state in the European Union or, in the case of any Foreign Subsidiary that is a
Restricted Subsidiary, such local currencies held by it from time to time in the
ordinary course of business;

(2) securities issued or directly and fully guaranteed or insured by the U.S.
government or any country that is a member of the European Union or any agency
or instrumentality thereof in each case maturing not more than two years from
the date of acquisition;

(3) certificates of deposit, time deposits and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers’
acceptances, in each case with maturities not exceeding one year and overnight
bank deposits, in each case with any commercial bank having capital and surplus
in excess of $250.0 million and whose long-term debt is rated “A” or the
equivalent thereof by Moody’s or S&P (or reasonably equivalent ratings of
another internationally recognized ratings agency);

 

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(4) repurchase obligations for underlying securities of the types described in
clauses (2) and (3) above entered into with any financial institution meeting
the qualifications specified in clause (3) above;

(5) commercial paper issued by a corporation (other than an Affiliate of the
Issuer) rated at least “A-1” or the equivalent thereof by Moody’s or S&P (or
reasonably equivalent ratings of another internationally recognized ratings
agency) and in each case maturing within one year after the date of acquisition;

(6) readily marketable direct obligations issued by any state of the United
States of America or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody’s or S&P (or reasonably
equivalent ratings of another internationally recognized ratings agency) in each
case with maturities not exceeding two years from the date of acquisition;

(7) Indebtedness issued by Persons (other than the Sponsors or any of their
Affiliates) with a rating of “A” or higher from S&P or “A-2” or higher from
Moody’s (or reasonably equivalent ratings of another internationally recognized
ratings agency) in each case with maturities not exceeding two years from the
date of acquisition; and

(8) investment funds investing at least 95% of their assets in securities of the
types described in clauses (1) through (7) above.

“Cash Interest” means interest paid entirety in cash.

“Change of Control” means the occurrence of either of the following:

(1) the sale, lease or transfer, in one or a series of related transactions, of
all or substantially all the assets of the Issuer and its Subsidiaries, taken as
a whole, to a Person other than any of the Permitted Holders; or

(2) the Issuer becomes aware (by way of a report or any other filing pursuant to
Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of
the acquisition by any Person or group (within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act, or any successor provision), including
any group acting for the purpose of acquiring, holding or disposing of
securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than any of the Permitted Holders, in a single transaction or in a related
series of transactions, by way of merger, consolidation, amalgamation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50%
of the total voting power of the Voting Stock of (prior to a Qualified IPO or
upon or after an Issuer IPO) the Issuer or (upon or after a Holdco Qualified
IPO) the Holdco Issuer.

“Code” means the Internal Revenue Code of 1986, as amended.

“Consolidated Depreciation and Amortization Expense” means, with respect to any
Person for any period, the total amount of depreciation and amortization
expense, including the amortization of intangible assets, deferred financing
fees and Capitalized Software Expenditures and amortization of unrecognized
prior service costs and actuarial gains and losses related to pensions and other
post-employment benefits, of such Person and its Restricted Subsidiaries for
such period on a consolidated basis and otherwise determined in accordance with
GAAP.

 

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“Consolidated Interest Expense” means, with respect to any Person for any
period, the sum, without duplication, of:

(1) consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, to the extent such expense was deducted in computing
Consolidated Net Income (including amortization of original issue discount, the
interest component of Capitalized Lease Obligations, and net payments and
receipts (if any) pursuant to interest rate Hedging Obligations and excluding
additional interest in respect of the Notes, amortization of deferred financing
fees, debt issuance costs, commissions, fees and expenses and expensing of any
bridge, commitment or other financing fees); plus

(2) consolidated capitalized interest of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued; plus

(3) commissions, discounts, yield and other fees and charges Incurred in
connection with any Receivables Financing which are payable to Persons other
than the Issuer and its Restricted Subsidiaries; minus

(4) interest income for such period.

For purposes of this definition, interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by the
Issuer to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP.

“Consolidated Leverage Ratio” means, with respect to any Person, at any date the
ratio of (i) Indebtedness (other than Qualified Non-Recourse Debt) of such
Person and its Restricted Subsidiaries as of such date of calculation
(determined on a consolidated basis in accordance with GAAP) less the amount of
cash and Cash Equivalents in excess of any Restricted Cash that would be stated
on the balance sheet of such Person and its Restricted Subsidiaries and held by
such Person and its Restricted Subsidiaries as of such date of determination to
(ii) EBITDA of such Person for the four full fiscal quarters for which internal
financial statements are available immediately preceding such date on which such
additional Indebtedness is Incurred. In the event that the Issuer or any of its
Restricted Subsidiaries Incurs, repays, repurchases or redeems any Indebtedness
subsequent to the commencement of the period for which the Consolidated Leverage
Ratio is being calculated but prior to the event for which the calculation of
the Consolidated Leverage Ratio is made (the “Consolidated Leverage Calculation
Date”), then the Consolidated Leverage Ratio shall be calculated giving pro
forma effect to such Incurrence, repayment, repurchase or redemption of
Indebtedness as if the same had occurred at the beginning of the applicable
four-quarter period; provided that the Issuer may elect pursuant to an Officer’s
Certificate delivered to the Trustee to treat all or any portion of the
commitment under any Indebtedness as being Incurred at such time, in which case
any subsequent Incurrence of Indebtedness under such commitment shall not be
deemed, for purposes of this calculation, to be an Incurrence at such subsequent
time.

For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, amalgamations, consolidations (including
the Transactions and the Post-Closing CMBS Transaction) and discontinued
operations (as determined in accordance with GAAP), in each case with respect to
an operating unit of a business, and any operational changes that the Issuer or
any of its Restricted Subsidiaries has determined to make and/or made during the
four-quarter reference period or

 

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subsequent to such reference period and on or prior to or simultaneously with
the Consolidated Leverage Calculation Date shall be calculated on a pro forma
basis assuming that all such Investments, acquisitions, dispositions, mergers,
amalgamations, consolidations (including the Transactions and the Post-Closing
CMBS Transaction), discontinued operations and other operational changes (and
the change of any associated Indebtedness and the change in EBITDA resulting
therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person that subsequently became a
Restricted Subsidiary or was merged with or into the Issuer or any Restricted
Subsidiary since the beginning of such period shall have made any Investment,
acquisition, disposition, merger, consolidation, amalgamation, discontinued
operation or operational change, in each case with respect to an operating unit
of a business, that would have required adjustment pursuant to this definition,
then the Consolidated Leverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such Investment, acquisition, disposition,
discontinued operation, merger, amalgamation, consolidation or operational
change had occurred at the beginning of the applicable four-quarter period. For
purposes of making the computation referred to above, with respect to each New
Project that commences operations and records not less than one full fiscal
quarter’s operations during the four-quarter reference period, the operating
results of such New Project will be annualized on a straight-line basis during
such period.

For purposes of this definition, whenever pro forma effect is to be given to any
event, the pro forma calculations shall be made in good faith by a responsible
financial or accounting officer of the Issuer. Any such pro forma calculation
may include adjustments appropriate, in the reasonable good faith determination
of the Issuer as set forth in an Officer’s Certificate, to reflect (1) operating
expense reductions and other operating improvements or synergies reasonably
expected to result from the applicable event (including, to the extent
applicable, from the Transactions and the Post-Closing CMBS Transaction) and
(2) all adjustments of the nature used in connection with the calculation of
“Adjusted EBITDA” as set forth in footnote 3 to “Summary Pro Forma Consolidated
Financial Data” under “Summary” in the Offering Memorandum to the extent such
adjustments, without duplication, continue to be applicable to such four-quarter
period.

For purposes of this definition, any amount in a currency than U.S. dollars will
be converted to U.S. dollars based on the average exchange rate for such
currency for the most recent twelve month period immediately prior to the date
of determination in a manner consistent with that used in calculating EBITDA for
the applicable period.

“Consolidated Net Income” means, with respect to any Person for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis; provided, however, that:

(1) any net after-tax extraordinary, nonrecurring or unusual gains or losses
(less all fees and expenses relating thereto) or expenses or charges, any
severance expenses, relocation expenses, curtailments or modifications to
pension and post-retirement employee benefit plans, any expenses related to any
reconstruction, decommissioning, recommissioning or reconfiguration of fixed
assets for alternate uses and fees, expenses or charges relating to facilities
closing costs, acquisition integration costs, facilities opening costs, project
start-up costs, business optimization costs, signing, retention or completion
bonuses, expenses or charges related to any issuance of Equity Interests,
Investment, acquisition, disposition, recapitalization or issuance, repayment,
refinancing, amendment or modification of Indebtedness (in each case, whether or
not successful), and any fees, expenses, charges or change in control payments
made under the Acquisition Documents or otherwise related to the Transactions or
the Post-Closing CMBS Transaction, in each case, shall be excluded;

 

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(2) effects of purchase accounting adjustments (including the effects of such
adjustments pushed down to such Person and such Restricted Subsidiaries) in
amounts required or permitted by GAAP, resulting from the application of
purchase accounting in relation to the Transactions or any consummated
acquisition or the amortization or write-off of any amounts thereof, net of
taxes, shall be excluded;

(3) the Net Income for such period shall not include the cumulative effect of a
change in accounting principles during such period;

(4) any net after-tax income or loss from disposed, abandoned, transferred,
closed or discontinued operations and any net after-tax gains or losses on
disposal of disposed, abandoned, transferred, closed or discontinued operations
shall be excluded;

(5) any net after-tax gains or losses (less all fees and expenses or charges
relating thereto) attributable to business dispositions or asset dispositions
other than in the ordinary course of business (as determined in good faith by
management of the Issuer) shall be excluded;

(6) any net after-tax gains or losses (less all fees and expenses or charges
relating thereto) attributable to the early extinguishment of indebtedness,
Hedging Obligations or other derivative instruments shall be excluded;

(7) the Net Income for such period of any Person that is not a Subsidiary of
such Person, or is an Unrestricted Subsidiary or a Qualified Non-Recourse
Subsidiary, or that is accounted for by the equity method of accounting, shall
be included only to the extent of the amount of dividends or distributions or
other payments paid in cash (or to the extent converted into cash) to the
referent Person or a Restricted Subsidiary thereof (other than a Qualified
Non-Recourse Subsidiary of such referent Person) in respect of such period;

(8) solely for the purpose of determining the amount available for Restricted
Payments under clause (1) of the definition of “Cumulative Credit,” the Net
Income for such period of any Restricted Subsidiary (other than any Note
Guarantor) shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, unless such restrictions with
respect to the payment of dividends or similar distributions have been legally
waived; provided that the Consolidated Net Income of such Person shall be
increased by the amount of dividends or other distributions or other payments
actually paid in cash (or converted into cash) by any such Restricted Subsidiary
to such Person, to the extent not already included therein;

(9) an amount equal to the amount of Tax Distributions actually made to any
parent or equity holder of such Person in respect of such period in accordance
with Section 4.04(b)(xii) shall be included as though such amounts had been paid
as income taxes directly by such Person for such period;

(10) any impairment charges or asset write-offs, in each case pursuant to GAAP,
and the amortization of intangibles arising pursuant to GAAP shall be excluded;

(11) any non-cash expense realized or resulting from stock option plans,
employee benefit plans or post-employment benefit plans, or grants or sales of
stock, stock appreciation or similar rights, stock options, restricted stock,
preferred stock or other rights, shall be excluded;

 

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(12) any (a) one-time non-cash compensation charges, (b) costs and expenses
after the Issue Date related to employment of terminated employees, or (c) costs
or expenses realized in connection with or resulting from stock appreciation or
similar rights, stock options or other rights existing on the Issue Date of
officers, directors and employees, in each case of such Person or any of its
Restricted Subsidiaries, shall be excluded;

(13) accruals and reserves that are established or adjusted within 12 months
after the Issue Date and that are so required to be established or adjusted in
accordance with GAAP or as a result of adoption or modification of accounting
policies shall be excluded;

(14) solely for purposes of calculating EBITDA, (a) the Net Income of any Person
and its Restricted Subsidiaries shall be calculated without deducting the income
attributable to, or adding the losses attributable to, the minority equity
interests of third parties in any non-Wholly Owned Restricted Subsidiary except
to the extent of dividends declared or paid in respect of such period or any
prior period on the shares of Capital Stock of such Restricted Subsidiary held
by such third parties and (b) any ordinary course dividend, distribution or
other payment paid in cash and received from any Person in excess of amounts
included in clause (7) above shall be included;

(15) (a)(i) the non-cash portion of “straight-line” rent expense shall be
excluded and (ii) the cash portion of “straight-line” rent expense which exceeds
the amount expensed in respect of such rent expense shall be included and
(b) non-cash gains, losses, income and expenses resulting from fair value
accounting required by the applicable standard under GAAP and related
interpretations shall be excluded;

(16) any currency translation gains and losses related to currency
remeasurements of Indebtedness, and any net loss or gain resulting from hedging
transactions for currency exchange risk, shall be excluded; and

(17) to the extent covered by insurance and actually reimbursed, or, so long as
such Person has made a determination that there exists reasonable evidence that
such amount will in fact be reimbursed by the insurer and only to the extent
that such amount is (a) not denied by the applicable carrier in writing within
180 days and (b) in fact reimbursed within 365 days of the date of such evidence
(with a deduction for any amount so added back to the extent not so reimbursed
within 365 days), expenses with respect to liability or casualty events or
business interruption shall be excluded.

Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries of the
Issuer or a Restricted Subsidiary of the Issuer to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such Section pursuant to clauses (D) and (E) of the definition of
“Cumulative Credit.”

“Consolidated Non-cash Charges” means, with respect to any Person for any
period, the non-cash expenses (other than Consolidated Depreciation and
Amortization Expense) of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person for such period on a consolidated basis
and otherwise determined in accordance with GAAP, provided that if any such
non-cash expenses represent an accrual or reserve for potential cash items in
any future period, the cash payment in respect thereof in such future period
shall be subtracted from EBITDA in such future period to the extent paid, but
excluding from this proviso, for the avoidance of doubt, amortization of a
prepaid cash item that was paid in a prior period.

 

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“Consolidated Taxes” means, with respect to any Person for any period, the
provision for taxes based on income, profits or capital, including, without
limitation, state, franchise, property and similar taxes, foreign withholding
taxes (including penalties and interest related to such taxes or arising from
tax examinations) and any Tax Distributions taken into account in calculating
Consolidated Net Income.

“Contingent Obligations” means, with respect to any Person, any obligation of
such Person guaranteeing any leases, dividends or other obligations that do not
constitute Indebtedness (“primary obligations”) of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent:

(1) to purchase any such primary obligation or any property constituting direct
or indirect security therefor,

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor; or

(3) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation against loss in respect
thereof.

“Credit Agreement” means (i) the credit agreement entered into in connection
with, and on or prior to, the consummation of the Acquisition, among the Issuer,
the pledgors named therein, the financial institutions named therein, and Bank
of America, N.A., as Administrative Agent, as amended, restated, supplemented,
waived, replaced (whether or not upon termination, and whether with the original
lenders or otherwise), restructured, repaid, refunded, refinanced or otherwise
modified from time to time, including any agreement or indenture extending the
maturity thereof, refinancing, replacing or otherwise restructuring all or any
portion of the Indebtedness under such agreement or agreements or indenture or
indentures or any successor or replacement agreement or agreements or indenture
or indentures or increasing the amount loaned or issued thereunder or altering
the maturity thereof and (ii) whether or not the credit agreement referred to in
clause (i) remains outstanding, if designated by the Issuer to be included in
the definition of “Credit Agreement,” one or more (A) debt facilities or
commercial paper facilities, providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to lenders or
to special purpose entities formed to borrow from lenders against such
receivables) or letters of credit, (B) debt securities, indentures or other
forms of debt financing (including convertible or exchangeable debt instruments
or bank guarantees or bankers’ acceptances), or (C) instruments or agreements
evidencing any other Indebtedness, in each case, with the same or different
borrowers or issuers and, in each case, as amended, supplemented, modified,
extended, restructured, renewed, refinanced, restated, replaced or refunded in
whole or in part from time to time.

“Credit Agreement Documents” means the collective reference to any Credit
Agreement, any notes issued pursuant thereto and the guarantees thereof, and the
collateral documents relating thereto, as amended, supplemented, restated,
renewed, refunded, replaced, restructured, repaid, refinanced or otherwise
modified, in whole or in part, from time to time.

“Cumulative Credit” means the sum of (without duplication):

 

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(A) 50% of the Consolidated Net Income of the Issuer for the period (taken as
one accounting period), from January 1, 2008 to the end of the Issuer’s most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, in the case such
Consolidated Net Income for such period is a deficit, minus 100% of such
deficit), plus

(B) 100% of the aggregate net proceeds, including cash and the Fair Market Value
(as determined in good faith by the Issuer) of property other than cash,
received by the Issuer after the Issue Date (other than net proceeds to the
extent such net proceeds have been used to Incur Indebtedness, Disqualified
Stock or Preferred Stock pursuant to Section 4.03(b)(xii)) from the issue or
sale of Equity Interests of the Issuer (excluding Refunding Capital Stock,
Designated Preferred Stock, Excluded Contributions and Disqualified Stock),
including Equity Interests issued upon exercise of warrants or options (other
than an issuance or sale to a Restricted Subsidiary of the Issuer), plus

(C) 100% of the aggregate amount of contributions to the capital of the Issuer
received in cash and the Fair Market Value (as determined in good faith by the
Issuer) of property other than cash after the Issue Date (other than Excluded
Contributions, Refunding Capital Stock, Designated Preferred Stock and
Disqualified Stock and other than contributions to the extent such contributions
have been used to Incur Indebtedness, Disqualified Stock or Preferred Stock
pursuant to Section 4.03(b)(xii)), plus

(D) 100% of the principal amount of any Indebtedness or the liquidation
preference or maximum fixed repurchase price, as the case may be, of any
Disqualified Stock of the Issuer or any Restricted Subsidiary thereof issued
after the Issue Date (other than Indebtedness or Disqualified Stock issued to a
Restricted Subsidiary) which has been converted into or exchanged for Equity
Interests in the Issuer (other than Disqualified Stock) or any direct or
indirect parent of the Issuer (provided in the case of any parent, such
Indebtedness or Disqualified Stock is retired or extinguished), plus

(E) 100% of the aggregate amount received by the Issuer or any Restricted
Subsidiary in cash and the Fair Market Value (as determined in good faith by the
Issuer) of property other than cash received by the Issuer or any Restricted
Subsidiary from:

(I) the sale or other disposition (other than to the Issuer or a Restricted
Subsidiary of the Issuer) of Restricted Investments made by the Issuer and its
Restricted Subsidiaries and from repurchases and redemptions of such Restricted
Investments from the Issuer and its Restricted Subsidiaries by any Person (other
than the Issuer or any of its Restricted Subsidiaries) and from repayments of
loans or advances, and releases of guarantees, which constituted Restricted
Investments (other than in each case to the extent that the Restricted
Investment was made pursuant to clause (vii) or (x) of Section 4.04(b)),

(II) the sale (other than to the Issuer or a Restricted Subsidiary of the
Issuer) of the Capital Stock of an Unrestricted Subsidiary, or

(III) a distribution or dividend from an Unrestricted Subsidiary, plus

(F) in the event any Unrestricted Subsidiary of the Issuer has been redesignated
as a Restricted Subsidiary or has been merged, consolidated or amalgamated with
or into, or transfers or conveys its assets to, or is liquidated into, the
Issuer or a Restricted Subsidiary of the Issuer, the Fair Market Value (as
determined in good faith by the Issuer) of the Investment of the Issuer

 

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in such Unrestricted Subsidiary (which, if the Fair Market Value of such
investment shall exceed $250.0 million, shall be determined by the Board of
Directors of the Issuer, a copy of the resolution of which with respect thereto
shall be delivered to the Trustee) at the time of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as
applicable) (other than in each case to the extent that the designation of such
Subsidiary as an Unrestricted Subsidiary was made pursuant to clause (vii) of
Section 4.04(b) or constituted a Permitted Investment).

“Default” means any event which is, or after notice or passage of time or both
would be, an Event of Default.

“Designated Non-cash Consideration” means the Fair Market Value (as determined
in good faith by the Issuer) of non-cash consideration received by the Issuer or
one of its Restricted Subsidiaries in connection with an Asset Sale that is so
designated as Designated Non-cash Consideration pursuant to an Officer’s
Certificate, setting forth the basis of such valuation, less the amount of Cash
Equivalents received in connection with a subsequent sale of such Designated
Non-cash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Issuer or any direct
or indirect parent of the Issuer (other than Disqualified Stock), that is issued
for cash (other than to the Issuer or any of its Subsidiaries or an employee
stock ownership plan or trust established by the Issuer or any of its
Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an
Officer’s Certificate, on the issuance date thereof.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is redeemable or exchangeable), or upon the
happening of any event:

(1) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise (other than as a result of a change of control or asset sale),

(2) is convertible or exchangeable for Indebtedness or Disqualified Stock of
such Person, or

(3) is redeemable at the option of the holder thereof, in whole or in part
(other than solely as a result of a change of control or asset sale),

in each case prior to 91 days after the earlier of the maturity date of the
Notes or the date the Notes are no longer outstanding; provided, however, that
only the portion of Capital Stock which so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof prior to such date shall be deemed to be Disqualified Stock;
provided, further, however, that if such Capital Stock is issued to any employee
or to any plan for the benefit of employees of the Issuer or its Subsidiaries or
by any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Issuer in order to satisfy applicable statutory or regulatory obligations or as
a result of such employee’s termination, death or disability; provided, further,
that any class of Capital Stock of such Person that by its terms authorizes such
Person to satisfy its obligations thereunder by delivery of Capital Stock that
is not Disqualified Stock shall not be deemed to be Disqualified Stock.

“Domestic Subsidiary” means a Restricted Subsidiary that is not a Foreign
Subsidiary.

 

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“EBITDA” means, with respect to any Person for any period, the Consolidated Net
Income of such Person for such period plus, without duplication, to the extent
the same was deducted in calculating Consolidated Net Income:

(1) Consolidated Taxes; plus

(2) Fixed Charges; plus

(3) Consolidated Depreciation and Amortization Expense; plus

(4) Consolidated Non-cash Charges; plus

(5) any expenses or charges (other than Consolidated Depreciation and
Amortization Expense) related to any issuance of Equity Interests, Investment,
acquisition, disposition, recapitalization or the Incurrence or repayment of
Indebtedness permitted to be Incurred by this Indenture (including a refinancing
thereof) (whether or not successful), including (i) such fees, expenses or
charges related to the offering of the Notes and the Bank Indebtedness, (ii) any
amendment or other modification of the Notes or other Indebtedness, (iii) any
additional interest in respect of the Notes and (iv) commissions, discounts,
yield and other fees and charges (including any interest expense) related to any
Qualified Receivables Financing; plus

(6) business optimization expenses and other restructuring charges, reserves or
expenses (which, for the avoidance of doubt, shall include, without limitation,
the effect of inventory optimization programs, facility consolidations,
retention, systems establishment costs, contract termination costs, future lease
commitments and excess pension charges); plus

(7) the amount of management, monitoring, consulting, transaction and advisory
fees and related expenses paid to the Sponsors (or any accruals relating to such
fees and related expenses) during such period to the extent otherwise permitted
by Section 4.07; plus

(8) the amount of loss on sale of receivables and related assets to a
Receivables Subsidiary in connection with a Qualified Receivables Financing;
plus

(9) any costs or expense Incurred pursuant to any management equity plan or
stock option plan or any other management or employee benefit plan or agreement
or any stock subscription or shareholder agreement, to the extent that such cost
or expenses are funded with cash proceeds contributed to the capital of the
Issuer or a Note Guarantor or net cash proceeds of an issuance of Equity
Interests of the Issuer (other than Disqualified Stock) solely to the extent
that such net cash proceeds are excluded from the calculation of the Cumulative
Credit; plus

(10) Pre-Opening Expenses;

less, without duplication,

(11) non-cash items increasing Consolidated Net Income for such period
(excluding the recognition of deferred revenue or any items which represent the
reversal of any accrual of, or cash reserve for, anticipated cash charges that
reduced EBITDA in any prior period and any items for which cash was received in
a prior period).

“Equity Interests” means Capital Stock and all warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).

 

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“Equity Offering” means any public or private sale after the Issue Date of
common stock or Preferred Stock of the Issuer or any direct or indirect parent
of the Issuer, as applicable (other than Disqualified Stock), other than:

(1) public offerings with respect to the Issuer’s or such direct or indirect
parent’s common stock registered on Form S-4 or Form S-8;

(2) issuances to any Subsidiary of the Issuer; and

(3) any such public or private sale that constitutes an Excluded Contribution.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

“Exchange Offer Registration Statement” means the registration statement filed
with the SEC in connection with the Registered Exchange Offer.

“Excluded Contributions” means the Cash Equivalents or other assets (valued at
their Fair Market Value as determined in good faith by senior management or the
Board of Directors of the Issuer) received by the Issuer after the Issue Date
from:

(1) contributions to its common equity capital, and

(2) the sale (other than to a Subsidiary of the Issuer or to any Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Stock and
Designated Preferred Stock) of the Issuer,

in each case designated as Excluded Contributions pursuant to an Officer’s
Certificate executed by an Officer of the Issuer on or promptly after the date
such capital contributions are made or the date such Capital Stock is sold, as
the case may be.

“Fair Market Value” means, with respect to any asset or property, the price
which could be negotiated in an arm’s-length transaction, for cash, between a
willing seller and a willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period,
the ratio of EBITDA of such Person for such period to the Fixed Charges (other
than Fixed Charges in respect of Qualified Non-Recourse Debt) of such Person for
such period. In the event that the Issuer or any of its Restricted Subsidiaries
Incurs, repays, repurchases or redeems any Indebtedness (other than in the case
of revolving credit borrowings or revolving advances under any Qualified
Receivables Financing, in which case interest expense shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period) or issues, repurchases or redeems Disqualified Stock or Preferred Stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
Incurrence, repayment, repurchase or redemption of Indebtedness, or such
issuance, repurchase or redemption of Disqualified Stock or Preferred Stock, as
if the same had occurred at the beginning of the applicable four-quarter period.

 

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For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, amalgamations, consolidations (including
the Transactions and the Post-Closing CMBS Transaction) and discontinued
operations (as determined in accordance with GAAP), in each case with respect to
an operating unit of a business, and any operational changes that the Issuer or
any of its Restricted Subsidiaries has determined to make and/or made during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Calculation Date shall be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
mergers, amalgamations, consolidations (including the Transactions and the
Post-Closing CMBS Transaction), discontinued operations and operational changes
(and the change of any associated fixed charge obligations and the change in
EBITDA resulting therefrom) had occurred on the first day of the four-quarter
reference period. If since the beginning of such period any Person that
subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period shall
have made any Investment, acquisition, disposition, merger, consolidation,
amalgamation, discontinued operation or operational change, in each case with
respect to an operating unit of a business, that would have required adjustment
pursuant to this definition, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect thereto for such period as if such
Investment, acquisition, disposition, discontinued operation, merger,
amalgamation, consolidation or operational change had occurred at the beginning
of the applicable four-quarter period. For purposes of making the computation
referred to above, with respect to each New Project that commences operations
and records not less than one full fiscal quarter’s operations during the
four-quarter reference period, the operating results of such New Project will be
annualized on a straight line basis during such period.

For purposes of this definition, whenever pro forma effect is to be given to any
event, the pro forma calculations shall be made in good faith by a responsible
financial or accounting officer of the Issuer. Any such pro forma calculation
may include adjustments appropriate, in the reasonable good faith determination
of the Issuer as set forth in an Officer’s Certificate, to reflect (1) operating
expense reductions and other operating improvements or synergies reasonably
expected to result from the applicable event (including, to the extent
applicable, from the Transactions and the Post-Closing CMBS Transaction), and
(2) all adjustments of the nature used in connection with the calculation of
“Adjusted EBITDA” as set forth in footnote 3 to “Summary Pro Forma Consolidated
Financial Data” under “Summary” in the Offering Memorandum to the extent such
adjustments, without duplication, continue to be applicable to such four-quarter
period.

If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest on such Indebtedness shall be calculated as if the
rate in effect on the Calculation Date had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligation has a remaining term in excess of 12
months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by a responsible financial or accounting
officer of the Issuer to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP. For purposes of making the computation
referred to above, interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period. Interest on
Indebtedness that may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rate, shall be deemed to have been based upon the rate actually chosen,
or, if none, then based upon such optional rate chosen as the Issuer may
designate.

For purposes of this definition, any amount in a currency than U.S. dollars will
be converted to U.S. dollars based on the average exchange rate for such
currency for the most recent twelve-month period immediately prior to the date
of determination in a manner consistent with that used in calculating EBITDA for
the applicable period.

 

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“Fixed Charges” means, with respect to any Person for any period, the sum,
without duplication, of:

(1) Consolidated Interest Expense of such Person for such period, and

(2) all cash dividend payments (excluding items eliminated in consolidation) on
any series of Preferred Stock or Disqualified Stock of such Person and its
Restricted Subsidiaries.

“Foreign Subsidiary” means a Restricted Subsidiary not organized or existing
under the laws of the United States of America or any state or territory thereof
or the District of Columbia and any direct or indirect subsidiary of such
Restricted Subsidiary.

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Issue Date. For the
purposes of this Indenture, the term “consolidated” with respect to any Person
shall mean such Person consolidated with its Restricted Subsidiaries, and shall
not include any Unrestricted Subsidiary, but the interest of such Person in an
Unrestricted Subsidiary will be accounted for as an Investment.

“Gaming Authorities” means, in any jurisdiction in which Issuer 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 issuance of the Notes
have, jurisdiction over the gaming activities of the Issuer or any of its
subsidiaries, or any successor to such authority or (b) is, or may at any time
after the issuance of the Notes be, responsible for interpreting, administering
and enforcing the Gaming Laws.

“Gaming Laws” means all applicable constitutions, treaties, laws 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 or regulations of any Gaming Authority applicable to the
gambling, casino or gaming businesses or activities of the Issuer 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.

“guarantee” means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.

“Harrah’s Entertainment” means Harrah’s Entertainment, Inc., a Delaware
corporation.

 

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“Hedging Obligations” means, with respect to any Person, the obligations of such
Person under:

(1) currency exchange, interest rate or commodity swap agreements, currency
exchange, interest rate or commodity cap agreements and currency exchange,
interest rate or commodity collar agreements; and

(2) other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange, interest rates or commodity prices.

“Holdco Issuer” means the issuer in any Holdco Qualified IPO.

“Holdco Qualified IPO” means any Qualified IPO in which a direct or indirect
parent of the Issuer is the issuer.

“holder” or “noteholder” means the Person in whose name a Note is registered on
the Registrar’s books.

“Incur” means issue, assume, guarantee, incur or otherwise become liable for;
provided, however, that any Indebtedness or Capital Stock of a Person existing
at the time such person becomes a Subsidiary (whether by merger, amalgamation,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary.

“Indebtedness” means, with respect to any Person:

(1) the principal and premium (if any) of any indebtedness of such Person,
whether or not contingent, (a) in respect of borrowed money, (b) evidenced by
bonds, notes, debentures or similar instruments or letters of credit or bankers’
acceptances (or, without duplication, reimbursement agreements in respect
thereof), (c) representing the deferred and unpaid purchase price of any
property (except any such balance that constitutes (i) a trade payable or
similar obligation to a trade creditor Incurred in the ordinary course of
business, (ii) any earn-out obligations until such obligation becomes a
liability on the balance sheet of such Person in accordance with GAAP and
(iii) liabilities accrued in the ordinary course of business), which purchase
price is due more than six months after the date of placing the property in
service or taking delivery and title thereto, (d) in respect of Capitalized
Lease Obligations, or (e) representing any Hedging Obligations, if and to the
extent that any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability on a balance sheet (excluding
the footnotes thereto) of such Person prepared in accordance with GAAP;

(2) to the extent not otherwise included, any obligation of such Person to be
liable for, or to pay, as obligor, guarantor or otherwise, the obligations
referred to in clause (1) of another Person (other than by endorsement of
negotiable instruments for collection in the ordinary course of business); and

(3) to the extent not otherwise included, Indebtedness of another Person secured
by a Lien on any asset owned by such Person (whether or not such Indebtedness is
assumed by such Person); provided, however, that the amount of such Indebtedness
will be the lesser of: (a) the Fair Market Value (as determined in good faith by
the Issuer) of such asset at such date of determination, and (b) the amount of
such Indebtedness of such other Person;

provided, however, that notwithstanding the foregoing, Indebtedness shall be
deemed not to include (1) Contingent Obligations Incurred in the ordinary course
of business and not in respect of borrowed

 

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money; (2) deferred or prepaid revenues; (3) purchase price holdbacks in respect
of a portion of the purchase price of an asset to satisfy warranty or other
unperformed obligations of the respective seller; (4) Obligations under or in
respect of Qualified Receivables Financing or (5) obligations under the
Acquisition Documents.

Notwithstanding anything in this Indenture to the contrary, Indebtedness shall
not include, and shall be calculated without giving effect to, the effects of
Statement of Financial Accounting Standards No. 133 and related interpretations
to the extent such effects would otherwise increase or decrease an amount of
Indebtedness for any purpose under this Indenture as a result of accounting for
any embedded derivatives created by the terms of such Indebtedness; and any such
amounts that would have constituted Indebtedness under this Indenture but for
the application of this sentence shall not be deemed an Incurrence of
Indebtedness under this Indenture.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Independent Financial Advisor” means an accounting, appraisal or investment
banking firm or consultant, in each case of nationally recognized standing, that
is, in the good faith determination of the Issuer, qualified to perform the task
for which it has been engaged.

“Intercreditor Agreement” means the intercreditor agreement, as it may be
amended from time to time in accordance with this Indenture, among Bank of
America, N.A., as agent under the Credit Agreement Documents, Citibank, N.A., in
its capacity as administrative agent under the Senior Interim Loan Facility, the
Trustee, the Issuer, each Note Guarantor that is a Subsidiary of the Issuer, and
any representative on behalf of other holders of securities or lenders of
indebtedness ranking pari passu with the Notes that is Incurred from time to
time.

“Interest Payment Date” has the meaning set forth in Exhibits A-1 and A-2 and
Exhibits B-1 and B-2 hereto.

“Interest Period” means the period commencing on and including an interest
payment date and ending on and including the day immediately preceding the next
succeeding interest payment date, with the exception that the first Interest
Period shall commence on and include the Issue Date and end on and include
July 31, 2008.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent
rating by any other Rating Agency.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof (other than Cash
Equivalents),

(2) securities that have a rating equal to or higher than Baa3 (or equivalent)
by Moody’s and BBB- (or equivalent) by S&P, but excluding any debt securities or
loans or advances between and among the Issuer and its Subsidiaries,

(3) investments in any fund that invests exclusively in investments of the type
described in clauses (1) and (2) which fund may also hold immaterial amounts of
cash pending investment and/or distribution, and

 

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(4) corresponding instruments in countries other than the United States
customarily utilized for high quality investments and in each case with
maturities not exceeding two years from the date of acquisition.

“Investments” means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit and advances to customers and commission, travel and similar
advances to officers, employees and consultants made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities issued by any other Person and investments
that are required by GAAP to be classified on the balance sheet of the Issuer in
the same manner as the other investments included in this definition to the
extent such transactions involve the transfer of cash or other property. For
purposes of the definition of “Unrestricted Subsidiary” and Section 4.04:

(1) “Investments” shall include the portion (proportionate to the Issuer’s
equity interest in such Subsidiary) of the Fair Market Value (as determined in
good faith by the Issuer) of the net assets of a Subsidiary of the Issuer at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Issuer shall be deemed to continue to have a permanent
“Investment” in an Unrestricted Subsidiary equal to an amount (if positive)
equal to:

(a) the Issuer’s “Investment” in such Subsidiary at the time of such
redesignation less

(b) the portion (proportionate to the Issuer’s equity interest in such
Subsidiary) of the Fair Market Value (as determined in good faith by the Issuer)
of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its Fair Market Value (as determined in good faith by the Issuer) at
the time of such transfer, in each case as determined in good faith by the Board
of Directors of the Issuer.

“Issue Date” means the date on which the Notes are originally issued.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or similar encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided that in no event shall an operating lease be deemed to constitute a
Lien.

“Long-Term Retained Notes” means the Issuer’s 5.625% Senior Notes due 2015,
6.500% Senior Notes due 2016 and 5.75% Senior Notes due 2017.

“Management Group” means the group consisting of the directors, executive
officers and other management personnel of the Issuer or any direct or indirect
parent of the Issuer, as the case may be, on the Issue Date together with
(1) any new directors whose election by such boards of directors or whose
nomination for election by the shareholders of the Issuer or any direct or
indirect parent of the Issuer, as applicable, was approved by a vote of a
majority of the directors of the Issuer or any direct or indirect parent of the
Issuer, as applicable, then still in office who were either directors on the
Issue Date or

 

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whose election or nomination was previously so approved and (2) executive
officers and other management personnel of the Issuer or any direct or indirect
parent of the Issuer, as applicable, hired at a time when the directors on the
Issue Date together with the directors so approved constituted a majority of the
directors of the Issuer or any direct or indirect parent of the Issuer, as
applicable.

“Merger Agreement” means the Agreement and Plan of Merger among Hamlet Holdings
LLC, Hamlet Merger Inc. and Harrah’s Entertainment, dated as of December 19,
2006, as amended, supplemented or modified from time to time prior to the Issue
Date or thereafter, in accordance with its terms.

“Moody’s” means Moody’s Investors Service, Inc. or any successor to the rating
agency business thereof.

“Net Income” means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received in respect of or upon the sale or other
disposition of any Designated Non-cash Consideration received in any Asset Sale
and any cash payments received by way of deferred payment of principal pursuant
to a note or installment receivable or otherwise, but only as and when received,
but excluding the assumption by the acquiring Person of Indebtedness relating to
the disposed assets or other consideration received in any other non-cash form),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Non-cash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
and any relocation expenses Incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than pursuant to Section 4.06(b)(i)) to be paid as
a result of such transaction, and any deduction of appropriate amounts to be
provided by the Issuer as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Issuer after such sale or other disposition thereof, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.

“New Project” means each capital project which is either a new project or a new
feature of an existing project owned by the Issuer or its Restricted
Subsidiaries which receives a certificate of completion or occupancy and all
relevant licenses, and in fact commences operations.

“Note Guarantee” means any guarantee of the obligations of the Issuer under this
Indenture and the Notes by any Person in accordance with the provisions of this
Indenture.

“Note Guarantor” means each Person that guarantees the Notes in accordance with
the terms of this Indenture. Any reference to “Note Guarantor” in this Indenture
includes both the Parent Note Guarantor and the Subsidiary Note Guarantors,
unless specified otherwise.

“Obligations” means any principal, interest, penalties, fees, indemnifications,
reimbursements (including, without limitation, reimbursement obligations with
respect to letters of credit and bankers’ acceptances), damages and other
liabilities payable under the documentation governing any Indebtedness; provided
that Obligations with respect to the Notes shall not include fees or
indemnifications in favor of the Trustee and other third parties other than the
holders of the Notes.

 

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“Offering Memorandum” means the confidential offering memorandum, dated
January 29, 2008, relating to the sale of the Initial Notes.

“Officer” means the Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, President, any Executive Vice President, Senior Vice
President or Vice President, the Treasurer or the Secretary of the Issuer.

“Officer’s Certificate” means a certificate signed on behalf of the Issuer by an
Officer of the Issuer, who must be the principal executive officer, the
principal financial officer, the treasurer or the principal accounting officer
of the Issuer, which meets the requirements set forth in this Indenture.

“Operations Management Agreement” means each of the real estate management
agreements and any other operating management agreement entered into by the
Issuer or any of its Restricted Subsidiaries with Harrah’s Entertainment or with
any other direct or indirect Subsidiary of Harrah’s Entertainment, including,
without limitation, any Real Estate Subsidiary, and any and all modifications
thereto, substitutions therefor and replacements thereof so long as such
modifications, substitutions and replacements are not materially less favorable,
taken as a whole, to the Issuer and its Restricted Subsidiaries than the terms
of such agreements as in effect on the Issue Date.

“Opinion of Counsel” means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Trustee.

“Parent Note Guarantee” means a Note Guarantee of Harrah’s Entertainment and its
successors.

“Parent Note Guarantor” means Harrah’s Entertainment and its successors.

“Pari Passu Indebtedness” means:

(1) with respect to the Issuer, the Notes and any Indebtedness which ranks pari
passu in right of payment to the Notes; and

(2) with respect to any Note Guarantor, its Note Guarantee and any Indebtedness
which ranks pari passu in right of payment to such Note Guarantor’s Note
Guarantee.

“Partial PIK Interest” has the meaning set forth in Exhibit A-2 and Exhibit B-2
hereto.

“Permitted Holders” means, at any time, each of (i) the Sponsors, (ii) the
Management Group, (iii) any Person that has no material assets other than the
Capital Stock of the Issuer and, directly or indirectly, holds or acquires 100%
of the total voting power of the Voting Stock of the Issuer, and of which no
other Person or group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor provision), other than
any of the other Permitted Holders specified in clauses (i) and (ii) above,
holds more than 50% of the total voting power of the Voting Stock thereof and
(iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act, or any successor provision) the members of which include any
of the Permitted Holders specified in clauses (i) and (ii) above and that,
directly or indirectly, hold or acquire beneficial ownership of the Voting Stock
of the Issuer (a “Permitted Holder Group”), so long as (1) each member of the
Permitted Holder Group has

 

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voting rights proportional to the percentage of ownership interests held or
acquired by such member and (2) no Person or other “group” (other than the
Permitted Holders specified in clauses (i) and (ii) above) beneficially owns
more than 50% on a fully diluted basis of the Voting Stock held by the Permitted
Holder Group. Any Person or group whose acquisition of beneficial ownership
constitutes a Change of Control in respect of which a Change of Control Offer is
made in accordance with the requirements of this Indenture will thereafter,
together with its Affiliates, constitute an additional Permitted Holder.

“Permitted Investments” means:

(1) any Investment in the Issuer or any Restricted Subsidiary;

(2) any Investment in Cash Equivalents or Investment Grade Securities;

(3) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a
Person if as a result of such Investment (a) such Person becomes a Restricted
Subsidiary of the Issuer, or (b) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys all or substantially all of its assets to, or is liquidated
into, the Issuer or a Restricted Subsidiary of the Issuer;

(4) any Investment in securities or other assets not constituting Cash
Equivalents and received in connection with an Asset Sale made pursuant to the
provisions of Section 4.06 or any other disposition of assets not constituting
an Asset Sale;

(5) any Investment existing on, or made pursuant to binding commitments existing
on, the Issue Date or an Investment consisting of any extension, modification or
renewal of any Investment existing on the Issue Date; provided that the amount
of any such Investment may be increased (x) as required by the terms of such
Investment as in existence on the Issue Date or (y) as otherwise permitted under
this Indenture;

(6) advances to employees, taken together with all other advances made pursuant
to this clause (6), not to exceed $25.0 million at any one time outstanding;

(7) any Investment acquired by the Issuer or any of its Restricted Subsidiaries
(a) in exchange for any other Investment or accounts receivable held by the
Issuer or any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable, or (b) as a result of a foreclosure by
the Issuer or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default;

(8) Hedging Obligations permitted under Section 4.03(b)(x);

(9) any Investment by the Issuer or any of its Restricted Subsidiaries in a
Similar Business having an aggregate Fair Market Value (as determined in good
faith by the Issuer), taken together with all other Investments made pursuant to
this clause (9) that are at that time outstanding, not to exceed the greater of
(x) $500.0 million and (y) 4.5% of Total Assets at the time of such Investment
(with the Fair Market Value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); provided, however,
that if any Investment pursuant to this clause (9) is made in any Person that is
not a Restricted Subsidiary of the Issuer at the date of the making of such
Investment and such Person becomes a Restricted Subsidiary of the Issuer after
such date, such Investment shall thereafter be deemed to have been made pursuant
to clause (1) above and shall cease to have been made pursuant to this clause
(9) for so long as such Person continues to be a Restricted Subsidiary;

 

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(10) additional Investments by the Issuer or any of its Restricted Subsidiaries
having an aggregate Fair Market Value (as determined in good faith by the
Issuer), taken together with all other Investments made pursuant to this clause
(10) that are at that time outstanding, not to exceed the greater of (x) $950.0
million and (y) 4.5% of Total Assets at the time of such Investment (with the
Fair Market Value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); provided, however, that if any
Investment pursuant to this clause (10) is made in any Person that is not a
Restricted Subsidiary of the Issuer at the date of the making of such Investment
and such Person becomes a Restricted Subsidiary of the Issuer after such date,
such Investment shall thereafter be deemed to have been made pursuant to clause
(1) above and shall cease to have been made pursuant to this clause (10) for so
long as such Person continues to be a Restricted Subsidiary;

(11) loans and advances to officers, directors or employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
Incurred in the ordinary course of business or consistent with past practice or
to fund such person’s purchase of Equity Interests of the Issuer or any direct
or indirect parent of the Issuer;

(12) Investments the payment for which consists of Equity Interests of the
Issuer (other than Disqualified Stock) or any direct or indirect parent of the
Issuer, as applicable; provided, however, that such Equity Interests will not
increase the amount available for Restricted Payments under clause (C) of the
definition of “Cumulative Credit”;

(13) any transaction to the extent it constitutes an Investment that is
permitted by and made in accordance with the provisions of Section 4.07(b)
(except transactions described in clauses (ii), (vi), (vii), (xi) and
(xii)(b) of such Section);

(14) Investments consisting of the licensing or contribution of intellectual
property pursuant to joint marketing arrangements with other Persons;

(15) guarantees issued in accordance with Section 4.03 and Section 4.11,
including, without limitation, any guarantee or other obligation issued or
Incurred under the Credit Agreement in connection with any letter of credit
issued for the account of Harrah’s Entertainment or any of its subsidiaries
(including with respect to the issuance of, or payments in respect of drawings
under, such letters of credit);

(16) Investments consisting of or to finance purchases and acquisitions of
inventory, supplies, materials, services or equipment or purchases of contract
rights or licenses or leases of intellectual property;

(17) any Investment in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other Person in connection with a Qualified
Receivables Financing, including Investments of funds held in accounts permitted
or required by the arrangements governing such Qualified Receivables Financing
or any related Indebtedness;

(18) any Investment in an entity or purchase of a business or assets in each
case owned (or previously owned) by a customer of a Restricted Subsidiary as a
condition or in connection with such customer (or any member of such customer’s
group) contracting with a Restricted Subsidiary, in each case in the ordinary
course of business;

(19) any Investment in an entity which is not a Restricted Subsidiary to which a
Restricted Subsidiary sells accounts receivable pursuant to a Qualified
Receivables Financing;

 

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(20) additional Investments in joint ventures not to exceed at any one time in
the aggregate outstanding under this clause (20) the greater of $350.0 million
and 2.0% of Total Assets; provided, however, that if any Investment pursuant to
this clause (20) is made in any Person that is not a Restricted Subsidiary of
the Issuer at the date of the making of such Investment and such Person becomes
a Restricted Subsidiary of the Issuer after such date, such Investment shall
thereafter be deemed to have been made pursuant to clause (1) above and shall
cease to have been made pursuant to this clause (20) for so long as such Person
continues to be a Restricted Subsidiary;

(21) Investments of a Restricted Subsidiary of the Issuer acquired after the
Issue Date or of an entity merged into, amalgamated with or consolidated with
the Issuer or a Restricted Subsidiary of the Issuer in a transaction that is not
prohibited by Section 5.01 after the Issue Date to the extent that such
Investments were not made in contemplation of such acquisition, merger,
amalgamation or consolidation and were in existence on the date of such
acquisition, merger, amalgamation or consolidation; and

(22) any Investment in any Subsidiary of the Issuer or any joint venture in
connection with intercompany cash management arrangements or related activities
arising in the ordinary course of business.

“Permitted Liens” means, with respect to any Person:

(1) pledges or deposits by such Person under workmen’s compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or U.S.
government bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business;

(2) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’
Liens, in each case for sums not yet due or being contested in good faith by
appropriate proceedings or other Liens arising out of judgments or awards
against such Person with respect to which such Person shall then be proceeding
with an appeal or other proceedings for review;

(3) Liens for taxes, assessments or other governmental charges not yet due or
payable or subject to penalties for nonpayment or which are being contested in
good faith by appropriate proceedings;

(4) Liens in favor of issuers of performance and surety bonds or bid bonds or
with respect to other regulatory requirements or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business;

(5) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person;

(6) (A) Liens on assets of a Restricted Subsidiary that is not a Note Guarantor
securing Indebtedness of such Restricted Subsidiary permitted to be Incurred
pursuant to Section 4.03,

 

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(B) Liens securing Indebtedness permitted to be Incurred under the Credit
Agreement, including any letter of credit facility relating thereto, that was
permitted to be Incurred pursuant to Section 4.03(b)(i), (C) Liens securing
obligations in respect of any Indebtedness permitted to be Incurred pursuant to
Section 4.03; provided that, with respect to Liens securing obligations
permitted under this clause (C), at the time of Incurrence and after giving pro
forma effect thereto, the Secured Indebtedness Leverage Ratio of the Issuer
would not exceed 4.50 to 1.00, and (D) Liens securing Indebtedness permitted to
be Incurred pursuant to clause (iv), (xii), (xvi), (xx), (xxii) or (xxv) of
Section 4.03(b) (provided that (1) in the case of clause (iv), such Lien extends
only to the assets and/or Capital Stock, the acquisition, lease, construction,
repair, replacement or improvement of which is financed thereby and any proceeds
or products thereof, (2) in the case of clause (xx), such Lien does not extend
to the property or assets of any Subsidiary of the Issuer other than a Foreign
Subsidiary, and (3) in the case of clauses (xxiii) and (xxv) such Lien applies
solely to acquired property or asset of the acquired entity, as the case may
be);

(7) Liens existing on the Issue Date (other than Liens in favor of the lenders
under the Credit Agreement);

(8) Liens on assets, property or shares of stock of a Person at the time such
Person becomes a Subsidiary; provided, however, that such Liens are not created
or Incurred in connection with, or in contemplation of, such other Person
becoming such a Subsidiary; provided, further, however, that such Liens may not
extend to any other property owned by the Issuer or any Restricted Subsidiary of
the Issuer;

(9) Liens on assets or property at the time the Issuer or a Restricted
Subsidiary of the Issuer acquired the assets or property, including any
acquisition by means of a merger, amalgamation or consolidation with or into the
Issuer or any Restricted Subsidiary of the Issuer; provided, however, that such
Liens are not created or Incurred in connection with, or in contemplation of,
such acquisition; provided, further, however, that the Liens may not extend to
any other property owned by the Issuer or any Restricted Subsidiary of the
Issuer;

(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary
owing to the Issuer or another Restricted Subsidiary of the Issuer permitted to
be Incurred in accordance with Section 4.03;

(11) Liens securing Hedging Obligations not Incurred in violation of this
Indenture; provided that with respect to Hedging Obligations relating to
Indebtedness, such Lien extends only to the property securing such Indebtedness;

(12) Liens on specific items of inventory or other goods and proceeds of any
Person securing such Person’s obligations in respect of bankers’ acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;

(13) leases and subleases of real property which do not materially interfere
with the ordinary conduct of the business of the Issuer or any of its Restricted
Subsidiaries;

(14) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Issuer and its Restricted
Subsidiaries in the ordinary course of business;

(15) Liens in favor of the Issuer or any Note Guarantor;

 

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(16) Liens on accounts receivable and related assets of the type specified in
the definition of “Receivables Financing” Incurred in connection with a
Qualified Receivables Financing;

(17) deposits made in the ordinary course of business to secure liability to
insurance carriers;

(18) Liens on the Equity Interests of Unrestricted Subsidiaries;

(19) grants of software and other technology licenses in the ordinary course of
business;

(20) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (6), (7), (8), (9), (10), (11) and (15);
provided, however, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements on such
property), and (y) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described under
clauses (6), (7), (8), (9), (10), (11) and (15) at the time the original Lien
became a Permitted Lien under this Indenture, and (B) an amount necessary to pay
any fees and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement; provided further, however, that in
the case of any Liens to secure any refinancing, refunding, extension or renewal
of Indebtedness secured by a Lien referred to in clause (6)(B), the principal
amount of any Indebtedness Incurred for such refinancing, refunding, extension
or renewal shall be deemed secured by a Lien under clause (6)(B) and not this
clause (20) for purposes of determining the principal amount of Indebtedness
outstanding under clause (6)(B);

(21) Liens on equipment of the Issuer or any Restricted Subsidiary granted in
the ordinary course of business to the Issuer’s or such Restricted Subsidiary’s
client at which such equipment is located;

(22) judgment and attachment Liens not giving rise to an Event of Default and
notices of lis pendens and associated rights related to litigation being
contested in good faith by appropriate proceedings and for which adequate
reserves have been made;

(23) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into in the ordinary course
of business;

(24) Liens Incurred to secure cash management services or to implement cash
pooling arrangements in the ordinary course of business;

(25) other Liens securing obligations Incurred in the ordinary course of
business which obligations do not exceed $100.0 million at any one time
outstanding;

(26) any encumbrance or restriction (including put and call arrangements) with
respect to Capital Stock of any joint venture or similar arrangement pursuant to
any joint venture or similar agreement;

(27) any amounts held by a trustee in the funds and accounts under an indenture
securing any revenue bonds issued for the benefit of the Issuer or any
Restricted Subsidiary; and

 

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(28) Liens arising by virtue of any statutory or common law provisions relating
to banker’s Liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained with a depository or financial
institution.

For purposes of this definition, notwithstanding anything in the foregoing
clauses (1) through (28), any Lien that secures Retained Notes or Long-Term
Retained Notes shall not under any circumstances be deemed Permitted Liens.

“Person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

“PIK Interest” has the meaning set forth in Exhibits A-2 and B-2 hereto.

“Post-Closing CMBS Transaction” means the transaction described as the
“Post-Closing CMBS Transaction” under “Summary—The Transactions—CMBS
Transactions” in the Offering Memorandum.

“Preferred Stock” means any Equity Interest with preferential right of payment
of dividends or upon liquidation, dissolution, or winding up.

“Pre-Opening Expenses” means, with respect to any fiscal period, the amount of
expenses (other than interest expense) Incurred with respect to capital projects
that are classified as “pre-opening expenses” on the applicable financial
statements of the Issuer and its Restricted Subsidiaries for such period,
prepared in accordance with GAAP.

“Project Financings” means (1) any Capitalized Lease Obligations, mortgage
financing, purchase money Indebtedness or other Indebtedness Incurred in
connection with the acquisition, lease, construction, repair, replacement,
improvement or financing related to any of the Margaritaville Casino & Resort in
Biloxi, Mississippi, the retail facilities related to the Margaritaville
Casino & Resort, the planned casino and hotel in the community of Ciudad Real,
Spain, and a hotel project with Baha Mar Resort Holdings Ltd. in the Bahamas, or
any refinancing of any such Indebtedness that does not extend to any assets
other than the assets listed above and (2) any Sale/Leaseback Transaction with
respect to any of Margaritaville Casino & Resort in Biloxi, Mississippi, the
retail facilities related to the Margaritaville Casino & Resort, the planned
casino and hotel in the community of Ciudad Real, Spain, and a hotel project
with Baha Mar Resort Holdings Ltd. in the Bahamas.

“Qualified IPO” means any underwritten public Equity Offering.

“Qualified Non-Recourse Debt” means Indebtedness that (1) is (a) Incurred by a
Qualified Non-Recourse Subsidiary to finance (whether prior to or within 270
days after) the acquisition, lease, construction, repair, replacement or
improvement of any property (real or personal) or equipment (whether through the
direct purchase of property or the Equity Interests of any person owning such
property and whether in a single acquisition or a series of related
acquisitions) or (b) assumed by a Qualified Non-Recourse Subsidiary, (2) is
non-recourse to the Issuer and any Note Guarantor and (3) is non-recourse to any
Restricted Subsidiary that is not a Qualified Non-Recourse Subsidiary.

“Qualified Non-Recourse Subsidiary” means (1) a Restricted Subsidiary that is
not a Note Guarantor and that is formed or created after the Issue Date in order
to finance an acquisition, lease, construction, repair, replacement or
improvement of any property or equipment (directly or through one of its
Subsidiaries) that secures Qualified Non-Recourse Debt and (2) any Restricted
Subsidiary of a Qualified Non-Recourse Subsidiary.

 

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“Qualified Receivables Financing” means any Receivables Financing of a
Receivables Subsidiary that meets the following conditions:

(1) the Board of Directors of the Issuer shall have determined in good faith
that such Qualified Receivables Financing (including financing terms, covenants,
termination events and other provisions) is in the aggregate economically fair
and reasonable to the Issuer and the Receivables Subsidiary;

(2) all sales of accounts receivable and related assets to the Receivables
Subsidiary are made at Fair Market Value (as determined in good faith by the
Issuer); and

(3) the financing terms, covenants, termination events and other provisions
thereof shall be market terms (as determined in good faith by the Issuer) and
may include Standard Securitization Undertakings.

The grant of a security interest in any accounts receivable of the Issuer or any
of its Restricted Subsidiaries (other than a Receivables Subsidiary) to secure
Bank Indebtedness, Indebtedness in respect of the Notes or any Refinancing
Indebtedness with respect to the Notes shall not be deemed a Qualified
Receivables Financing.

“Rating Agency” means (1) each of Moody’s and S&P and (2) if Moody’s or S&P
ceases to rate the Notes for reasons outside of the Issuer’s control, a
“nationally recognized statistical rating organization” within the meaning of
Rule 15cs-1(c)(2)(vi)(F) under the Exchange Act selected by the Issuer or any
direct or indirect parent of the Issuer as a replacement agency for Moody’s or
S&P, as the case may be.

“Real Estate Assets” means, collectively, all Real Property that is to be
transferred on the Issue Date constituting any of the following: Harrah’s Las
Vegas, Rio and Flamingo Las Vegas in Las Vegas, Nevada; Harrah’s Atlantic City
and Showboat Atlantic City in Atlantic City, New Jersey; and Harrah’s Lake
Tahoe, Harveys Lake Tahoe and Bill’s Lake Tahoe in Lake Tahoe, Nevada, as well
as the Capital Stock of any Subsidiary the assets of which are comprised of such
Real Property.

“Real Estate Facility” means the mortgage financing and mezzanine financing
arrangements between the Real Estate Subsidiaries, which are direct or indirect
subsidiaries of Harrah’s Entertainment, and JPMorgan Chase Bank N.A. and its
successors and assigns, on behalf of the noteholders dated as of the Issue Date,
as amended, restated, supplemented, extended, waived, replaced, restructured,
repaid, refunded, refinanced or otherwise modified from time to time (including
in connection with the Post-Closing CMBS Transaction).

“Real Estate Subsidiary” means those Subsidiaries of Harrah’s Entertainment that
are party to (prior to, on or after the Issue Date) the Real Estate Facility
(and their respective Subsidiaries) secured by the Real Estate Assets
collateralizing such facility on the Issue Date plus any additional Real
Property sold, contributed or transferred to such Subsidiaries by the Issuer or
any Restricted Subsidiary (whether directly or indirectly through the sale,
contribution or transfer of the Capital Stock of a Subsidiary the assets of
which are comprised solely of such Real Property) subsequent to the Issue Date
pursuant to Section 4.06 or in connection with the Post-Closing CMBS
Transaction.

 

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“Real Property” means, collectively, all right, title and interests (including
any leasehold, mineral or other estate) in and to any and all parcels of or
interests in real property owned, leased or operated by any Person, whether by
lease, license or other means, together with, in each case, all easements,
hereditaments and appurtenances relating thereto, all buildings, structures,
parking areas and improvements and appurtenant fixtures and equipment, all
general intangibles and contract rights and other property and rights incidental
to the ownership, lease or operation thereof.

“Record Date” has the meaning specified in Exhibits A-1, A-2, B-1 and B-2
hereto.

“Receivables Fees” means distributions or payments made directly or by means of
discounts with respect to any participation interests issued or sold in
connection with, and all other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Financing.

“Receivables Financing” means any transaction or series of transactions that may
be entered into by the Issuer or any of its Subsidiaries pursuant to which the
Issuer or any of its Subsidiaries may sell, convey or otherwise transfer to
(a) a Receivables Subsidiary (in the case of a transfer by the Issuer or any of
its Subsidiaries); and (b) any other Person (in the case of a transfer by a
Receivables Subsidiary), or may grant a security interest in, any accounts
receivable (whether now existing or arising in the future) of the Issuer or any
of its Subsidiaries, and any assets related thereto including, without
limitation, all collateral securing such accounts receivable, all contracts and
all guarantees or other obligations in respect of such accounts receivable,
proceeds of such accounts receivable and other assets which are customarily
transferred or in respect of which security interests are customarily granted in
connection with asset securitization transactions involving accounts receivable
and any Hedging Obligations entered into by the Issuer or any such Subsidiary in
connection with such accounts receivable.

“Receivables Repurchase Obligation” means any obligation of a seller of
receivables in a Qualified Receivables Financing to repurchase receivables
arising as a result of a breach of a representation, warranty or covenant or
otherwise, including as a result of a receivable or portion thereof becoming
subject to any asserted defense, dispute, off-set or counterclaim of any kind as
a result of any action taken by, any failure to take action by or any other
event relating to the seller.

“Receivables Subsidiary” means a Wholly Owned Restricted Subsidiary of the
Issuer (or another Person formed for the purposes of engaging in Qualified
Receivables Financing with the Issuer in which the Issuer or any Subsidiary of
the Issuer makes an Investment and to which the Issuer or any Subsidiary of the
Issuer transfers accounts receivable and related assets) which engages in no
activities other than in connection with the financing of accounts receivable of
the Issuer and its Subsidiaries, all proceeds thereof and all rights
(contractual or other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and which is
designated by the Board of Directors of the Issuer (as provided below) as a
Receivables Subsidiary and:

(a) no portion of the Indebtedness or any other obligations (contingent or
otherwise) of which (i) is guaranteed by the Issuer or any other Subsidiary of
the Issuer (excluding guarantees of obligations (other than the principal of and
interest on, Indebtedness) pursuant to Standard Securitization Undertakings),
(ii) is recourse to or obligates the Issuer or any other Subsidiary of the
Issuer in any way other than pursuant to Standard Securitization Undertakings,
or (iii) subjects any property or asset of the Issuer or any other Subsidiary of
the Issuer, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings;

 

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(b) with which neither the Issuer nor any other Subsidiary of the Issuer has any
material contract, agreement, arrangement or understanding other than on terms
which the Issuer reasonably believes to be no less favorable to the Issuer or
such Subsidiary than those that might be obtained at the time from Persons that
are not Affiliates of the Issuer; and

(c) to which neither the Issuer nor any other Subsidiary of the Issuer has any
obligation to maintain or preserve such entity’s financial condition or cause
such entity to achieve certain levels of operating results.

Any such designation by the Board of Directors of the Issuer shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the resolution of
the Board of Directors of the Issuer giving effect to such designation and an
Officer’s Certificate certifying that such designation complied with the
foregoing conditions.

“Representative” means the trustee, agent or representative (if any) for an
issue of Indebtedness; provided that if, and for so long as, such Indebtedness
lacks such a Representative, then the Representative for such Indebtedness shall
at all times constitute the holder or holders of a majority in outstanding
principal amount of obligations under such Indebtedness.

“Restricted Cash” means cash and Cash Equivalents held by Restricted
Subsidiaries that are contractually restricted from being distributed to the
Issuer, except for (i) such cash and Cash Equivalents subject only to such
restrictions that are contained in agreements governing Indebtedness permitted
under this Indenture and that are secured by such cash or Cash Equivalents and
(ii) cash and Cash Equivalents constituting “cage cash.”

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means, with respect to any Person, any Subsidiary of
such Person other than an Unrestricted Subsidiary of such Person. Unless
otherwise indicated in this Indenture, all references to Restricted Subsidiaries
shall mean Restricted Subsidiaries of the Issuer.

“Retained Notes” means the Issuer’s 5.500% Senior Notes due 2010, 8.00% Senior
Notes due 2011, 5.375% Senior Notes due 2013, 7.875% Senior Subordinated Notes
due 2010, and 8.125% Senior Subordinated Notes due 2011.

“Reversion Date” means the date on which one or both of the Rating Agencies
withdraw their Investment Grade Rating or downgrade the rating assigned to the
Notes below an Investment Grade Rating.

“Sale/Leaseback Transaction” means an arrangement relating to property now owned
or hereafter acquired by the Issuer or a Restricted Subsidiary whereby the
Issuer or a Restricted Subsidiary transfers such property to a Person and the
Issuer or such Restricted Subsidiary leases it from such Person, other than
leases between the Issuer and a Restricted Subsidiary of the Issuer or between
Restricted Subsidiaries of the Issuer.

“S&P” means Standard & Poor’s Ratings Group or any successor to the rating
agency business thereof.

“SEC” means the Securities and Exchange Commission.

 

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“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Secured Indebtedness Leverage Ratio” means, with respect to any Person, at any
date the ratio of (i) Secured Indebtedness (other than Qualified Non-Recourse
Debt) of such Person and its Restricted Subsidiaries as of such date of
calculation (determined on a consolidated basis in accordance with GAAP) less
the amount of cash and Cash Equivalents in excess of any Restricted Cash held by
such Person and its Restricted Subsidiaries as of such date of determination to
(ii) EBITDA of such Person for the four full fiscal quarters for which internal
financial statements are available immediately preceding such date on which such
additional Indebtedness is Incurred. In the event that the Issuer or any of its
Restricted Subsidiaries Incurs, repays, repurchases or redeems any Indebtedness
subsequent to the commencement of the period for which the Secured Indebtedness
Leverage Ratio is being calculated but prior to the event for which the
calculation of the Secured Indebtedness Leverage Ratio is made (the “Secured
Leverage Calculation Date”), then the Secured Indebtedness Leverage Ratio shall
be calculated giving pro forma effect to such Incurrence, repayment, repurchase
or redemption of Indebtedness as if the same had occurred at the beginning of
the applicable four-quarter period; provided that the Issuer may elect pursuant
to an Officer’s Certificate delivered to the Trustee to treat all or any portion
of the commitment under any Indebtedness as being Incurred at such time, in
which case any subsequent Incurrence of Indebtedness under such commitment shall
not be deemed, for purposes of this calculation, to be an Incurrence at such
subsequent time.

For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, amalgamations, consolidations (including
the Transactions and the Post-Closing CMBS Transaction) and discontinued
operations (as determined in accordance with GAAP), in each case with respect to
an operating unit of a business, and any operational changes that the Issuer or
any of its Restricted Subsidiaries has determined to make and/or made during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Secured Leverage Calculation Date shall be
calculated on a pro forma basis assuming that all such Investments,
acquisitions, dispositions, mergers, amalgamations, consolidations (including
the Transactions and the Post-Closing CMBS Transaction), discontinued operations
and other operational changes (and the change of any associated Indebtedness and
the change in EBITDA resulting therefrom) had occurred on the first day of the
four-quarter reference period. If since the beginning of such period any Person
that subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period shall
have made any Investment, acquisition, disposition, merger, consolidation,
amalgamation, discontinued operation or operational change, in each case with
respect to an operating unit of a business, that would have required adjustment
pursuant to this definition, then the Secured Indebtedness Leverage Ratio shall
be calculated giving pro forma effect thereto for such period as if such
Investment, acquisition, disposition, discontinued operation, merger,
amalgamation, consolidation or operational change had occurred at the beginning
of the applicable four-quarter period. For purposes of making the computation
referred to above, with respect to each New Project that commences operations
and records not less than one full fiscal quarter’s operations during the
four-quarter reference period, the operating results of such New Project will be
annualized on a straight line basis during such period.

For purposes of this definition, whenever pro forma effect is to be given to any
event, the pro forma calculations shall be made in good faith by a responsible
financial or accounting officer of the Issuer. Any such pro forma calculation
may include adjustments appropriate, in the reasonable good faith determination
of the Issuer as set forth in an Officer’s Certificate, to reflect (1) operating
expense reductions and other operating improvements or synergies reasonably
expected to result from the applicable event (including, to the extent
applicable, from the Transactions and the Post-Closing CMBS Transaction) and
(2) all adjustments of the nature used in connection with the calculation of
“Adjusted EBITDA” as set

 

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forth in footnote 3 to “Summary Historical and Unaudited Pro Forma Financial
Data” under “Summary” in the Offering Memorandum to the extent such adjustments,
without duplication, continue to be applicable to such four-quarter period.

For purposes of this definition, any amount in a currency than U.S. dollars will
be converted to U.S. dollars based on the average exchange rate for such
currency for the most recent twelve-month period immediately prior to the date
of determination in a manner consistent with that used in calculating EBITDA for
the applicable period.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.

“Senior Interim Loan Facility” means the interim loan agreement, dated as of
January 28, 2008, by and among the Issuer, as borrower, the lenders party
thereto in their capacities as lenders thereunder and Citibank, N.A. as
administrative agent, including any guarantees, instruments and agreements
executed in connection therewith, and any amendments, supplements, modifications
or restatements thereof.

“Significant Subsidiary” means any Restricted Subsidiary that would be a
“Significant Subsidiary” of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC (or any successor provision).

“Similar Business” means a business, the majority of whose revenues are derived
from the activities of the Issuer and its Subsidiaries as of the Issue Date or
any business or activity that is reasonably similar or complementary thereto or
a reasonable extension, development or expansion thereof or ancillary thereto.

“Sponsors” means (i) Apollo Management, L.P. and any of its respective
Affiliates other than any portfolio companies (collectively, the “Apollo
Sponsors”), (ii) Texas Pacific Group and any of its respective Affiliates other
than any portfolio companies (collectively, the “Texas Pacific Sponsors”),
(iii) any individual who is a partner or employee of an Apollo Sponsor or a
Texas Pacific Sponsor that is licensed by a relevant gaming authority on the
Issue Date or thereafter replaces such licensee and (iv) any Person that forms a
group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision) with any Apollo Sponsors and/or Texas
Pacific Sponsors; provided that the Apollo Sponsors and/or the Texas Pacific
Sponsors (x) own a majority of the voting power and (y) control a majority of
the Board of Directors of the Issuer.

“Standard Securitization Undertakings” means representations, warranties,
covenants, indemnities and guarantees of performance entered into by the Issuer
or any Subsidiary of the Issuer which the Issuer has determined in good faith to
be customary in a Receivables Financing including, without limitation, those
relating to the servicing of the assets of a Receivables Subsidiary, it being
understood that any Receivables Repurchase Obligation shall be deemed to be a
Standard Securitization Undertaking.

“Stated Maturity” means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).

 

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“Subordinated Indebtedness” means (a) with respect to the Issuer, any
Indebtedness of the Issuer which is by its terms subordinated in right of
payment to the Notes, and (b) with respect to any Note Guarantor, any
Indebtedness of such Note Guarantor which is by its terms subordinated in right
of payment to its Note Guarantee.

“Subsidiary” means, with respect to any Person, (1) any corporation, association
or other business entity (other than a partnership, joint venture or limited
liability company) of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
of determination owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
and (2) any partnership, joint venture or limited liability company of which
(x) more than 50% of the capital accounts, distribution rights, total equity and
voting interests or general and limited partnership interests, as applicable,
are owned or controlled, directly or indirectly, by such Person or one or more
of the other Subsidiaries of that Person or a combination thereof, whether in
the form of membership, general, special or limited partnership interests or
otherwise, and (y) such Person or any Subsidiary of such Person is a controlling
general partner or otherwise controls such entity.

“Subsidiary Note Guarantee” means a Note Guarantee of a Note Guarantor that is a
Restricted Subsidiary.

“Subsidiary Note Guarantor” means a Note Guarantor that is a Restricted
Subsidiary.

“Suspension Period” means the period of time between a Covenant Suspension Event
and the related Reversion Date.

“Tax Distributions” means any distributions described in Section 4.04(b)(xii).

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as
in effect on the date of this Indenture.

“Total Assets” means the total consolidated assets of the Issuer and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Issuer, without giving effect to any amortization of the amount of intangible
assets since the Issue Date.

“Transactions” means, with the exception of the Post-Closing CMBS Transaction,
the transactions described under “Summary—The Transactions” in the Offering
Memorandum.

“Treasury Rate” means, as of the applicable redemption date, the yield to
maturity as of such redemption date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
business days prior to such redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from such redemption date to February 1, 2012, in the
case of the Cash Pay Notes, and February 1,2013, in the case of the Toggle
Notes; provided, however, that if the period from such redemption date to
February 1, 2012 in the case of the Cash Pay Notes, and February 1, 2013, in the
case of the Toggle Notes, is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year will be used.

 

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“Trust Officer” means:

(1) any officer within the corporate trust department of the Trustee, including
any vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such Person’s knowledge of and familiarity with the
particular subject, and

(2) who shall have direct responsibility for the administration of this
Indenture.

“Trustee” means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in
effect from time to time.

“Unrestricted Subsidiary” means:

(1) any Subsidiary of the Issuer that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below; and

(2) any Subsidiary of an Unrestricted Subsidiary;

The Issuer may designate any Subsidiary of the Issuer (including any newly
acquired or newly formed Subsidiary of the Issuer) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests or Indebtedness of, or owns or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that the Subsidiary to be so
designated and its Subsidiaries do not at the time of designation have and do
not thereafter Incur any Indebtedness pursuant to which the lender has recourse
to any of the assets of the Issuer or any of its Restricted Subsidiaries;
provided, further, however, that either:

(a) the Subsidiary to be so designated has total consolidated assets of $1,000
or less; or

(b) if such Subsidiary has consolidated assets greater than $1,000, then such
designation would be permitted under Section 4.04.

The Issuer may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation:

(x) (1) the Issuer could Incur $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.03(a), or (2) the Fixed
Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be
greater than such ratio for the Issuer and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation, and

(y) no Event of Default shall have occurred and be continuing.

 

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Any such designation by Issuer shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the resolution of the Board of Directors or
any committee thereof of the Issuer giving effect to such designation and an
Officer’s Certificate certifying that such designation complied with the
foregoing provisions.

“U.S. Government Obligations” means securities that are:

(1) direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged, or

(2) obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America, the timely payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America,

which, in each case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any such U.S. Government Obligations or a specific payment of principal of or
interest on any such U.S. Government Obligations held by such custodian for the
account of the holder of such depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligations or the specific
payment of principal of or interest on the U.S. Government Obligations evidenced
by such depository receipt.

“Voting Stock” of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness or
Disqualified Stock or Preferred Stock, as the case may be, at any date, the
quotient obtained by dividing (1) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock or Preferred Stock multiplied by the amount
of such payment, by (2) the sum of all such payments.

“Wholly Owned Restricted Subsidiary” is any Wholly Owned Subsidiary that is a
Restricted Subsidiary.

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person 100%
of the outstanding Capital Stock or other ownership interests of which (other
than directors’ qualifying shares or shares required to be held by Foreign
Subsidiaries) shall at the time be owned by such Person or by one or more Wholly
Owned Subsidiaries of such Person.

SECTION 1.02. Other Definitions.

 

Term

  

Defined

in Section

“Additional Interest”

   Appendix A

“Affiliate Transaction”

   4.07

“Asset Sale Offer”

   4.06(b)

“Bankruptcy Law”

   6.01

 

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Term

  

Defined

in Section

“Cash Pay Notes”

   Preamble

“Change of Control Offer”

   4.08

“covenant defeasance option”

   8.01(c)

“Covenant Suspension Event”

   4.15

“Custodian”

   6.01

“Definitive Note”

   Appendix A

“Disqualified Holder”

   2.15

“Depository”

   Appendix A

“Euroclear”

   Appendix A

“Event of Default”

   6.01

“Excess Proceeds”

   4.06(b)

“Exchange Notes”

   Preamble

“Global Notes”

   Appendix A

“Global Notes Legend”

   Appendix A

“Guaranteed Obligations”

   11.01(a)

“IAI”

   Appendix A

“incorporated provision”

   13.01

“Initial Purchasers”

   Appendix A

“Initial Notes”

   Preamble

“Issuer”

   Preamble

“legal defeasance option”

   8.01

“Notes”

   Preamble

“Notes Custodian”

   Appendix A

“Notice of Default”

   6.01

“Offer Period”

   4.06(d)

“Paying Agent”

   2.04(a)

“PIK Notes”

   2.01

“PIK Payment”

   2.01

“protected purchaser”

   2.08

“Purchase Agreement”

   Appendix A

“QIB”

   Appendix A

“Refinancing Indebtedness”

   4.03(b)

“Refunding Capital Stock”

   4.04(b)

“Registered Exchange Offer”

   Appendix A

“Registration Agreement”

   Appendix A

“Registrar”

   2.04(a)

“Regulation S”

   Appendix A

“Regulation S Notes”

   Appendix A

“Restricted Payment”

   4.04(a)

“Restricted Period”

   Appendix A

“Restricted Notes Legend”

   Appendix A

“Retired Capital Stock”

   4.04(b)

“Reversion Date”

   4.15

“Rule 501”

   Appendix A

“Rule 144A”

   Appendix A

“Rule 144A Notes”

   Appendix A

“Second Commitment”

   4.06

 

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Term

  

Defined

in Section

“Shelf Registration Statement”

   Appendix A

“Successor Issuer”

   5.01(a)

“Successor Note Guarantor”

   5.01(b)

“Successor Parent Note Guarantor”

   5.01

“Suspended Covenants”

   4.15

“Toggle Notes”

   Preamble

“Transfer”

   5.01(b)

“Transfer Restricted Notes”

   Appendix A

“Unrestricted Definitive Note

   Appendix A

SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture
incorporates by reference certain provisions of the TIA. The following TIA terms
have the following meanings:

“Commission” means the SEC.

“indenture securities” means the Notes and the Guarantees.

“indenture security holder” means a holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the indenture securities means the Issuer, the Note Guarantors and
any other obligor on the Notes.

All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule have the meanings
assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

(c) “or” is not exclusive;

(d) “including” means including without limitation;

(e) words in the singular include the plural and words in the plural include the
singular;

(f) unsecured Indebtedness shall not be deemed to be subordinate or junior to
Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

 

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(g) the principal amount of any non-interest bearing or other discount security
at any date shall be the principal amount thereof that would be shown on a
balance sheet of the issuer dated such date prepared in accordance with GAAP;

(h) the principal amount of any Preferred Stock shall be (i) the maximum
liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater;

(i) unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP;

(j) “$” and “U.S. dollars” each refer to United States dollars, or such other
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts; and

(k) whenever in this Indenture or the Notes there is mentioned, in any context,
principal, interest or any other amount payable under or with respect to any
Notes, such mention shall be deemed to include mention of the payment of
Additional Interest, to the extent that, in such context, Additional Interest
is, were or would be payable in respect thereof.

ARTICLE 2

THE NOTES

SECTION 2.01. Amount of Notes. The aggregate principal amount of Notes which may
be authenticated and delivered under this Indenture on the Issue Date is
$6,335,000,000, comprised of $4,932,417,000 in initial aggregate principal
amount of Cash Pay Notes and $1,402,583,000 in aggregate principal amount of
Toggle Notes.

In connection with the payment of PIK Interest or Partial PIK Interest in
respect of the Notes, the Issuer is entitled to, without the consent of the
holders and without regard to Section 4.03, increase the outstanding principal
amount of the Notes or issue additional Notes (the “PIK Notes”) under this
Indenture on the same terms and conditions as the Toggle Notes (in each case,
the “PIK Payment”).

In addition, the Issuer may from time to time after the Issue Date issue
Additional Notes under this Indenture in an unlimited principal amount, so long
as (i) the Incurrence of the Indebtedness represented by such Additional Notes
is at such time permitted by Section 4.03 and (ii) such Additional Notes are
issued in compliance with the other applicable provisions of this Indenture.
With respect to any Additional Notes issued after the Issue Date (except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.09,
2.10, 3.06, 4.06(g), 4.08(c) or Appendix A), there shall be (a) established in
or pursuant to a resolution of the Board of Directors and (b) (i) set forth or
determined in the manner provided in an Officer’s Certificate or
(ii) established in one or more indentures supplemental hereto, prior to the
issuance of such Additional Notes:

(1) the aggregate principal amount of such Additional Notes which may be
authenticated and delivered under this Indenture,

 

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(2) the issue price and issuance date of such Additional Notes, including the
date from which interest on such Additional Notes shall accrue;

(3) if applicable, that such Additional Notes shall be issuable in whole or in
part in the form of one or more Global Notes and, in such case, the respective
depositaries for such Global Notes, the form of any legend or legends which
shall be borne by such Global Notes in addition to or in lieu of those set forth
in Exhibits A-1 and A-2 hereto and any circumstances in addition to or in lieu
of those set forth in Section 2.2 of Appendix A in which any such Global Note
may be exchanged in whole or in part for Additional Notes registered, or any
transfer of such Global Note in whole or in part may be registered, in the name
or names of Persons other than the depositary for such Global Note or a nominee
thereof; and

(4) if applicable, that such Additional Notes that are not Transfer Restricted
Notes shall not be issued in the form of Initial Notes as set forth in Exhibits
A-1 and A-2, but shall be issued in the form of Exchange Notes as set forth in
Exhibits B-1 and B-2.

If any of the terms of any Additional Notes are established by action taken
pursuant to a resolution of the Board of Directors, a copy of an appropriate
record of such action shall be certified by the Secretary or any Assistant
Secretary of the Issuer and delivered to the Trustee at or prior to the delivery
of the Officers’ Certificate or the indenture supplemental hereto setting forth
the terms of the Additional Notes.

The Cash Pay Notes, including any Additional Notes issued as Cash Pay Notes,
may, at the Issuer’s option, be treated as a single class for all purposes under
this Indenture, including, without limitation, waivers, amendments, redemptions
and offers to purchase. The Toggle Notes, including any PIK Notes and any
Additional Notes issued as Toggle Notes, may, at the Issuer’s option, be treated
as a single class for all purposes under this Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase.

SECTION 2.02. Form and Dating. Provisions relating to the Initial Notes and the
Exchange Notes are set forth in Appendix A, which is hereby incorporated in and
expressly made a part of this Indenture. The (i) Initial Notes and the Trustee’s
certificate of authentication and (ii) any Additional Notes (if issued as
Transfer Restricted Notes) and the Trustee’s certificate of authentication shall
each be substantially in the form of Exhibits A-1 and A-2 hereto, which are
hereby incorporated in and expressly made a part of this Indenture. The
(i) Exchange Notes and the Trustee’s certificate of authentication and (ii) any
Additional Notes issued other than as Transfer Restricted Notes and the
Trustee’s certificate of authentication shall each be substantially in the form
of Exhibits B-1 and B-2 hereto, which are hereby incorporated in and expressly
made a part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Issuer or any Note Guarantor is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Issuer).
Each Note shall be dated the date of its authentication. The Notes shall be
issuable only in registered form without interest coupons and in denominations
of $2,000 and any integral multiples of $1,000 (rounded to the nearest $1 in the
case of any PIK Notes).

SECTION 2.03. Execution and Authentication. The Trustee shall authenticate and
make available for delivery upon a written order of the Issuer signed by one
Officer (a) Initial Notes for original issue on the date hereof in an aggregate
principal amount of $6,335,000,000, consisting of $4,932,417,000 aggregate
principal amount of Cash Pay Notes and $1,402,583,000 aggregate principal amount
of Toggle Notes, (b) subject to the terms of this Indenture, Additional Notes in
an aggregate principal

 

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amount to be determined at the time of issuance and specified therein, (c) the
Exchange Notes for issue in a Registered Exchange Offer pursuant to the
Registration Agreement for a like principal amount of Initial Notes exchanged
pursuant thereto or otherwise pursuant to an effective registration statement
under the Securities Act and (d) any PIK Notes issued in payment of PIK Interest
or Partial PIK Interest. Such order shall specify the amount of separate Note
certificates to be authenticated, the principal amount of each of the Notes to
be authenticated, the date on which the original issue of Notes is to be
authenticated, the registered holder of each of the Notes and delivery
instructions and whether the Notes are to be Initial Notes or Exchange Notes.
Notwithstanding anything to the contrary in this Indenture or Appendix A, any
issuance of Additional Notes after the Issue Date shall be in a principal amount
of at least $2,000 and integral multiples of $1,000 in excess of $2,000.

One Officer shall sign the Notes for the Issuer by manual or facsimile
signature.

If an Officer whose signature is on a Note no longer holds that office at the
time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee manually
signs the certificate of authentication on the Note. The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee may appoint one or more authenticating agents reasonably acceptable
to the Issuer to authenticate the Notes. Any such appointment shall be evidenced
by an instrument signed by a Trust Officer, a copy of which shall be furnished
to the Issuer. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.

On any Interest Payment Date on which the Issuer pays PIK Interest or Partial
PIK Interest with respect to a Note, the Trustee shall increase the principal
amount of such Note by an amount equal to the interest payable, rounded up to
the nearest $1,000, for the relevant interest period on the principal amount of
such Note as of the relevant Record Date for such Interest Payment Date, to the
credit of the holders on such Record Date, pro rata in accordance with their
interests, and an adjustment shall be made on the books and records of the
Trustee (if it is then the Note Custodian for such Global Note) with respect to
such Global Note, by the Trustee or the Note Custodian, to reflect such
increase. On any Interest Payment Date on which the Issuer pays PIK Interest or
Partial PIK Interest by issuing definitive PIK Notes, the principal amount of
any such PIK Notes issued to any holder, for the relevant interest period as of
the relevant Record Date for such Interest Payment Date, shall be rounded up to
the nearest $1.00.

SECTION 2.04. Registrar and Paying Agent.

(a) The Issuer shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (the “Registrar”) and
(ii) an office or agency where Notes may be presented for payment (the “Paying
Agent”). The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Issuer may have one or more co-registrars and one or more
additional paying agents. The term “Registrar” includes any co-registrars. The
term “Paying Agent” includes the Paying Agent and any additional paying agents.
The Issuer initially appoints the Trustee as Registrar, Paying Agent and the
Notes Custodian with respect to the Global Notes.

 

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(b) The Issuer may enter into an appropriate agency agreement with any Registrar
or Paying Agent not a party to this Indenture, which shall incorporate the terms
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such agent. The Issuer shall notify the Trustee in writing of the name
and address of any such agent. If the Issuer fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 7.07. The Issuer or any of its
domestically organized Wholly Owned Subsidiaries may act as Paying Agent or
Registrar.

(c) The Issuer may remove any Registrar or Paying Agent upon written notice to
such Registrar or Paying Agent and to the Trustee; provided, however, that no
such removal shall become effective until (i) if applicable, acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuer and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (i) above. The Registrar or Paying Agent may
resign at any time upon written notice to the Issuer and the Trustee; provided,
however, that the Trustee may resign as Paying Agent or Registrar only if the
Trustee also resigns as Trustee in accordance with Section 7.08.

SECTION 2.05. Paying Agent to Hold Money in Trust. Prior to each due date of the
principal of and interest on any Note, the Issuer shall deposit with each Paying
Agent (or if the Issuer or a Wholly Owned Subsidiary is acting as Paying Agent,
segregate and hold in trust for the benefit of the Persons entitled thereto) a
sum sufficient to pay such principal and interest when so becoming due. The
Issuer shall require each Paying Agent (other than the Trustee) to agree in
writing that a Paying Agent shall hold in trust for the benefit of holders or
the Trustee all money held by a Paying Agent for the payment of principal of and
interest on the Notes, and shall notify the Trustee of any default by the Issuer
in making any such payment. If the Issuer or a Wholly Owned Subsidiary of the
Issuer acts as Paying Agent, it shall segregate the money held by it as Paying
Agent and hold it in trust for the benefit of the Persons entitled thereto. The
Issuer at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed by such Paying Agent. Upon
complying with this Section, a Paying Agent shall have no further liability for
the money delivered to the Trustee.

SECTION 2.06. Holder Lists. The Trustee shall preserve in as current a form as
is reasonably practicable the most recent list available to it of the names and
addresses of holders. If the Trustee is not the Registrar, the Issuer shall
furnish, or cause the Registrar to furnish, to the Trustee, in writing at least
five Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of holders.

SECTION 2.07. Transfer and Exchange. The Notes shall be issued in registered
form and shall be transferable only upon the surrender of a Note for
registration of transfer and in compliance with Appendix A. When a Note is
presented to the Registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if its requirements therefor are met.
When Notes are presented to the Registrar with a request to exchange them for an
equal principal amount of Notes of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Issuer shall execute and the
Trustee shall authenticate Notes at the Registrar’s request. The Issuer may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Issuer shall not be required to make, and the Registrar need
not register, transfers or exchanges of Notes selected for redemption (except,
in the case of Notes to be redeemed in part, the portion thereof not to be
redeemed) or of any Notes for a period of 15 days before a selection of Notes to
be redeemed.

 

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Prior to the due presentation for registration of transfer of any Note, the
Issuer, the Note Guarantors, the Trustee, the Paying Agent and the Registrar may
deem and treat the Person in whose name a Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether or
not such Note is overdue, and none of the Issuer, any Note Guarantor, the
Trustee, the Paying Agent or the Registrar shall be affected by notice to the
contrary.

Any holder of a beneficial interest in a Global Note shall, by acceptance of
such beneficial interest, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system maintained by
(a) the holder of such Global Note (or its agent) or (b) any holder of a
beneficial interest in such Global Note, and that ownership of a beneficial
interest in such Global Note shall be required to be reflected in a book entry.

All Notes issued upon any transfer or exchange pursuant to the terms of this
Indenture shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.

SECTION 2.08. Replacement Notes. If a mutilated Note is surrendered to the
Registrar or if the holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met, such that the holder (a) satisfies the Issuer
or the Trustee within a reasonable time after such holder has notice of such
loss, destruction or wrongful taking and the Registrar does not register a
transfer prior to receiving such notification, (b) makes such request to the
Issuer or the Trustee prior to the Note being acquired by a protected purchaser
as defined in Section 8-303 of the Uniform Commercial Code (a “protected
purchaser”) and (c) satisfies any other reasonable requirements of the Trustee.
If required by the Trustee or the Issuer, such holder shall furnish an indemnity
bond sufficient in the judgment of the Trustee and the Issuer to protect the
Issuer, the Trustee, a Paying Agent and the Registrar from any loss or liability
that any of them may suffer if a Note is replaced and subsequently presented or
claimed for payment. The Issuer and the Trustee may charge the holder for their
expenses in replacing a Note (including without limitation, attorneys’ fees and
disbursements in replacing such Note). In the event any such mutilated, lost,
destroyed or wrongfully taken Note has become or is about to become due and
payable, the Issuer in its discretion may pay such Note instead of issuing a new
Note in replacement thereof.

Every replacement Note is an additional obligation of the Issuer.

The provisions of this Section 2.08 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, lost, destroyed or wrongfully taken Notes.

SECTION 2.09. Outstanding Notes. Notes outstanding at any time are all Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to Section 13.06, a Note does not cease to be outstanding because the
Issuer or an Affiliate of the Issuer holds the Note.

 

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If a Note is replaced pursuant to Section 2.08 (other than a mutilated Note
surrendered for replacement), it ceases to be outstanding unless the Trustee and
the Issuer receive proof satisfactory to them that the replaced Note is held by
a protected purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.08.

If a Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be, and no Paying
Agent is prohibited from paying such money to the holders on that date pursuant
to the terms of this Indenture, then on and after that date such Notes (or
portions thereof) cease to be outstanding and interest on them ceases to accrue.

SECTION 2.10. Temporary Notes. In the event that Definitive Notes are to be
issued under the terms of this Indenture, until such Definitive Notes are ready
for delivery, the Issuer may prepare and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
Definitive Notes but may have variations that the Issuer considers appropriate
for temporary Notes. Without unreasonable delay, the Issuer shall prepare and
the Trustee shall authenticate Definitive Notes and make them available for
delivery in exchange for temporary Notes upon surrender of such temporary Notes
at the office or agency of the Issuer, without charge to the holder. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as Definitive Notes.

SECTION 2.11. Cancellation. The Issuer at any time may deliver Notes to the
Trustee for cancellation. The Registrar and each Paying Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment or cancellation and shall dispose of
canceled Notes in accordance with its customary procedures. The Issuer may not
issue new Notes to replace Notes it has redeemed, paid or delivered to the
Trustee for cancellation. The Trustee shall not authenticate Notes in place of
canceled Notes other than pursuant to the terms of this Indenture.

SECTION 2.12. Defaulted Interest. If the Issuer defaults in a payment of
interest on the Notes, the Issuer shall pay the defaulted interest then borne by
the Notes (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Issuer may pay the defaulted interest to the Persons who are
holders on a subsequent special record date. The Issuer shall fix or cause to be
fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly mail or cause to be mailed to
each affected holder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid.

SECTION 2.13. CUSIP Numbers, ISINs, Etc. The Issuer in issuing the Notes may use
CUSIP numbers, ISINs and “Common Code” numbers (if then generally in use) and,
if so, the Trustee shall use CUSIP numbers, ISINs and “Common Code” numbers in
notices of redemption as a convenience to holders; provided, however, that any
such notice may state that no representation is made as to the correctness of
such numbers, either as printed on the Notes or as contained in any notice of a
redemption that reliance may be placed only on the other identification numbers
printed on the Notes and that any such redemption shall not be affected by any
defect in or omission of such numbers. The Issuer shall advise the Trustee of
any change in the CUSIP numbers, ISINs and “Common Code” numbers.

SECTION 2.14. Calculation of Principal Amount of Notes. The aggregate principal
amount of the Notes, at any date of determination, shall be the principal amount
of the Notes at such date of determination. With respect to any matter requiring
consent, waiver, approval or other action of the

 

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holders of a specified percentage of the principal amount of all the Notes, such
percentage shall be calculated, on the relevant date of determination, by
dividing (a) the principal amount, as of such date of determination, of Notes,
the holders of which have so consented, by (b) the aggregate principal amount,
as of such date of determination, of the Notes then outstanding, in each case,
as determined in accordance with the preceding sentence, Section 2.09 and
Section 13.06 of this Indenture. Any such calculation made pursuant to this
Section 2.14 shall be made by the Issuer and delivered to the Trustee pursuant
to an Officers’ Certificate.

SECTION 2.15. Mandatory Disposition Pursuant to Gaming Laws. Each person that
holds or acquires beneficial ownership of any of the Notes shall be deemed to
have agreed, by accepting such Notes, that if any Gaming Authority requires such
person to be approved, licensed, qualified or found suitable under applicable
Gaming Laws, such holder or beneficial owner, as the case may be, shall apply
for a license, qualification or finding of suitability within the required time
period.

If a person required to apply or become licensed or qualified or be found
suitable fails to do so (a “Disqualified Holder”), the Issuer shall have the
right, at its election, (1) to require such person to dispose of its Notes or
beneficial interest therein within 30 days of receipt of notice of such election
or such earlier date as may be required by such Gaming Authority or (2) to
redeem such Notes at a redemption price that, unless otherwise directed by such
Gaming Authority, shall be at a redemption price that is equal to the lesser of:

(a) such person’s cost, or

(b) 100% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the earlier of (i) the redemption date or (ii) the date such person
became a Disqualified Holder.

The Issuer shall notify the Trustee and applicable Gaming Authority in writing
of any such redemption as soon as practicable. The Issuer shall not be
responsible for any costs or expenses any such holder may Incur in connection
with its application for a license, qualification or finding of suitability.

ARTICLE 3

REDEMPTION

SECTION 3.01. Redemption. The Notes may be redeemed, in whole, or from time to
time in part, subject to the conditions and at the redemption prices set forth
in Paragraph 5 of the forms of Note set forth in Exhibits A-1 and A-2 and
Exhibits B-1 and B-2 hereto, which are hereby incorporated by reference and made
a part of this Indenture, together with accrued and unpaid interest to the
redemption date.

SECTION 3.02. Applicability of Article. Redemption of Notes at the election of
the Issuer or otherwise, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.

SECTION 3.03. Notices to Trustee. If the Issuer elects to redeem Notes pursuant
to the optional redemption provisions of Paragraph 5 of the Note, it shall
notify the Trustee in writing of (i) the Section of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price. The Issuer shall
give notice to the Trustee provided for in this paragraph at least 30 days but
not more than 60 days before a redemption

 

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date if the redemption is pursuant to Paragraph 5 of the Note, unless a shorter
period is acceptable to the Trustee. Such notice shall be accompanied by an
Officers’ Certificate and Opinion of Counsel from the Issuer to the effect that
such redemption will comply with the conditions herein, as well as such notice
required to be delivered under Section 3.05 below. If fewer than all the Notes
are to be redeemed, the record date relating to such redemption shall be
selected by the Issuer and given to the Trustee, which record date shall be not
fewer than 15 days after the date of notice to the Trustee. Any such notice may
be canceled at any time prior to notice of such redemption being mailed to any
holder and shall thereby be void and of no effect.

SECTION 3.04. Selection of Notes to Be Redeemed. In the case of any partial
redemption, selection of the Notes for redemption will be made by the Trustee on
a pro rata basis to the extent practicable; provided that no Notes of $2,000 or
less shall be redeemed in part. The Trustee shall make the selection from
outstanding Notes not previously called for redemption. The Trustee may select
for redemption portions of the principal of Notes that have denominations larger
than $2,000. Notes and portions of them the Trustee selects shall be in amounts
of $2,000 or any integral multiple of $1,000. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Issuer promptly of the Notes or
portions of Notes to be redeemed.

SECTION 3.05. Notice of Optional Redemption.

(a) At least 30 days but not more than 60 days before a redemption date pursuant
to Paragraph 5 of the Note, the Issuer shall mail or cause to be mailed by
first-class mail a notice of redemption to each holder whose Notes are to be
redeemed.

Any such notice shall identify the Notes to be redeemed and shall state:

(i) the redemption date;

(ii) the redemption price and the amount of accrued interest to the redemption
date;

(iii) the name and address of the Paying Agent;

(iv) that Notes called for redemption must be surrendered to the Paying Agent to
collect the redemption price, plus accrued interest;

(v) if fewer than all the outstanding Notes are to be redeemed, the certificate
numbers and principal amounts of the particular Notes to be redeemed, the
aggregate principal amount of Notes to be redeemed and the aggregate principal
amount of Notes to be outstanding after such partial redemption;

(vi) that, unless the Issuer defaults in making such redemption payment or the
Paying Agent is prohibited from making such payment pursuant to the terms of
this Indenture, interest on Notes (or portion thereof) called for redemption
ceases to accrue on and after the redemption date;

(vii) the CUSIP number, ISIN and/or “Common Code” number, if any, printed on the
Notes being redeemed; and

 

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(viii) that no representation is made as to the correctness or accuracy of the
CUSIP number or ISIN and/or “Common Code” number, if any, listed in such notice
or printed on the Notes.

(b) At the Issuer’s request, the Trustee shall give the notice of redemption in
the Issuer’s name and at the Issuer’s expense. In such event, the Issuer shall
provide the Trustee with the information required by this Section at least one
Business Day prior to the date such notice is to be provided to holders in the
final form such notice is to be delivered to holders and such notice may not be
canceled.

SECTION 3.06. Effect of Notice of Redemption. Once notice of redemption is
mailed in accordance with Section 3.05, Notes called for redemption become due
and payable on the redemption date and at the redemption price stated in the
notice, except as provided in the final sentence of paragraph 5 of the Notes.
Upon surrender to the Paying Agent, such Notes shall be paid at the redemption
price stated in the notice, plus accrued interest, to, but not including, the
redemption date; provided, however, that if the redemption date is after a
regular record date and on or prior to the interest payment date, the accrued
interest shall be payable to the holder of the redeemed Notes registered on the
relevant record date. Failure to give notice or any defect in the notice to any
holder shall not affect the validity of the notice to any other holder.

SECTION 3.07. Deposit of Redemption Price. With respect to any Notes, prior to
10:00 a.m., New York City time, on the redemption date, the Issuer shall deposit
with the Paying Agent (or, if the Issuer or a Wholly Owned Subsidiary is the
Paying Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest on all Notes or portions thereof to be
redeemed on that date other than Notes or portions of Notes called for
redemption that have been delivered by the Issuer to the Trustee for
cancellation. On and after the redemption date, interest shall cease to accrue
on Notes or portions thereof called for redemption so long as the Issuer has
deposited with the Paying Agent funds sufficient to pay the principal of, plus
accrued and unpaid interest on, the Notes to be redeemed, unless the Paying
Agent is prohibited from making such payment pursuant to the terms of this
Indenture.

SECTION 3.08. Notes Redeemed in Part. Upon surrender of a Note that is redeemed
in part, the Issuer shall execute and the Trustee shall authenticate for the
holder (at the Issuer’s expense) a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.

ARTICLE 4

COVENANTS

SECTION 4.01. Payment of Notes. The Issuer shall promptly pay the principal of
and interest on the Notes on the dates and in the manner provided in the Notes
and in this Indenture. An installment of principal of or interest shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds as of 12:00 p.m. Eastern time money sufficient to pay all principal and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the holders on that date pursuant to
the terms of this Indenture.

The Issuer shall pay interest on overdue principal at the rate specified
therefor in the Notes, and it shall pay interest on overdue installments of
interest at the same rate borne by the Notes to the extent lawful.

 

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SECTION 4.02. Reports and Other Information.

(a) Notwithstanding that the Issuer may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on
an annual and quarterly basis on forms provided for such annual and quarterly
reporting pursuant to rules and regulations promulgated by the SEC, the Issuer
shall file with the SEC (and provide the Trustee and holders with copies
thereof, without cost to each holder, within 15 days after it files them with
the SEC),

(i) within the time period specified in the SEC’s rules and regulations for
non-accelerated filers, annual reports on Form 10-K (or any successor or
comparable form) containing the information required to be contained therein (or
required in such successor or comparable form),

(ii) within the time period specified in the SEC’s rules and regulations for
non-accelerated filers, reports on Form 10-Q (or any successor or comparable
form) containing the information required to be contained therein (or required
in such successor or comparable form),

(iii) promptly from time to time after the occurrence of an event required to be
therein reported (and in any event within the time period specified in the SEC’s
rules and regulations), such other reports on Form 8-K (or any successor or
comparable form), and

(iv) any other information, documents and other reports which the Issuer would
be required to file with the SEC if it were subject to Section 13 or 15(d) of
the Exchange Act;

provided, however, that the Issuer shall not be so obligated to file such
reports with the SEC if the SEC does not permit such filing, in which event the
Issuer will make available such information to prospective purchasers of Notes
in addition to providing such information to the Trustee and the holders, in
each case within 15 days after the time the Issuer would be required to file
such information with the SEC if it were subject to Section 13 or 15(d) of the
Exchange Act, subject, in the case of any such information, certificates or
reports provided prior to the effectiveness of the Exchange Offer Registration
Statement or Shelf Registration Statement, to exceptions consistent with the
presentation of financial information in the Offering Memorandum.

Notwithstanding the foregoing, the Issuer shall not be required to furnish any
information, certificates or reports required by Items 307 or 308 of Regulation
S-K prior to the effectiveness of the Exchange Offer Registration Statement or
Shelf Registration Statement.

(b) In the event that:

(i) the rules and regulations of the SEC permit the Issuer and any direct or
indirect parent of the Issuer to report at such parent entity’s level on a
consolidated basis and such parent entity is not engaged in any business in any
material respect other than incidental to its ownership, directly or indirectly,
of the capital stock of the Issuer, or

(ii) any direct or indirect parent of the Issuer is or becomes a Note Guarantor
of the Notes,

consolidating reporting at the parent entity’s level in a manner consistent with
that described in this Section 4.02 and furnishing financial information
relating to such direct or indirect parent for the Issuer will satisfy this
Section 4.02; provided that such financial information is accompanied by
consolidating information

 

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that explains in reasonable detail the differences between the information
relating to such direct or indirect parent and any of its Subsidiaries other
than the Issuer and its Subsidiaries, on the one hand, and the information
relating to the Issuer, the Note Guarantors and the other Subsidiaries of the
Issuer on a standalone basis, on the other hand.

(c) The Issuer will make such information available to prospective investors
upon request. In addition, the Issuer has agreed that, for so long as any Notes
remain outstanding during any period when it is not subject to Section 13 or
15(d) of the Exchange Act, or otherwise permitted to furnish the SEC with
certain information pursuant to Rule 12g3-2(b) of the Exchange Act, it will
furnish to the holders of the Notes and to prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.

Notwithstanding the foregoing, the Issuer will be deemed to have furnished such
reports referred to above to the Trustee and the holders if the Issuer has filed
such reports with the SEC via the EDGAR filing system and such reports are
publicly available. In addition, the requirements of this Section 4.02 shall be
deemed satisfied prior to the commencement of the exchange offer contemplated by
the Registration Rights Agreement relating to the Notes or the effectiveness of
the Shelf Registration Statement by (1) the filing with the SEC of the Exchange
Offer Registration Statement and/or Shelf Registration Statement in accordance
with the provisions of such Registration Rights Agreement, and any amendments
thereto, if such registration statement and/or amendments thereto are filed at
times that otherwise satisfy the time requirements set forth in Section 4.02(a)
and/or (2) the posting of reports that would be required to be provided to the
Trustee and the holders on the Issuer’s website (or that of any of its parent
companies).

SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock.

(a) (i) The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) or issue any shares of Disqualified Stock; and (ii) the
Issuer shall not permit any of its Restricted Subsidiaries (other than a Note
Guarantor) to issue any shares of Preferred Stock; provided, however, that the
Issuer and any Note Guarantor may Incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock, and, subject to
Section 4.03(c), any Restricted Subsidiary of the Issuer that is not a Note
Guarantor may Incur Indebtedness (including Acquired Indebtedness), issue shares
of Disqualified Stock or issue shares of Preferred Stock, in each case if the
Fixed Charge Coverage Ratio of the Issuer for the most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is Incurred
or such Disqualified Stock or Preferred Stock is issued would have been at least
2.00 to 1.00 determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
Incurred, or the Disqualified Stock or Preferred Stock had been issued, as the
case may be, and the application of proceeds therefrom had occurred at the
beginning of such four-quarter period.

(b) The limitations set forth in Section 4.03(a) shall not apply to:

(i) the Incurrence by the Issuer or its Restricted Subsidiaries of Indebtedness
under the Credit Agreement and the issuance and creation of letters of credit
and bankers’ acceptances thereunder up to an aggregate principal amount of
$11,000 million;

 

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(ii) the Incurrence by the Issuer and the Note Guarantors of Indebtedness
represented by the Notes (not including any Additional Notes, but including any
PIK Notes issued as interest from time to time) and the Note Guarantees
(including Exchange Notes and related guarantees thereof) and any loans under
the Senior Interim Loan Facility (including any PIK interest thereon)
outstanding on the Issue Date (other than any loans repaid with the proceeds of
the Notes on the Issue Date);

(iii) Indebtedness existing on the Issue Date (other than Indebtedness described
in clauses (i) and (ii) of this Section 4.03(b));

(iv) Indebtedness (including Capitalized Lease Obligations) Incurred by the
Issuer or any of its Restricted Subsidiaries, Disqualified Stock issued by the
Issuer or any of its Restricted Subsidiaries and Preferred Stock issued by any
Restricted Subsidiaries of the Issuer to finance (whether prior to or within 270
days after) the acquisition, lease, construction, repair, replacement or
improvement of property (real or personal) or equipment (whether through the
direct purchase of assets or the Capital Stock of any Person owning such
assets);

(v) Indebtedness Incurred by the Issuer or any of its Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of credit and
bank guarantees issued in the ordinary course of business, including without
limitation letters of credit in respect of workers’ compensation claims, health,
disability or other benefits to employees or former employees or their families
or property, casualty or liability insurance or self-insurance, and letters of
credit in connection with the maintenance of, or pursuant to the requirements
of, environmental or other permits or licenses from governmental authorities, or
other Indebtedness with respect to reimbursement type obligations regarding
workers’ compensation claims;

(vi) Indebtedness arising from agreements of the Issuer or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, Incurred in connection with the Transactions
or any other acquisition or disposition of any business, assets or a Subsidiary
of the Issuer in accordance with the terms of this Indenture, other than
guarantees of Indebtedness Incurred by any Person acquiring all or any portion
of such business, assets or Subsidiary for the purpose of financing such
acquisition;

(vii) Indebtedness of the Issuer to a Restricted Subsidiary; provided that
(except in respect of intercompany current liabilities Incurred in the ordinary
course of business in connection with the cash management operations of the
Issuer and its Subsidiaries) any such Indebtedness owed to a Restricted
Subsidiary that is not a Note Guarantor is subordinated in right of payment to
the obligations of the Issuer under the Notes; provided, further, that any
subsequent issuance or transfer of any Capital Stock or any other event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of any such Indebtedness (except to the Issuer
or another Restricted Subsidiary or any pledge of such Indebtedness constituting
a Permitted Lien) shall be deemed, in each case, to be an Incurrence of such
Indebtedness not permitted by this clause (vii);

(viii) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer
or another Restricted Subsidiary; provided that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any Restricted
Subsidiary that holds such shares of Preferred Stock of another Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent
transfer of any such shares of Preferred Stock (except to the Issuer or another
Restricted Subsidiary) shall be deemed, in each case, to be an issuance of
shares of Preferred Stock not permitted by this clause (viii);

 

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(ix) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted
Subsidiary; provided that if a Note Guarantor Incurs such Indebtedness to a
Restricted Subsidiary that is not a Note Guarantor (except in respect of
intercompany current liabilities Incurred in the ordinary course of business in
connection with the cash management operations of the Issuer and its
Subsidiaries), such Indebtedness is subordinated in right of payment to the Note
Guarantee of such Note Guarantor; provided, further, that any subsequent
issuance or transfer of any Capital Stock or any other event which results in
any Restricted Subsidiary holding such Indebtedness ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such Indebtedness (except to
the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness
constituting a Permitted Lien) shall be deemed, in each case, to be an
Incurrence of such Indebtedness not permitted by this clause (ix);

(x) (A) Hedging Obligations entered into in connection with the Transactions and
(B) Hedging Obligations that are not Incurred for speculative purposes but
(1) for the purpose of fixing or hedging interest rate risk with respect to any
Indebtedness that is permitted by the terms of this Indenture to be outstanding;
(2) for the purpose of fixing or hedging currency exchange rate risk with
respect to any currency exchanges; or (3) for the purpose of fixing or hedging
commodity price risk with respect to any commodity purchases or sales;

(xi) obligations (including reimbursement obligations with respect to letters of
credit and bank guarantees) in respect of performance, bid, appeal and surety
bonds and completion guarantees provided by the Issuer or any Restricted
Subsidiary in the ordinary course of business or consistent with past practice
or industry practice;

(xii) Indebtedness or Disqualified Stock of the Issuer or, subject to
Section 4.03(c), Indebtedness, Disqualified Stock or Preferred Stock of any
Restricted Subsidiary of the Issuer not otherwise permitted hereunder in an
aggregate principal amount or liquidation preference which, when aggregated with
the principal amount or liquidation preference of all other Indebtedness,
Disqualified Stock and Preferred Stock then outstanding and Incurred pursuant to
this clause (xii), does not exceed the greater of $1,100 million and 5.0% of
Total Assets at the time of Incurrence (it being understood that any
Indebtedness Incurred pursuant to this clause (xii) shall cease to be deemed
Incurred or outstanding for purposes of this clause (xii) but shall be deemed
Incurred for purposes of Section 4.03(a) from and after the first date on which
the Issuer, or the Restricted Subsidiary, as the case may be, could have
Incurred such Indebtedness under Section 4.03(a) without reliance upon this
clause (xii));

(xiii) Indebtedness or Disqualified Stock of the Issuer or any Restricted
Subsidiary of the Issuer and Preferred Stock of any Restricted Subsidiary of the
Issuer not otherwise permitted hereunder in an aggregate principal amount or
liquidation preference not greater than 200.0% of the net cash proceeds received
by the Issuer and its Restricted Subsidiaries since immediately after the Issue
Date from the issue or sale of Equity Interests of the Issuer or any direct or
indirect parent entity of the Issuer (which proceeds are contributed to the
Issuer or its Restricted Subsidiary) or cash contributed to the capital of the
Issuer (in each case other than proceeds of Disqualified Stock or sales of
Equity Interests to, or contributions received from, the Issuer or any of its
Subsidiaries) as determined in accordance with clauses (B) and (C) of the
definition of “Cumulative Credit” to the extent such net cash proceeds or cash
has not been applied pursuant to such

 

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clauses to make Restricted Payments or to make other Investments, payments or
exchanges pursuant to Section 4.04(b) or to make Permitted Investments (other
than Permitted Investments specified in clauses (1) and (3) of the definition
thereof);

(xiv) any guarantee by the Issuer or any Restricted Subsidiary of the Issuer of
Indebtedness or other obligations of the Issuer or any of its Restricted
Subsidiaries so long as the Incurrence of such Indebtedness Incurred by the
Issuer or such Restricted Subsidiary is permitted under the terms of this
Indenture; provided that (i) if such Indebtedness is by its express terms
subordinated in right of payment to the Notes or the Note Guarantee of such
Restricted Subsidiary, as applicable, any such guarantee of such Note Guarantor
with respect to such Indebtedness shall be subordinated in right of payment to
such Note Guarantor’s Note Guarantee with respect to the Notes substantially to
the same extent as such Indebtedness is subordinated to the Notes or the Note
Guarantee of such Restricted Subsidiary, as applicable and (ii) if such
guarantee is of Indebtedness of the Issuer, such guarantee is Incurred in
accordance with Section 4.11 solely to the extent such Section is applicable;

(xv) the Incurrence by the Issuer or any of its Restricted Subsidiaries of
Indebtedness or Disqualified Stock or Preferred Stock of a Restricted Subsidiary
of the Issuer which serves to refund, refinance or defease any Indebtedness
Incurred or Disqualified Stock or Preferred Stock issued as permitted under
Section 4.03(a) and clauses (ii), (iii), (iv), (xii), (xiii), (xv), (xvi),
(xx) and (xxiv) of this Section 4.03(b) or any Indebtedness, Disqualified Stock
or Preferred Stock Incurred to so refund or refinance such Indebtedness,
Disqualified Stock or Preferred Stock, including any additional Indebtedness,
Disqualified Stock or Preferred Stock Incurred to pay premiums (including tender
premiums), expenses, defeasance costs and fees in connection therewith (subject
to the following proviso, “Refinancing Indebtedness”) prior to its respective
maturity; provided, however, that such Refinancing Indebtedness:

(1) has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is Incurred which is not less than the shorter of (x) the remaining
Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or
Preferred Stock being refunded, refinanced or defeased and (y) the Weighted
Average Life to Maturity that would result if all payments of principal on the
Indebtedness, Disqualified Stock and Preferred Stock being refunded or
refinanced that were due on or after the date that is one year following the
last maturity date of any Notes then outstanding were instead due on such date;

(2) to the extent such Refinancing Indebtedness refinances (a) Indebtedness
junior to the Notes or the Note Guarantee of such Restricted Subsidiary, as
applicable, such Refinancing Indebtedness is junior to the Notes or the Note
Guarantee of such Restricted Subsidiary, as applicable, or (b) Disqualified
Stock or Preferred Stock, such Refinancing Indebtedness is Disqualified Stock or
Preferred Stock; and

(3) shall not include (x) Indebtedness of a Restricted Subsidiary of the Issuer
that is not a Note Guarantor that refinances Indebtedness of the Issuer or a
Note Guarantor, or (y) Indebtedness of the Issuer or a Restricted Subsidiary
that refinances Indebtedness of an Unrestricted Subsidiary.

provided, further, that subclause (1) of this clause (xv) will not apply to any
refunding or refinancing of any Secured Indebtedness and subclauses (1) and
(2) of this clause (xv) will not apply to any refunding or refinancing of any of
the Retained Notes;

 

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(xvi) Indebtedness, Disqualified Stock or Preferred Stock of (x) the Issuer or,
subject to Section 4.03(b), any of its Restricted Subsidiaries Incurred to
finance an acquisition or (y) Persons that are acquired by the Issuer or any of
its Restricted Subsidiaries or merged, consolidated or amalgamated with or into
the Issuer or any of its Restricted Subsidiaries in accordance with the terms of
this Indenture; provided that after giving effect to such acquisition or merger,
consolidation or amalgamation, either:

(1) the Issuer would be permitted to Incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
Section 4.03(a); or

(2) the Fixed Charge Coverage Ratio of the Issuer would be greater than
immediately prior to such acquisition or merger, consolidation or amalgamation;

(xvii) Indebtedness Incurred by a Receivables Subsidiary in a Qualified
Receivables Financing that is not recourse to the Issuer or any Restricted
Subsidiary other than a Receivables Subsidiary (except for Standard
Securitization Undertakings);

(xviii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business; provided that such Indebtedness is
extinguished within five Business Days of its Incurrence;

(xix) Indebtedness of the Issuer or any Restricted Subsidiary supported by a
letter of credit or bank guarantee issued pursuant to the Credit Agreement, in a
principal amount not in excess of the stated amount of such letter of credit;

(xx) Indebtedness of Foreign Subsidiaries; provided, however, that the aggregate
principal amount of Indebtedness Incurred under this clause (xx), when
aggregated with the principal amount of all other Indebtedness then outstanding
and Incurred pursuant to this clause (xx), does not exceed the greater of
$250.0 million and 7.5% of Total Assets of the Foreign Subsidiaries at any one
time outstanding (it being understood that any Indebtedness Incurred pursuant to
this clause (xx) shall cease to be deemed Incurred or outstanding for purposes
of this clause (xx) but shall be deemed Incurred for the purposes of
Section 4.03(a) from and after the first date on which such Foreign Subsidiary
could have Incurred such Indebtedness under Section 4.03(a) without reliance
upon this clause (xx));

(xxi) Indebtedness of the Issuer or any Restricted Subsidiary consisting of
(1) the financing of insurance premiums or (2) take-or-pay obligations contained
in supply arrangements, in each case, in the ordinary course of business;

(xxii) Indebtedness consisting of Indebtedness issued by the Issuer or a
Restricted Subsidiary of the Issuer to current or former officers, directors and
employees thereof or any direct or indirect parent thereof, their respective
estates, spouses or former spouses, in each case to finance the purchase or
redemption of Equity Interests of the Issuer or any of its direct or indirect
parent companies to the extent described in Section 4.04(b)(iv);

(xxiii) Indebtedness Incurred in connection with any Project Financing;

 

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(xxiv) Indebtedness Incurred on behalf of, or representing guarantees of
Indebtedness of, joint ventures of the Issuer or any Restricted Subsidiary not
in excess, at any one time outstanding, of $300.0 million; and

(xxv) Indebtedness of any Persons that are acquired by the Issuer or any of its
Restricted Subsidiaries or merged, consolidated or amalgamated with or into the
Issuer or any of its Restricted Subsidiaries in connection with the Post-Closing
CMBS Transaction.

(c) Restricted Subsidiaries that are not Note Guarantors may not Incur
Indebtedness or issue Disqualified Stock or Preferred Stock under
Section 4.03(a) or clause (xii), (xvi) or (xxiv) of Section 4.03(b) if, after
giving pro forma effect to such Incurrence or issuance (including a pro forma
application of the net proceeds therefrom), the aggregate amount of Indebtedness
and Disqualified Stock and Preferred Stock of Restricted Subsidiaries that are
not Note Guarantors Incurred or issued pursuant to Section 4.03(a) and clauses
(xii), (xvi) and (xxiv) of Section 4.03(b), collectively, would exceed the
greater of $2,000 million and 5.0% of Total Assets.

(d) For purposes of determining compliance with this Section 4.03:

(i) in the event that an item of Indebtedness, Disqualified Stock or Preferred
Stock (or any portion thereof) meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (i) through
(xxv) above or is entitled to be Incurred pursuant to Section 4.03(a), the
Issuer shall, in its sole discretion, classify or reclassify, or later divide,
classify or reclassify, such item of Indebtedness, Disqualified Stock or
Preferred Stock (or any portion thereof) in any manner that complies with this
Section 4.03; and

(ii) at the time of Incurrence, the Issuer will be entitled to divide and
classify an item of Indebtedness in more than one of the types of Indebtedness
described in Section 4.03(a) and (b) without giving pro forma effect to the
Indebtedness Incurred pursuant to Section 4.03(b) when calculating the amount of
Indebtedness that may be Incurred pursuant to Section 4.03(a).

Accrual of interest, the accretion of accreted value, the payment of interest or
dividends in the form of additional Indebtedness, Disqualified Stock or
Preferred Stock, as applicable, amortization of original issue discount, the
accretion of liquidation preference and increases in the amount of Indebtedness
outstanding solely as a result of fluctuations in the exchange rate of
currencies will not be deemed to be an Incurrence of Indebtedness, Disqualified
Stock or Preferred Stock for purposes of this Section 4.03. Guarantees of, or
obligations in respect of letters of credit relating to, Indebtedness which is
otherwise included in the determination of a particular amount of Indebtedness
shall not be included in the determination of such amount of Indebtedness;
provided that the Incurrence of the Indebtedness represented by such guarantee
or letter of credit, as the case may be, was in compliance with this
Section 4.03.

For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred, in the case of term debt, or first committed or
first Incurred (whichever yields the lower U.S. dollar equivalent), in the case
of revolving credit debt; provided that if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced.

 

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(e) Notwithstanding any other provision of this Section 4.03, the maximum amount
of Indebtedness that the Issuer and its Restricted Subsidiaries may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect
to any outstanding Indebtedness, solely as a result of fluctuations in the
exchange rate of currencies. The principal amount of any Indebtedness Incurred
to refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.

SECTION 4.04. Limitation on Restricted Payments.

(a) The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:

(i) declare or pay any dividend or make any distribution on account of the
Issuer’s or any of its Restricted Subsidiaries’ Equity Interests, including any
payment made in connection with any merger, amalgamation or consolidation
involving the Issuer (other than (A) dividends or distributions by the Issuer
payable solely in Equity Interests (other than Disqualified Stock) of the
Issuer; or (B) dividends or distributions by a Restricted Subsidiary so long as,
in the case of any dividend or distribution payable on or in respect of any
class or series of securities issued by a Restricted Subsidiary other than a
Wholly Owned Restricted Subsidiary, the Issuer or a Restricted Subsidiary
receives at least its pro rata share of such dividend or distribution in
accordance with its Equity Interests in such class or series of securities);

(ii) purchase or otherwise acquire or retire for value any Equity Interests of
the Issuer or any direct or indirect parent of the Issuer;

(iii) make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value, in each case prior to any scheduled repayment or
scheduled maturity, any Subordinated Indebtedness or Long-Term Retained Notes of
the Issuer or any of its Restricted Subsidiaries (other than the payment,
redemption, repurchase, defeasance, acquisition or retirement of
(A) Subordinated Indebtedness or Long-Term Retained Notes in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of such payment, redemption,
repurchase, defeasance, acquisition or retirement and (B) Indebtedness permitted
under clauses (vii) and (ix) of Section 4.03(b)); or

(iv) make any Restricted Investment

(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as “Restricted Payments”), unless, at the time of
such Restricted Payment:

(1) no Default shall have occurred and be continuing or would occur as a
consequence thereof;

(2) immediately after giving effect to such transaction on a pro forma basis,
the Issuer could Incur $1.00 of additional Indebtedness under Section 4.03(a);
and

 

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(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Issuer and its Restricted Subsidiaries after the
Issue Date (including Restricted Payments permitted by clauses (i), (ii) (with
respect to the payment of dividends on Refunding Capital Stock (as defined
below) pursuant to clause (C) thereof), (vi)(C), (viii), (xiii)(B) and (xx) of
Section 4.04(b), but excluding all other Restricted Payments permitted by
Section 4.04(b)), is less than the amount equal to the Cumulative Credit.

(b) The provisions of Section 4.04(a) shall not prohibit:

(i) the payment of any dividend or distribution within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Indenture;

(ii) (A) the redemption, repurchase, retirement or other acquisition of any
Equity Interests (“Retired Capital Stock”) or Subordinated Indebtedness of the
Issuer, any direct or indirect parent of the Issuer or any Note Guarantor in
exchange for, or out of the proceeds of, the substantially concurrent sale of,
Equity Interests of the Issuer or any direct or indirect parent of the Issuer or
contributions to the equity capital of the Issuer (other than any Disqualified
Stock or any Equity Interests sold to a Subsidiary of the Issuer) (collectively,
including any such contributions, “Refunding Capital Stock”),

(B) the declaration and payment of dividends on the Retired Capital Stock out of
the proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Issuer) of Refunding Capital Stock, and

(C) if immediately prior to the retirement of Retired Capital Stock, the
declaration and payment of dividends thereon was permitted under clause (vi) of
this Section 4.04(b) and not made pursuant to clause (ii)(B), the declaration
and payment of dividends on the Refunding Capital Stock (other than Refunding
Capital Stock the proceeds of which were used to redeem, repurchase, retire or
otherwise acquire any Equity Interests of any direct or indirect parent of the
Issuer) in an aggregate amount per year no greater than the aggregate amount of
dividends per annum that were declarable and payable on such Retired Capital
Stock immediately prior to such retirement;

(iii) the redemption, repurchase, defeasance, or other acquisition or retirement
of Subordinated Indebtedness of the Issuer or any Note Guarantor made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
new Indebtedness of the Issuer or a Note Guarantor which is Incurred in
accordance with Section 4.03 so long as

(A) the principal amount (or accreted value, if applicable) of such new
Indebtedness does not exceed the principal amount (or accreted value, if
applicable), plus any accrued and unpaid interest, of the Subordinated
Indebtedness being so redeemed, repurchased, defeased, acquired or retired for
value (plus the amount of any premium required to be paid under the terms of the
instrument governing the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired, any tender premiums, plus any defeasance
costs, fees and expenses Incurred in connection therewith),

(B) such Indebtedness is subordinated to the Notes or the related Note
Guarantee, as the case may be, at least to the same extent as such Subordinated
Indebtedness so purchased, exchanged, redeemed, repurchased, defeased, acquired
or retired for value,

 

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(C) such Indebtedness has a final scheduled maturity date equal to or later than
the earlier of (x) the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired and (y) 91 days
following the last maturity date of any Notes then outstanding, and

(D) such Indebtedness has a Weighted Average Life to Maturity at the time
Incurred which is not less than the shorter of (x) the remaining Weighted
Average Life to Maturity of the Subordinated Indebtedness being so redeemed,
repurchased, defeased, acquired or retired and (y) the Weighted Average Life to
Maturity that would result if all payments of principal on the Subordinated
Indebtedness being redeemed, repurchased, defeased, acquired or retired that
were due on or after the date that is one year following the last maturity date
of any Notes then outstanding were instead due on such date;

(iv) a Restricted Payment to pay for the repurchase, retirement or other
acquisition for value of Equity Interests of the Issuer or any direct or
indirect parent of the Issuer held by any future, present or former employee,
director or consultant of the Issuer or any direct or indirect parent of the
Issuer or any Subsidiary of the Issuer pursuant to any management equity plan or
stock option plan or any other management or employee benefit plan or other
agreement or arrangement; provided, however, that the aggregate Restricted
Payments made under this clause (iv) do not exceed $50.0 million in any calendar
year (with unused amounts in any calendar year being permitted to be carried
over to succeeding calendar years subject to a maximum (without giving effect to
the following proviso) of $100.0 million in any calendar year (which shall
increase to $150.0 million subsequent to the consummation of an underwritten
public Equity Offering of common stock); provided, further, however, that such
amount in any calendar year may be increased by an amount not to exceed:

(A) the cash proceeds received by the Issuer or any of its Restricted
Subsidiaries from the sale of Equity Interests (other than Disqualified Stock)
of the Issuer or any direct or indirect parent of the Issuer (to the extent
contributed to the Issuer) to members of management, directors or consultants of
the Issuer and its Restricted Subsidiaries or any direct or indirect parent of
the Issuer that occurs after the Issue Date (provided that the amount of such
cash proceeds utilized for any such repurchase, retirement, other acquisition or
dividend will not increase the amount available for Restricted Payments under
Section 4.04(a)(iii)), plus

(B) the cash proceeds of key man life insurance policies received by the Issuer
or any direct or indirect parent of the Issuer (to the extent contributed to the
Issuer) or the Issuer’s Restricted Subsidiaries after the Issue Date, plus

(C) the amount of any cash bonuses otherwise payable to members of management,
directors or consultants of the Issuer and its Restricted Subsidiaries or any
direct or indirect parent of the Issuer in connection with the Transactions that
are forgone in return for the receipt of Equity Interests;

provided that the Issuer may elect to apply all or any portion of the aggregate
increase contemplated by clauses (A), (B) and (C) above in any calendar year;
and provided, further, that cancellation of Indebtedness owing to the Issuer or
any Restricted Subsidiary from any present or former employees, directors,
officers or consultants of the Issuer, any of its Restricted Subsidiaries or its
direct or indirect parents in connection with a repurchase of Equity Interests
of the Issuer or any of its direct or indirect parents will not be deemed to
constitute a Restricted Payment for purposes of this Section 4.04 or any other
provision of this Indenture;

 

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(v) the declaration and payment of dividends or distributions to holders of any
class or series of Disqualified Stock of the Issuer or any of its Restricted
Subsidiaries issued or Incurred in accordance with Section 4.03 to the extent
such dividends are included in the definition of “Fixed Charges”;

(vi) (A) the declaration and payment of dividends or distributions to holders of
any class or series of Designated Preferred Stock (other than Disqualified
Stock) issued after the Issue Date;

(B) a Restricted Payment to any direct or indirect parent of the Issuer, the
proceeds of which will be used to fund the payment of dividends to holders of
any class or series of Designated Preferred Stock (other than Disqualified
Stock) of any direct or indirect parent of the Issuer issued after the Issue
Date; provided that the aggregate amount of dividends declared and paid pursuant
to this clause (B) does not exceed the net cash proceeds actually received by
the Issuer from any such sale of Designated Preferred Stock (other than
Disqualified Stock) issued after the Issue Date; and

(C) the declaration and payment of dividends on Refunding Capital Stock that is
Preferred Stock in excess of the dividends declarable and payable thereon
pursuant to Section 4.04(b)(ii);

provided, however, in the case of each of (A) and (C) above of this clause (vi),
that for the most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date of issuance of
such Designated Preferred Stock, after giving effect to such issuance (and the
payment of dividends or distributions) on a pro forma basis, the Issuer would
have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(vii) Investments in Unrestricted Subsidiaries having an aggregate Fair Market
Value (as determined in good faith by the Issuer), taken together with all other
Investments made pursuant to this clause (vii) that are at that time
outstanding, not to exceed $250.0 million at the time of such Investment (with
the Fair Market Value of each Investment being measured at the time made and
without giving effect to subsequent changes in value);

(viii) the payment of dividends on the Issuer’s common stock (or a Restricted
Payment to any direct or indirect parent of the Issuer to fund the payment by
such direct or indirect parent of the Issuer of dividends on such entity’s
common stock) of up to 6% per annum of the net proceeds received by the Issuer
from any public offering of common stock of the Issuer or any direct or indirect
parent of the Issuer, other than public offerings with respect to the Issuer’s
(or such direct or indirect parent’s) common stock registered on Form S-4 or
Form S-8 and other than any public sale constituting an Excluded Contribution;

(ix) Restricted Payments that are made with Excluded Contributions;

(x) other Restricted Payments in an aggregate amount not to exceed the greater
of $500.0 million and 2.5% of Total Assets at the time made;

 

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(xi) the distribution, as a dividend or otherwise, of shares of Capital Stock
of, or Indebtedness owed to the Issuer or a Restricted Subsidiary of the Issuer
by, Unrestricted Subsidiaries;

(xii) the payment of dividends or other distributions to any direct or indirect
parent of the Issuer that files a consolidated tax return that includes the
Issuer and its subsidiaries (including, without limitation, by virtue of such
parent being the common parent of a consolidated or combined tax group of which
the Issuer and/or its Restricted Subsidiaries are members) in an amount not to
exceed the amount that the Issuer and its Restricted Subsidiaries would have
been required to pay in respect of federal, state or local taxes (as the case
may be) if the Issuer and its Restricted Subsidiaries paid such taxes as a
stand-alone taxpayer (or stand-alone group);

(xiii) the payment of Restricted Payment, if applicable:

(A) in amounts required for any direct or indirect parent of the Issuer to pay
fees and expenses (including franchise or similar taxes) required to maintain
its corporate existence, customary salary, bonus and other benefits payable to,
and indemnities provided on behalf of, officers and employees of any direct or
indirect parent of the Issuer and general corporate operating and overhead
expenses of any direct or indirect parent of the Issuer in each case to the
extent such fees and expenses are attributable to the ownership or operation of
the Issuer, if applicable, and its Subsidiaries;

(B) in amounts required for any direct or indirect parent of the Issuer, if
applicable, to pay interest and/or principal on Indebtedness the proceeds of
which have been contributed to the Issuer or any of its Restricted Subsidiaries
and that has been guaranteed by, or is otherwise considered Indebtedness of, the
Issuer Incurred in accordance with Section 4.03; and

(C) in amounts required for any direct or indirect parent of the Issuer to pay
fees and expenses, other than to Affiliates of the Issuer, related to any
unsuccessful equity or debt offering of such parent;

(xiv) any Restricted Payment used to fund the Transactions and the payment of
fees and expenses Incurred in connection with the Transactions or owed by the
Issuer or any direct or indirect parent of the Issuer or Restricted Subsidiaries
of the Issuer to Affiliates, and any other payments made, including any such
payments made to any direct or indirect parent of the Issuer to enable it to
make payments, in connection with the consummation of the Transactions or as
contemplated by the Acquisition Documents, whether payable on the Issue Date or
thereafter, in each case to the extent permitted by Section 4.07;

(xv) any Restricted Payment of Real Estate Assets that is made for the purpose
of transferring such assets to a Real Estate Subsidiary on the Issue Date;

(xvi) any Restricted Payment made under the Operations Management Agreement and
any Restricted Payment made in connection with the Post-Closing CMBS
Transaction;

(xvii) repurchases of Equity Interests deemed to occur upon exercise of stock
options or warrants if such Equity Interests represent a portion of the exercise
price of such options or warrants;

 

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(xviii) purchases of receivables pursuant to a Receivables Repurchase Obligation
in connection with a Qualified Receivables Financing and the payment or
distribution of Receivables Fees;

(xix) Restricted Payments by the Issuer or any Restricted Subsidiary to allow
the payment of cash in lieu of the issuance of fractional shares upon the
exercise of options or warrants or upon the conversion or exchange of Capital
Stock of any such Person;

(xx) the repurchase, redemption or other acquisition or retirement for value of
any Subordinated Indebtedness pursuant to the provisions similar to those
described under Sections 4.06 and 4.08; provided that all Notes tendered by
holders of the Notes in connection with a Change of Control Offer or Asset Sale
Offer, as applicable, have been repurchased, redeemed or acquired for value;

(xxi) payments or distributions to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, amalgamation,
merger or transfer of all or substantially all of the assets of the Issuer and
its Restricted Subsidiaries, taken as a whole, that complies with Section 5.01;
provided that as a result of such consolidation, amalgamation, merger or
transfer of assets, the Issuer shall have made a Change of Control Offer (if
required by this Indenture) and that all Notes tendered by holders in connection
with such Change of Control Offer have been repurchased, redeemed or acquired
for value;

(xxii) payments made to repay, defease, discharge or otherwise refinance
Retained Notes or to service Retained Notes; and

(xxiii) Restricted Payments made in connection with the Incurrence of
Indebtedness under the revolving portion of the Credit Agreement for the account
or benefit of the Subsidiaries of Harrah’s Entertainment other than the Issuer
or any of its Subsidiaries (including the distribution of the proceeds of any
such Indebtedness and with respect to the issuance of, or payments in respect of
drawings under, letters of credit), in each case for general corporate purposes
of such Subsidiaries (including, without limitation, for business acquisitions
and project development and, in the case of letters of credit, for the back-up
or replacement of existing letters of credit) in an aggregate amount not to
exceed $250.0 million at any time outstanding, so long as such proceeds are not
distributed to the stockholders of Harrah’s Entertainment;

provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (vi)(B), (vii), (x), (xi) and
(xiii)(B) of this Section 4.04(b), no Default shall have occurred and be
continuing or would occur as a consequence thereof.

(c) As of the Issue Date, all of the Issuer’s Subsidiaries will be Restricted
Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the definition of “Unrestricted
Subsidiary.” For purposes of designating any Restricted Subsidiary as an
Unrestricted Subsidiary, all outstanding Investments by the Issuer and its
Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so
designated will be deemed to be Restricted Payments in an amount determined as
set forth in the last sentence of the definition of “Investments.” Such
designation will only be permitted if a Restricted Payment or Permitted
Investment in such amount would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.

 

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Notwithstanding the foregoing provisions of this Section 4.04, the Issuer will
not, and will not permit any of its Restricted Subsidiaries to, pay any cash
dividend or make any cash distribution on, or in respect of, the Issuer’s
Capital Stock or purchase for cash or otherwise acquire for cash any Capital
Stock of the Issuer or any direct or indirect parent of the Issuer for the
purpose of paying any cash dividend or making any cash distribution to, or
acquiring Capital Stock of any direct or indirect parent of the Issuer for cash
from, the Investors, or guarantee any Indebtedness of any Affiliate of the
Issuer for the purpose of paying such dividend, making such distribution or so
acquiring such Capital Stock to or from the Investors, in each case by means of
utilization of the cumulative Restricted Payment credit provided by
Section 4.04(a), or the exceptions provided by clause (i), (vii) or (x) of
Section 4.04(b) or clause (9), (10), (15) or (20) of the definition of
“Permitted Investments,” if (x) at the time and after giving effect to such
payment, the Consolidated Leverage Ratio of the Issuer would be greater than
7.25 to 1.00; (y) prior to or at the time of such payment the Issuer has made an
election to pay PIK Interest and has not made a subsequent payment of Cash
Interest; or (z) such payment is not otherwise in compliance with this
Section 4.04.

SECTION 4.05. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Issuer shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:

(a) (i) pay dividends or make any other distributions to the Issuer or any of
its Restricted Subsidiaries (1) on its Capital Stock; or (2) with respect to any
other interest or participation in, or measured by, its profits; or (ii) pay any
Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

(b) make loans or advances to the Issuer or any of its Restricted Subsidiaries;
or

(c) sell, lease or transfer any of its properties or assets to the Issuer or any
of its Restricted Subsidiaries;

except in each case for such encumbrances or restrictions existing under or by
reason of:

(1) contractual encumbrances or restrictions in effect on the Issue Date,
including pursuant to the Credit Agreement and the other Credit Agreement
Documents;

(2) this Indenture, the Notes (and any Exchange Notes and guarantees thereof);

(3) applicable law or any applicable rule, regulation or order;

(4) any agreement or other instrument of a Person acquired by the Issuer or any
Restricted Subsidiary which was in existence at the time of such acquisition
(but not created in contemplation thereof or to provide all or any portion of
the funds or credit support utilized to consummate such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person and its Subsidiaries, or the
property or assets of the Person and its Subsidiaries, so acquired, and any
agreement or other instrument existing on the date of the Post-Closing CMBS
Transaction with respect to properties and assets that are subject to the
Post-Closing CMBS Transaction;

(5) contracts or agreements for the sale of assets, including any restriction
with respect to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of the Capital Stock or assets of such
Restricted Subsidiary;

 

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(6) Secured Indebtedness otherwise permitted to be Incurred pursuant to Sections
4.03 and 4.12 that limit the right of the debtor to dispose of the assets
securing such Indebtedness;

(7) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business;

(8) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business;

(9) purchase money obligations for property acquired and Capitalized Lease
Obligations in the ordinary course of business;

(10) customary provisions contained in leases, licenses and other similar
agreements entered into in the ordinary course of business;

(11) any encumbrance or restriction of a Receivables Subsidiary effected in
connection with a Qualified Receivables Financing; provided, however, that such
restrictions apply only to such Receivables Subsidiary;

(12) other Indebtedness, Disqualified Stock or Preferred Stock (a) of any
Restricted Subsidiary of the Issuer that is a Note Guarantor or a Foreign
Subsidiary, (b) of any Restricted Subsidiary that is not a Note Guarantor or a
Foreign Subsidiary so long as such encumbrances and restrictions contained in
any agreement or instrument will not materially affect the Issuer’s ability to
make anticipated principal or interest payments on the Notes (as determined in
good faith by the Issuer) or (c) of any Restricted Subsidiary Incurred in
connection with any Project Financing, provided that in the case of each of
clauses (a) and (b), such Indebtedness, Disqualified Stock or Preferred Stock is
permitted to be Incurred subsequent to the Issue Date pursuant to Section 4.03;

(13) any Restricted Investment not prohibited by Section 4.04 and any Permitted
Investment; or

(14) any encumbrances or restrictions of the type referred to in clauses (a),
(b) and (c) above imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings of
the contracts, instruments or obligations referred to in clauses (1) through
(13) above; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings are,
in the good faith judgment of the Issuer, no more restrictive with respect to
such dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.

For purposes of determining compliance with this Section 4.05, (i) the priority
of any Preferred Stock in receiving dividends or liquidating distributions prior
to dividends or liquidating distributions being paid on common stock shall not
be deemed a restriction on the ability to make distributions on Capital Stock
and (ii) the subordination of loans or advances made to the Issuer or a
Restricted Subsidiary of the Issuer to other Indebtedness Incurred by the Issuer
or any such Restricted Subsidiary shall not be deemed a restriction on the
ability to make loans or advances.

 

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SECTION 4.06. Asset Sales.

(a) The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, cause or make an Asset Sale, unless (x) the Issuer or any of
its Restricted Subsidiaries, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value (as determined
in good faith by the Issuer) of the assets sold or otherwise disposed of, and
(y) at least 75% of the consideration therefor received by the Issuer or such
Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents;
provided that the amount of:

(i) any liabilities (as shown on the Issuer’s or such Restricted Subsidiary’s
most recent balance sheet or in the Notes thereto) of the Issuer or any
Restricted Subsidiary of the Issuer (other than liabilities that are by their
terms subordinated to the Notes or any Note Guarantee) that are assumed by the
transferee of any such assets,

(ii) any notes or other obligations or other securities or assets received by
the Issuer or such Restricted Subsidiary of the Issuer from such transferee that
are converted by the Issuer or such Restricted Subsidiary of the Issuer into
cash within 180 days of the receipt thereof (to the extent of the cash
received), and

(iii) any Designated Non-cash Consideration received by the Issuer or any of its
Restricted Subsidiaries in such Asset Sale having an aggregate Fair Market Value
(as determined in good faith by the Issuer), taken together with all other
Designated Non-cash Consideration received pursuant to this clause (c) that is
at that time outstanding, not to exceed the greater of 5.0% of Total Assets and
$850.0 million at the time of the receipt of such Designated Non-cash
Consideration (with the Fair Market Value of each item of Designated Non-cash
Consideration being measured at the time received and without giving effect to
subsequent changes in value)

shall be deemed to be Cash Equivalents for the purposes of this Section 4.06(a).

(b) Within 15 months after the Issuer’s or any Restricted Subsidiary of the
Issuer’s receipt of the Net Proceeds of any Asset Sale, the Issuer or such
Restricted Subsidiary of the Issuer may apply the Net Proceeds from such Asset
Sale, at its option:

(i) to repay (A) Indebtedness constituting Bank Indebtedness and other Pari
Passu Indebtedness that is secured by a Lien permitted under this Indenture
(and, if the Indebtedness repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto), (B) Indebtedness of a
Restricted Subsidiary that is not a Note Guarantor, (C) Obligations under the
Notes or (D) other Pari Passu Indebtedness (provided that if the Issuer or any
Note Guarantor shall so reduce Obligations under unsecured Pari Passu
Indebtedness, the Issuer will equally and ratably reduce Obligations under the
Notes pursuant to Section 3.01 through open-market purchases (provided that such
purchases are at or above 100% of the principal amount thereof) or by making an
offer (in accordance with the procedures set forth below for an Asset Sale
Offer) to all holders to purchase at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Additional
Interest, if any, the pro rata principal amount of Notes), in each case other
than Indebtedness owed to the Issuer or an Affiliate of the Issuer; or

(ii) to make an Investment in any one or more businesses (provided that if such
Investment is in the form of the acquisition of Capital Stock of a Person, such
acquisition results in

 

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such Person becoming a Restricted Subsidiary of the Issuer), assets, or property
or capital expenditures, in each case (a) used or useful in a Similar Business
or (b) that replace the properties and assets that are the subject of such Asset
Sale.

In the case of Section 4.06(b)(ii), a binding commitment shall be treated as a
permitted application of the Net Proceeds from the date of such commitment;
provided that in the event such binding commitment is later canceled or
terminated for any reason before such Net Proceeds are so applied, the Issuer or
such Restricted Subsidiary enters into another binding commitment (a “Second
Commitment”) within six months of such cancellation or termination of the prior
binding commitment; provided, further that the Issuer or such Restricted
Subsidiary may only enter into a Second Commitment under the foregoing provision
one time with respect to each Asset Sale and to the extent such Second
Commitment is later cancelled or terminated for any reason before such Net
Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.

Pending the final application of any such Net Proceeds, the Issuer or such
Restricted Subsidiary of the Issuer may temporarily reduce Indebtedness under a
revolving credit facility, if any, or otherwise invest such Net Proceeds in any
manner not prohibited by this Indenture. Any Net Proceeds from any Asset Sale
that are not applied as provided and within the time period set forth in the
first sentence of this Section 4.06(b) (it being understood that any portion of
such Net Proceeds used to make an offer to purchase Notes, as described in
clause (i) of this Section 4.06(b), shall be deemed to have been invested
whether or not such offer is accepted) will be deemed to constitute “Excess
Proceeds.” When the aggregate amount of Excess Proceeds exceeds $200.0 million,
the Issuer shall make an offer to all holders of Notes (and, at the option of
the Issuer, to holders of any Pari Passu Indebtedness) (an “Asset Sale Offer”)
to purchase the maximum principal amount of Notes (and such Pari Passu
Indebtedness), that is at least $2,000 and an integral multiple of $1,000 in
excess thereof that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof (or, in
the event such Pari Passu Indebtedness was issued with significant original
issue discount, 100% of the accreted value thereof), plus accrued and unpaid
interest and Additional Interest, if any (or, in respect of such Pari Passu
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Pari Passu Indebtedness), to the date fixed for the closing of such offer,
in accordance with the procedures set forth in this Section 4.06. The Issuer
will commence an Asset Sale Offer with respect to Excess Proceeds within ten
(10) Business Days after the date that Excess Proceeds exceed $200.0 million by
mailing the notice required pursuant to the terms of Section 4.06(f), with a
copy to the Trustee. To the extent that the aggregate amount of Notes (and such
Pari Passu Indebtedness) tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any
purpose that is not prohibited by this Indenture. If the aggregate principal
amount of Notes (and such Pari Passu Indebtedness) surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased in the manner described in Section 4.06(e). Upon
completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.

(c) The Issuer shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws or regulations are applicable in connection with the repurchase of the
Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Indenture,
the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in this Indenture
by virtue thereof.

(d) Not later than the date upon which written notice of an Asset Sale Offer is
delivered to the Trustee as provided above, the Issuer shall deliver to the
Trustee an Officer’s Certificate as to

 

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(i) the amount of the Excess Proceeds, (ii) the allocation of the Net Proceeds
from the Asset Sales pursuant to which such Asset Sale Offer is being made and
(iii) the compliance of such allocation with the provisions of Section 4.06(b).
On such date, the Issuer shall also irrevocably deposit with the Trustee or with
a paying agent (or, if the Issuer or a Wholly Owned Restricted Subsidiary is
acting as the Paying Agent, segregate and hold in trust) an amount equal to the
Excess Proceeds to be invested in Cash Equivalents, as directed in writing by
the Issuer, and to be held for payment in accordance with the provisions of this
Section 4.06. Upon the expiration of the period for which the Asset Sale Offer
remains open (the “Offer Period”), the Issuer shall deliver to the Trustee for
cancellation the Notes or portions thereof that have been properly tendered to
and are to be accepted by the Issuer. The Trustee (or the Paying Agent, if not
the Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering holder in the amount of the purchase price. In the event that the
Excess Proceeds delivered by the Issuer to the Trustee are greater than the
purchase price of the Notes tendered, the Trustee shall deliver the excess to
the Issuer immediately after the expiration of the Offer Period for application
in accordance with Section 4.06.

(e) Holders electing to have a Note purchased shall be required to surrender the
Note, with an appropriate form duly completed, to the Issuer at the address
specified in the notice at least three Business Days prior to the purchase date.
Holders shall be entitled to withdraw their election if the Trustee or the
Issuer receives not later than one Business Day prior to the purchase date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Note which was delivered by the holder for
purchase and a statement that such holder is withdrawing his election to have
such Note purchased. If at the end of the Offer Period more Notes (and such Pari
Passu Indebtedness) are tendered pursuant to an Asset Sale Offer than the Issuer
is required to purchase, selection of such Notes for purchase shall be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed, or if such Notes
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements); provided that no Notes of $2,000 or less shall
be purchased in part. Selection of such Pari Passu Indebtedness shall be made
pursuant to the terms of such Pari Passu Indebtedness.

(f) Notices of an Asset Sale Offer shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the purchase date to each
holder of Notes at such holder’s registered address. If any Note is to be
purchased in part only, any notice of purchase that relates to such Note shall
state the portion of the principal amount thereof that has been or is to be
purchased.

SECTION 4.07. Transactions with Affiliates.

(a) The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction or
series of transactions, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the
foregoing, an “Affiliate Transaction”) involving aggregate consideration in
excess of $25.0 million, unless:

(i) such Affiliate Transaction is on terms that are not materially less
favorable to the Issuer or the relevant Restricted Subsidiary than those that
could have been obtained in a comparable transaction by the Issuer or such
Restricted Subsidiary with an unrelated Person; and

(ii) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $75.0 million, the
Issuer delivers to the Trustee

 

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a resolution adopted in good faith by the majority of the Board of Directors of
the Issuer, approving such Affiliate Transaction and set forth in an Officer’s
Certificate certifying that such Affiliate Transaction complies with
clause (a) above.

(b) The provisions of Section 4.07(a) shall not apply to the following:

(i) transactions between or among the Issuer and/or any of its Restricted
Subsidiaries (or an entity that becomes a Restricted Subsidiary as a result of
such transaction) and any merger, consolidation or amalgamation of the Issuer
and any direct parent of the Issuer; provided that such parent shall have no
material liabilities and no material assets other than cash, Cash Equivalents
and the Capital Stock of the Issuer and such merger, consolidation or
amalgamation is otherwise in compliance with the terms of this Indenture and
effected for a bona fide business purpose;

(ii) Restricted Payments permitted by Section 4.04 and Permitted Investments;

(iii) (x) the entering into of any agreement (and any amendment or modification
of any such agreement so long as, in the good faith judgment of the Board of
Directors of the Issuer, any such amendment is not disadvantageous to the
holders when taken as a whole, as compared to such agreement as in effect on the
Issue Date) to pay, and the payment of, management, consulting, monitoring and
advisory fees to the Sponsors in an aggregate amount in any fiscal year not to
exceed the greater of (A) $30.0 million and (B) 1.0% of EBITDA of the Issuer and
its Restricted Subsidiaries for the immediately preceding fiscal year, plus
out-of-pocket expense reimbursement; provided, however, that any payment not
made in any fiscal year may be carried forward and paid in the following two
fiscal years and (y) the payment of the present value of all amounts payable
pursuant to any agreement described in clause (iii)(x) of Section 4.07(b) in
connection with the termination of such agreement;

(iv) the payment of reasonable and customary fees and reimbursement of expenses
paid to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Issuer or any Restricted Subsidiary, any direct or indirect
parent of the Issuer;

(v) payments by the Issuer or any of its Restricted Subsidiaries to the Sponsors
made for any financial advisory, financing, underwriting or placement services
or in respect of other investment banking activities, including, without
limitation, in connection with acquisitions or divestitures, which payments are
(x) made pursuant to the agreements with the Sponsors described in the Offering
Memorandum or (y) approved by a majority of the Board of Directors of the Issuer
in good faith;

(vi) transactions in which the Issuer or any of its Restricted Subsidiaries, as
the case may be, delivers to the Trustee a letter from an Independent Financial
Advisor stating that such transaction is fair to the Issuer or such Restricted
Subsidiary from a financial point of view or meets the requirements of clause
(i) of Section 4.07(a);

(vii) payments or loans (or cancellation of loans) to officers, directors,
employees or consultants which are approved by a majority of the Board of
Directors of the Issuer in good faith;

(viii) any agreement as in effect as of the Issue Date or any amendment thereto
(so long as any such agreement together with all amendments thereto, taken as a
whole, is not more

 

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disadvantageous to the holders of the Notes in any material respect than the
original agreement as in effect on the Issue Date) or any transaction
contemplated thereby as determined in good faith by the Issuer;

(ix) the existence of, or the performance by the Issuer or any of its Restricted
Subsidiaries of its obligations under the terms of, Acquisition Documents, any
stockholders agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Issue Date, and any
transaction, agreement or arrangement described in the Offering Memorandum and,
in each case, any amendment thereto or similar transactions, agreements or
arrangements which it may enter into thereafter; provided, however, that the
existence of, or the performance by the Issuer or any of its Restricted
Subsidiaries of its obligations under, any future amendment to any such existing
transaction, agreement or arrangement or under any similar transaction,
agreement or arrangement entered into after the Issue Date shall only be
permitted by this clause (ix) to the extent that the terms of any such existing
transaction, agreement or arrangement together with all amendments thereto,
taken as a whole, or new transaction, agreement or arrangement are not otherwise
more disadvantageous to the holders of the Notes in any material respect than
the original transaction, agreement or arrangement as in effect on the Issue
Date;

(x) the execution of the Transactions and the Post-Closing CMBS Transaction, and
the payment of all fees and expenses related to the Transactions and the
Post-Closing CMBS Transaction, including fees to the Sponsors, which are
described in the Offering Memorandum or contemplated by the Acquisition
Documents;

(xi) any transfer of Real Estate Assets to a Real Estate Subsidiary on the Issue
Date, any transactions made pursuant to any Operations Management Agreement and
any transactions in connection with the use of the revolving credit facility
under the Credit Agreement for the account or benefit of the Subsidiaries of
Harrah’s Entertainment other than the Issuer and its Subsidiaries (including the
distribution of the proceeds of any such revolving credit Indebtedness and with
respect to the issuance of, or payments in respect of drawings under, letters of
credit);

(xii) (A) transactions with customers, clients, suppliers or purchasers or
sellers of goods or services, or transactions otherwise relating to the purchase
or sale of goods or services, in each case in the ordinary course of business
and otherwise in compliance with the terms of this Indenture, which are fair to
the Issuer and its Restricted Subsidiaries in the reasonable determination of
the Board of Directors or the senior management of the Issuer, or are on terms
at least as favorable as might reasonably have been obtained at such time from
an unaffiliated party or (B) transactions with joint ventures or Unrestricted
Subsidiaries entered into in the ordinary course of business and consistent with
past practice or industry norm;

(xiii) any transaction effected as part of a Qualified Receivables Financing;

(xiv) the issuance of Equity Interests (other than Disqualified Stock) of the
Issuer to any Person;

(xv) the issuances of securities or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock option and stock ownership plans or similar employee benefit plans
approved by the Board of Directors of the Issuer or any direct or indirect
parent of the Issuer or of a Restricted Subsidiary of the Issuer, as
appropriate, in good faith;

 

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(xvi) the entering into of any tax sharing agreement or arrangement that
complies with Section 4.04(b)(xii);

(xvii) any contribution to the capital of the Issuer;

(xviii) transactions permitted by, and complying with, Section 5.01;

(xix) transactions between the Issuer or any of its Restricted Subsidiaries and
any Person, a director of which is also a director of the Issuer or any direct
or indirect parent of the Issuer; provided, however, that such director abstains
from voting as a director of the Issuer or such direct or indirect parent, as
the case may be, on any matter involving such other Person;

(xx) pledges of Equity Interests of Unrestricted Subsidiaries;

(xxi) the formation and maintenance of any consolidated group or subgroup for
tax, accounting or cash pooling or management purposes in the ordinary course of
business;

(xxii) any employment agreements entered into by the Issuer or any of its
Restricted Subsidiaries in the ordinary course of business; and

(xxiii) transactions undertaken in good faith (as certified by a responsible
financial or accounting officer of the Issuer in an Officer’s Certificate) for
the purpose of improving the consolidated tax efficiency of the Issuer and its
Subsidiaries and not for the purpose of circumventing any provision set forth in
this Indenture.

SECTION 4.08. Change of Control.

(a) Upon a Change of Control, each holder shall have the right to require the
Issuer to repurchase all or any part of such holder’s Notes at a purchase price
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of the holders
of record on the relevant record date to receive interest due on the relevant
interest payment date), in accordance with the terms contemplated in this
Section 4.08; provided, however, that notwithstanding the occurrence of a Change
of Control, the Issuer shall not be obligated to purchase any Notes pursuant to
this Section 4.08 in the event that it has exercised its right to redeem such
Notes in accordance with Article 3 of this Indenture. In the event that at the
time of such Change of Control the terms of the Bank Indebtedness restrict or
prohibit the repurchase of Notes pursuant to this Section 4.08, then prior to
the mailing of the notice to the holders provided for in Section 4.08(b) but in
any event within 30 days following any Change of Control, the Issuer shall
(i) repay in full all Bank Indebtedness or, if doing so will allow the purchase
of Notes, offer to repay in full all Bank Indebtedness and repay the Bank
Indebtedness of each lender and/or noteholder who has accepted such offer, or
(ii) obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Notes as provided for in
Section 4.08(b).

(b) Within 30 days following any Change of Control, except to the extent that
the Issuer has exercised its right to redeem the Notes in accordance with
Article 3 of this Indenture, the Issuer shall mail a notice (a “Change of
Control Offer”) to each holder with a copy to the Trustee stating:

(i) that a Change of Control has occurred and that such holder has the right to
require the Issuer to repurchase such holder’s Notes at a repurchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Additional Interest, if any, to the date of repurchase (subject to
the right of the holders of record on the relevant record date to receive
interest on the relevant interest payment date);

 

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(ii) the circumstances and relevant facts and financial information regarding
such Change of Control;

(iii) the repurchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and

(iv) the instructions determined by the Issuer, consistent with this
Section 4.08, that a holder must follow in order to have its Notes purchased.

(c) holders electing to have a Note purchased shall be required to surrender the
Note, with an appropriate form duly completed, to the Issuer at the address
specified in the notice at least three Business Days prior to the purchase date.
The holders shall be entitled to withdraw their election if the Trustee or the
Issuer receives not later than one Business Day prior to the purchase date a
telegram, telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Note which was delivered for purchase by the
holder and a statement that such holder is withdrawing his election to have such
Note purchased. holders whose Notes are purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered.

(d) On the purchase date, all Notes purchased by the Issuer under this Section
shall be delivered to the Trustee for cancellation, and the Issuer shall pay the
purchase price plus accrued and unpaid interest to the holders entitled thereto.

(e) A Change of Control Offer may be made in advance of a Change of Control, and
conditioned upon such Change of Control, if a definitive agreement is in place
for the Change of Control at the time of making of the Change of Control Offer.

(f) Notwithstanding the foregoing provisions of this Section, the Issuer shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in Section 4.08
applicable to a Change of Control Offer made by the Issuer and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.

(g) Notes repurchased by the Issuer pursuant to a Change of Control Offer will
have the status of Notes issued but not outstanding or will be retired and
canceled at the option of the Issuer. Notes purchased by a third party pursuant
to the preceding clause (f) will have the status of Notes issued and
outstanding.

(h) At the time the Issuer delivers Notes to the Trustee which are to be
accepted for purchase, the Issuer shall also deliver an Officers’ Certificate
stating that such Notes are to be accepted by the Issuer pursuant to and in
accordance with the terms of this Section 4.08. A Note shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering holder.

 

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(i) Prior to any Change of Control Offer, the Issuer shall deliver to the
Trustee an Officers’ Certificate stating that all conditions precedent contained
herein to the right of the Issuer to make such offer have been complied with.

(j) The Issuer shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this Section. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this Section 4.08, the Issuer shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section by virtue thereof.

SECTION 4.09. Compliance Certificate. The Issuer shall deliver to the Trustee
within 120 days after the end of each fiscal year of the Issuer, beginning with
the fiscal year end on March 31, 2007, an Officer’s Certificate stating that in
the course of the performance by the signer of his or her duties as an Officer
of the Issuer he or she would normally have knowledge of any Default and whether
or not the signer knows of any Default that occurred during such period. If he
or she does, the certificate shall describe the Default, its status and what
action the Issuer is taking or proposes to take with respect thereto. The Issuer
also shall comply with Section 314(a)(4) of the TIA. Except with respect to
receipt of payments of principal and interest on the Notes and any Default or
Event of Default information contained in the Officer’s Certificate delivered to
it pursuant to this Section 4.09, the Trustee shall have no duty to review,
ascertain or confirm the Issuer’s compliance with or the breach of any
representation, warranty or covenant made in this Indenture.

SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the
Issuer shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.

SECTION 4.11. Future Note Guarantors. The Issuer shall cause each Wholly Owned
Restricted Subsidiary that is a Domestic Subsidiary (unless such Subsidiary is a
Receivables Subsidiary or a Domestic Subsidiary that is wholly owned by one or
more Foreign Subsidiaries and created to enhance the tax efficiency of the
Issuer and its Subsidiaries) and that guarantees any Indebtedness of the Issuer
or any of the Note Guarantors, to execute and deliver to the Trustee a
supplemental indenture substantially in the form of Exhibit D pursuant to which
such Subsidiary shall guarantee the Issuer’s Obligations under the Notes and
this Indenture and a joinder to the Intercreditor Agreement.

SECTION 4.12. Liens. The Issuer will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, Incur or suffer to
exist any Lien (except Permitted Liens) on any asset or property of the Issuer
or such Restricted Subsidiary securing Indebtedness of the Issuer or a
Restricted Subsidiary unless the Notes are equally and ratably secured with (or
on a senior basis to, in the case of obligations subordinated in right of
payment to the Notes) the obligations so secured until such time as such
obligations are no longer secured by a Lien. Any Lien which is granted to secure
the Notes or such Note Guarantee under this Section 4.12 shall be automatically
released and discharged at the same time as the release of the Lien that gave
rise to the obligation to secure the Notes or such Note Guarantee under this
Section 4.12.

SECTION 4.13. [Reserved].

 

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SECTION 4.14. Maintenance of Office or Agency.

(a) The Issuer shall maintain an office or agency (which may be an office of the
Trustee or an affiliate of the Trustee or Registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the corporate trust
office of the Trustee as set forth in Section 13.02.

(b) The Issuer may also from time to time designate one or more other offices or
agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuer of
its obligation to maintain an office or agency for such purposes. The Issuer
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.

(c) The Issuer hereby designates the corporate trust office of the Trustee or
its agent as such office or agency of the Issuer in accordance with
Section 2.04.

SECTION 4.15. Covenant Suspension. If on any date following the Issue Date,
(i) the Notes have Investment Grade Ratings from both Rating Agencies, and
(ii) no Default has occurred and is continuing under this Indenture, then,
beginning on that day and continuing at all times thereafter regardless of any
subsequent changes in the rating of the Notes (the occurrence of the events
described in the foregoing clauses (i) and (ii) being collectively referred to
as a “Covenant Suspension Event”), and subject to the provisions of the
following paragraph, the Issuer and the Restricted Subsidiaries shall not be
subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07 and 5.01(a)(iv) (collectively
the “Suspended Covenants”).

If and while the Issuer and its Restricted Subsidiaries are not subject to the
Suspended Covenants, the Notes will be entitled to substantially less covenant
protection. In the event that the Issuer and its Restricted Subsidiaries are not
subject to the Suspended Covenants under this Indenture for any period of time
as a result of the foregoing, and on any subsequent date (the “Reversion Date”)
one or both of the Rating Agencies withdraw their Investment Grade Rating or
downgrade the rating assigned to the Notes below an Investment Grade Rating,
then the Issuer and its Restricted Subsidiaries will thereafter again be subject
to the Suspended Covenants under this Indenture with respect to future events.

On each Reversion Date, all Indebtedness Incurred, or Disqualified Stock or
Preferred Stock issued, during the Suspension Period will be classified as
having been Incurred or issued pursuant to Section 4.03(a) or 4.03(b) (to the
extent such Indebtedness or Disqualified Stock or Preferred Stock would be
permitted to be Incurred or issued thereunder as of the Reversion Date and after
giving effect to Indebtedness Incurred or issued prior to the Suspension Period
and outstanding on the Reversion Date). To the extent such Indebtedness or
Disqualified Stock or Preferred Stock would not be so permitted to be Incurred
or issued pursuant to Section 4.03 such Indebtedness or Disqualified Stock or
Preferred Stock will be deemed to have been outstanding on the Issue Date, so
that it is classified as permitted under Section 4.03(b)(iii). Calculations made
after the Reversion Date of the amount available to be made as Restricted
Payments under Section 4.04 will be made as though Section 4.04 had been in
effect since the Issue Date and throughout the Suspension Period. Accordingly,
Restricted Payments made during the Suspension Period will reduce the amount
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4.04(a). As described above, however, no Default or Event of Default will be
deemed to have occurred on the Reversion Date as a result of any actions taken
by the Issuer or its Restricted Subsidiaries during the Suspension Period.

For purposes of Section 4.06, on the Reversion Date, the unutilized Excess
Proceeds amount will be reset to zero.

ARTICLE 5

SUCCESSOR COMPANY

SECTION 5.01. When Issuer May Merge or Transfer Assets.

(a) The Issuer shall not, directly or indirectly, consolidate, amalgamate or
merge with or into or wind up or convert into (whether or not the Issuer is the
surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions, to any Person unless:

(i) the Issuer is the surviving person or the Person formed by or surviving any
such consolidation, amalgamation, merger, winding up or conversion (if other
than the Issuer) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made is a corporation, partnership or
limited liability company organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory thereof
(the Issuer or such Person, as the case may be, being herein called the
“Successor Issuer”); provided that in the case where the surviving Person is not
a corporation, a co-obligor of the Notes is a corporation;

(ii) the Successor Issuer (if other than the Issuer) expressly assumes all the
obligations of the Issuer under this Indenture and the Notes pursuant to
supplemental indentures or other documents or instruments in form reasonably
satisfactory to the Trustee;

(iii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Issuer or any of its
Restricted Subsidiaries as a result of such transaction as having been Incurred
by the Successor Issuer or such Restricted Subsidiary at the time of such
transaction) no Default shall have occurred and be continuing;

(iv) immediately after giving pro forma effect to such transaction, as if such
transaction had occurred at the beginning of the applicable four-quarter period
(and treating any Indebtedness which becomes an obligation of the Successor
Issuer or any of its Restricted Subsidiaries as a result of such transaction as
having been Incurred by the Successor Issuer or such Restricted Subsidiary at
the time of such transaction), either

(A) the Successor Issuer would be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.03(a); or

(B) the Fixed Charge Coverage Ratio for the Successor Issuer and its Restricted
Subsidiaries would be greater than such ratio for the Issuer and its Restricted
Subsidiaries immediately prior to such transaction;

 

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(v) if the Issuer is not the Successor Issuer, each Note Guarantor, unless it is
the other party to the transactions described above, shall have by supplemental
indenture confirmed that its Note Guarantee shall apply to such Person’s
obligations under this Indenture and the Notes; and

(vi) the Issuer shall have delivered to the Trustee an Officer’s Certificate and
an Opinion of Counsel, each stating that such consolidation, merger,
amalgamation or transfer and such supplemental indentures (if any) comply with
this Indenture.

The Successor Issuer (if other than the Issuer) will succeed to, and be
substituted for, the Issuer under this Indenture and the Notes, and in such
event the Issuer will automatically be released and discharged from its
obligations under this Indenture and the Notes. Notwithstanding the foregoing
clauses (iii) and (iv) of this Section 5.01, (a) any Restricted Subsidiary may
merge, consolidate or amalgamate with or transfer all or part of its properties
and assets to the Issuer or to another Restricted Subsidiary, and (b) the Issuer
may merge, consolidate or amalgamate with an Affiliate incorporated solely for
the purpose of reincorporating the Issuer in another state of the United States,
the District of Columbia or any territory of the United States or may convert
into a limited liability company, so long as the amount of Indebtedness of the
Issuer and its Restricted Subsidiaries is not increased thereby. This Article 5
will not apply to a sale, assignment, transfer, conveyance or other disposition
of assets between or among the Issuer and its Restricted Subsidiaries.

(b) Subject to the provisions of Section 11.02(b) (which govern the release of a
Note Guarantee upon the sale or disposition of a Restricted Subsidiary of the
Issuer that is a Note Guarantor), no Subsidiary Note Guarantor shall, and the
Issuer shall not permit any Subsidiary Note Guarantor to, consolidate,
amalgamate or merge with or into or wind up into (whether or not such Subsidiary
Note Guarantor is the surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person (other than any such
sale, assignment, transfer, lease, conveyance or disposition in connection with
the Transactions or the Post-Closing CMBS Transaction described in the Offering
Memorandum) unless:

(i) either (A) such Subsidiary Note Guarantor is the surviving Person or the
Person formed by or surviving any such consolidation, amalgamation or merger (if
other than such Subsidiary Note Guarantor) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
corporation, partnership or limited liability company organized or existing
under the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (such Subsidiary Note Guarantor or such
Person, as the case may be, being herein called the “Successor Note Guarantor”)
and the Successor Subsidiary Note Guarantor (if other than such Subsidiary Note
Guarantor) expressly assumes all the obligations of such Subsidiary Note
Guarantor under this Indenture and such Subsidiary Note Guarantors’ Note
Guarantee pursuant to a supplemental indenture or other documents or instruments
in form reasonably satisfactory to the Trustee, or (b) such sale or disposition
or consolidation, amalgamation or merger is not in violation of Section 4.06;
and

(ii) the Successor Subsidiary Note Guarantor (if other than such Subsidiary Note
Guarantor) shall have delivered or caused to be delivered to the Trustee an
Officer’s Certificate and an Opinion of Counsel, each stating that such
consolidation, amalgamation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture.

 

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Except as otherwise provided in this Indenture, the Successor Subsidiary Note
Guarantor (if other than such Subsidiary Note Guarantor) will succeed to, and be
substituted for, such Subsidiary Note Guarantor under this Indenture and such
Subsidiary Note Guarantor’s Note Guarantee, and such Subsidiary Note Guarantor
will automatically be released and discharged from its obligations under this
Indenture and such Subsidiary Note Guarantor’s Note Guarantee. Notwithstanding
the foregoing, (1) a Subsidiary Note Guarantor may merge, amalgamate or
consolidate with an Affiliate incorporated solely for the purpose of
reincorporating such Subsidiary Note Guarantor in another state of the United
States, the District of Columbia or any territory of the United States so long
as the amount of Indebtedness of the Subsidiary Note Guarantor is not increased
thereby and (2) a Subsidiary Note Guarantor may merge, amalgamate or consolidate
with another Subsidiary Note Guarantor or the Issuer.

In addition, notwithstanding the foregoing, any Subsidiary Note Guarantor may
consolidate, amalgamate or merge with or into or wind up into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets (collectively, a “Transfer”) to the Issuer or any
Subsidiary Note Guarantor.

Except as otherwise provided in this Indenture, Harrah’s Entertainment will not
consolidate, amalgamate or merge with or into or wind up into (whether or not
Harrah’s Entertainment is the surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to, any Person (other than any
such sale, assignment, transfer, lease, conveyance or disposition in connection
with the Transactions described in the Offering Memorandum) unless:

(1) either Harrah’s Entertainment or the Issuer (provided that if the Issuer is
to be the surviving Person, then such transaction shall comply with
Section 5.01(a) or 5.01(b)) is the surviving Person or the Person formed by or
surviving any such consolidation, amalgamation or merger (if other than Harrah’s
Entertainment) or to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made is a corporation, partnership or limited
liability company organized or existing under the laws of the United States, any
state thereof, the District of Columbia, or any territory thereof (Harrah’s
Entertainment or such Person, as the case may be, being herein called the
“Successor Parent Note Guarantor”) and the Successor Parent Note Guarantor (if
other than Harrah’s Entertainment) expressly assumes all the obligations of
Harrah’s Entertainment under this Indenture and Harrah’s Entertainment’s Note
Guarantee pursuant to a supplemental indenture or other documents or instruments
in form reasonably satisfactory to the Trustee; and

(2) the Successor Parent Note Guarantor (if other than Harrah’s Entertainment)
shall have delivered or caused to be delivered to the Trustee an Officer’s
Certificate and an Opinion of Counsel, each stating that such consolidation,
amalgamation, merger or transfer and such supplemental indenture (if any) comply
with this Indenture.

Except as otherwise provided in this Indenture, the Successor Parent Note
Guarantor (if other than Harrah’s Entertainment) will succeed to, and be
substituted for, Harrah’s Entertainment under this Indenture, Harrah’s
Entertainment’s Note Guarantee, and Harrah’s Entertainment will automatically be
released and discharged from its obligations under this Indenture and such Note
Guarantee.

 

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ARTICLE 6

DEFAULTS AND REMEDIES

SECTION 6.01. Events of Default. An “Event of Default” occurs with respect to a
series of Notes if:

(a) there is a default in any payment of interest (including any additional
interest) on any Note of such series when the same becomes due and payable, and
such default continues for a period of 30 days,

(b) there is a default in the payment of principal or premium, if any, of any
Note of such series when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise,

(c) the failure by the Issuer or any Restricted Subsidiary to comply for 60 days
after notice with its other agreements contained in the Notes of such series or
this Indenture,

(d) the failure by the Issuer or any Significant Subsidiary (or any group of
Subsidiaries that together would constitute a Significant Subsidiary) to pay any
Indebtedness (other than Indebtedness owing to the Issuer or a Restricted
Subsidiary) within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default, in each case, if the total amount of such Indebtedness unpaid or
accelerated exceeds $150.0 million or its foreign currency equivalent (the
“cross-acceleration provision”),

(e) either the Issuer or any Significant Subsidiary of the Issuer pursuant to or
within the meaning of any Bankruptcy Law:

(i) commences a voluntary case;

(ii) consents to the entry of an order for relief against it in an involuntary
case;

(iii) consents to the appointment of a Custodian of it or for any substantial
part of its property; or

(iv) makes a general assignment for the benefit of its creditors or takes any
comparable action under any foreign laws relating to insolvency,

(f) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

(i) is for relief against either the Issuer or any Significant Subsidiary of the
Issuer in an involuntary case;

(ii) appoints a Custodian of either the Issuer or any Significant Subsidiary of
the Issuer or for any substantial part of its property; or

(iii) orders the winding up or liquidation of either the Issuer or any
Significant Subsidiary of the Issuer;

 

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or any similar relief is granted under any foreign laws and the order or decree
remains unstayed and in effect for 60 days,

(g) failure by the Issuer or any Significant Subsidiary (or any group of
Subsidiaries that together would constitute a Significant Subsidiary)to pay
final judgments aggregating in excess of $150.0 million or its foreign currency
equivalent (net of any amounts which are covered by enforceable insurance
policies issued by solvent carriers), which judgments are not discharged, waived
or stayed for a period of 60 days (the “judgment default provision”), or

(h) any Note Guarantee of the Parent Note Guarantor or a Significant Subsidiary
(or any group of Subsidiaries that together would constitute a Significant
Subsidiary) with respect to such series of Notes ceases to be in full force and
effect (except as contemplated by the terms thereof) or the Parent Note
Guarantor or any Note Guarantor that qualifies as a Significant Subsidiary (or
any group of Subsidiaries that together would constitute a Significant
Subsidiary) denies or disaffirms its obligations under this Indenture or any
Note Guarantee with respect to such series of Notes and such Default continues
for 10 days.

The foregoing shall constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.

The term “Bankruptcy Law” means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors. The term “Custodian” means any
receiver, trustee, assignee, liquidator, custodian or similar official under any
Bankruptcy Law.

However, a default under clause (d) above shall not constitute an Event of
Default until the Trustee or the holders of 30% in principal amount of
outstanding Notes of such series notify the Issuer of the default and the Issuer
does not cure such default within the time specified in clause (d) hereof after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a “Notice of Default.” The Issuer shall
deliver to the Trustee, within five (5) Business Days after the occurrence
thereof, written notice in the form of an Officers’ Certificate of any event
which is, or with the giving of notice or the lapse of time or both would
become, an Event of Default, its status and what action the Issuer is taking or
propose to take with respect thereto.

SECTION 6.02. Acceleration. If an Event of Default (other than a Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Issuer) occurs with respect to a series of Notes and is continuing, the Trustee
or the holders of at least 30% in principal amount of outstanding Notes of such
series by notice to the Issuer may declare the principal of, premium, if any,
and accrued but unpaid interest on all the Notes of such series to be due and
payable; provided, however, that so long as any Bank Indebtedness remains
outstanding, no such acceleration shall be effective until the earlier of
(1) five Business Days after the giving of written notice to the Issuer and the
Representative under the Credit Agreement and (2) the day on which any Bank
Indebtedness is accelerated. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.01(e) or (f) with respect to either of the Issuers occurs, the
principal of, premium, if any, and interest on all the Notes will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any holders. Under certain circumstances, the holders of a
majority in principal amount of outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.

 

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In the event of any Event of Default specified in Section 6.01(d) above, such
Event of Default and all consequences thereof (excluding, however, any resulting
payment default) shall be annulled, waived and rescinded, automatically and
without any action by the Trustee or the holders of the Notes, if within 20 days
after such Event of Default arose the Issuer delivers an Officer’s Certificate
to the Trustee stating that (x) the Indebtedness or guarantee that is the basis
for such Event of Default has been discharged or (y) the holders thereof have
rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default or (z) the default that is the basis for
such Event of Default has been cured, it being understood that in no event shall
an acceleration of the principal amount of the Notes as described above be
annulled, waived or rescinded upon the happening of any such events.

SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing,
the Trustee may pursue any available remedy at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the
Notes or does not produce any of them in the proceeding. A delay or omission by
the Trustee or any holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. To the extent required by law, all available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults. Provided the Notes are not then due and
payable by reason of a declaration of acceleration, the holders of a majority in
principal amount of the Notes by written notice to the Trustee may waive an
existing Default and its consequences except (a) a Default in the payment of the
principal of or interest on a Note, (b) a Default arising from the failure to
redeem or purchase any Note when required pursuant to the terms of this
Indenture or (c) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each holder affected. When a Default is
waived, it is deemed cured and the Issuer, the Trustee and the holders will be
restored to their former positions and rights under this Indenture, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.

SECTION 6.05. Control by Majority. The holders of a majority in principal amount
of each series of Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, if the Trustee, being
advised by counsel, determines that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of directors or
trustees, executive committee, or a trust committee of directors or trustees
and/or Responsible Officers shall determine that the action or proceeding so
directed would involve the Trustee in personal liability or expense for which it
is not adequately indemnified, or subject to Section 7.01, that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability. Prior to taking any action under this
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.

SECTION 6.06. Limitation on Suits.

(a) Except to enforce the right to receive payment of principal, premium (if
any) or interest when due, no holder may pursue any remedy with respect to this
Indenture or the Notes unless:

 

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(i) such holder has previously given the Trustee notice that an Event of Default
is continuing,

(ii) holders of at least 30% in principal amount of the outstanding Notes of the
applicable series have requested the Trustee to pursue the remedy,

(iii) such holders have offered the Trustee reasonable security or indemnity
satisfactory to the Trustee against any loss, liability or expense,

(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity, and

(v) the holders of a majority in principal amount of the outstanding Notes of
the applicable series have not given the Trustee a direction inconsistent with
such request within such 60-day period.

(b) A holder may not use this Indenture to prejudice the rights of another
holder or to obtain a preference or priority over another holder.

SECTION 6.07. Rights of the holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any holder to receive payment of
principal of and interest on the Notes held by such holder, on or after the
respective due dates expressed or provided for in the Notes, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such holder.

SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in
Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuer
or any other obligor on the Notes for the whole amount then due and owing
(together with interest on overdue principal and (to the extent lawful) on any
unpaid interest at the rate provided for in the Notes) and the amounts provided
for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs
of claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for reasonable
compensation, expenses disbursements and advances of the Trustee (including
counsel, accountants, experts or such other professionals as the Trustee deems
necessary, advisable or appropriate)) and the holders allowed in any judicial
proceedings relative to the Issuer or any Note Guarantor, their creditors or
their property, shall be entitled to participate as a member, voting or
otherwise, of any official committee of creditors appointed in such matters and,
unless prohibited by law or applicable regulations, may vote on behalf of the
holders in any election of a trustee in bankruptcy or other Person performing
similar functions, and any Custodian in any such judicial proceeding is hereby
authorized by each holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities. Subject to the terms of the Intercreditor Agreement,
any money or property collected by the Trustee pursuant to this Article 6 and
any other money or property distributable in respect of the Issuer’s or
Guarantors’ obligations under this Indenture after an Event of Default shall be
applied in the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

 

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SECOND: to the holders for amounts due and unpaid on the Notes for principal,
premium, if any, and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal and
interest, respectively; and

THIRD: to the Issuer or, to the extent the Trustee collects any amount for any
Note Guarantor, to such Note Guarantor.

The Trustee may fix a record date and payment date for any payment to the
holders pursuant to this Section. At least 15 days before such record date, the
Trustee shall mail to each holder and the Issuer a notice that states the record
date, the payment date and amount to be paid.

SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys’ fees and expenses, against any party litigant in
the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit by
the Trustee, a suit by a holder pursuant to Section 6.07 or a suit by holders of
more than 10% in principal amount of the Notes.

SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Issuer nor any Note
Guarantor (to the extent it may lawfully do so) shall at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Issuer and each Note Guarantor (to the extent that it may lawfully do so)
hereby expressly waive all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.

ARTICLE 7

TRUSTEE

SECTION 7.01. Duties of Trustee.

(a) The Trustee, prior to the occurrence of an Event of Default with respect to
the Notes and after the curing or waiving of all Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee (it being agreed that the
permissive right of the Trustee to do things enumerated in this Indenture shall
not be construed as a duty); and

 

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(ii) in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. The Trustee shall be under no duty to
make any investigation as to any statement contained in any such instance, but
may accept the same as conclusive evidence of the truth and accuracy of such
statement or the correctness of such opinions. However, in the case of
certificates or opinions required by any provision hereof to be provided to it,
the Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).

(c) The Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section;

(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts;

(iii) the Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05; and

(iv) no provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise Incur financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers.

(d) Every provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b) and (c) of this Section.

(e) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Issuer.

(f) Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.

(g) Every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.

SECTION 7.02. Rights of Trustee.

(a) The Trustee may conclusively rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel or both. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers’ Certificate or Opinion of Counsel.

(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.

 

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(d) The Trustee shall not be responsible or liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee’s conduct does not
constitute willful misconduct or negligence.

(e) The Trustee may consult with counsel of its own selection and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect of any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond, debenture, note or
other paper or document unless requested in writing to do so by the holders of
not less than a majority in principal amount of the Notes at the time
outstanding, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Issuer, personally
or by agent or attorney, at the expense of the Issuer and shall Incur no
liability of any kind by reason of such inquiry or investigation.

(g) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
holders pursuant to this Indenture, unless such holders shall have offered to
the Trustee security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities which might be Incurred by it in compliance with such
request or direction.

(h) The rights, privileges, protections, immunities and benefits given to the
Trustee, including its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder, and each agent,
custodian and other Person employed to act hereunder.

(i) The Trustee shall not be responsible or liable for any action taken or
omitted by it in good faith at the direction of the holders of not less than a
majority in principal amount of the Notes as to the time, method and place of
conducting any proceedings for any remedy available to the Trustee or the
exercising of any power conferred by this Indenture.

(j) Any action taken, or omitted to be taken, by the Trustee in good faith
pursuant to this Indenture upon the request or authority or consent of any
person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding upon future
holders of Notes and upon Notes executed and delivered in exchange therefor or
in place thereof.

(k) The Trustee shall not be deemed to have notice of any Default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a Default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Notes and this Indenture.

(l) The Trustee may request that the Issuer deliver an Officer’s Certificate
setting forth the names of individuals and/or titles of officers authorized at
such time to take specified actions pursuant to this Indenture, which Officer’s
Certificate may be signed by any Person authorized to sign an Officer’s
Certificate, including any Person specified as so authorized in any such
certificate previously delivered and not superseded.

 

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(m) The Trustee shall not be responsible or liable for special, indirect, or
consequential loss or damage of any kind whatsoever (including, but not limited
to, loss of profit) irrespective of whether the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of actions.

(n) The Trustee shall not be required to give any bond or surety in respect of
the execution of the trusts and powers under this Indenture.

(o) The Trustee shall not be responsible or liable for any failure or delay in
the performance of its obligations under this Indenture arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fire; flood; terrorism;
wars and other military disturbances; sabotage; epidemics; riots; interruptions;
loss or malfunction of utilities, computer (hardware or software) or
communication services; accidents; labor disputes; and acts of civil or military
authorities and governmental action.

SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any
other capacity may become the owner or pledgee of Notes and may otherwise deal
with the Issuer or its Affiliates with the same rights it would have if it were
not Trustee. Any Paying Agent or Registrar may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.

SECTION 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and
makes no representation as to the validity or adequacy of this Indenture, any
Note Guarantee or the Notes, it shall not be accountable for the Issuer’s use of
the proceeds from the Notes, and it shall not be responsible for any statement
of the Issuer or any Note Guarantor in this Indenture or in any document issued
in connection with the sale of the Notes or in the Notes other than the
Trustee’s certificate of authentication. The Trustee shall not be charged with
knowledge of any Default or Event of Default under Sections 6.01(c), (d), (e),
(h), or (i) or of the identity of any Significant Subsidiary unless either (a) a
Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have
received written notice thereof in accordance with Section 13.02 hereof from the
Issuer, any Note Guarantor or any holder. In accepting the trust hereby created,
the Trustee acts solely as Trustee for the holders of the Notes and not in its
individual capacity and all persons, including without limitation the holders of
Notes and the Issuer having any claim against the Trustee arising from this
Indenture shall look only to the funds and accounts held by the Trustee
hereunder for payment except as otherwise provided herein.

SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if
it is actually known to the Trustee, the Trustee shall mail to each holder
notice of the Default within the earlier of 90 days after it occurs or 30 days
after it is actually known to a Trust Officer or written notice of it is
received by the Trustee. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of the holders. The
Issuer is required to deliver to the Trustee, annually, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Issuer also is required to deliver to the Trustee, within 30
days after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the Issuer is taking
or proposes to take in respect thereof.

SECTION 7.06. Reports by Trustee to the Holders. As promptly as practicable
after each June 30 beginning with the June 30 following the date of this
Indenture, and in any event prior to June 30 in each year, the Trustee shall
mail to each holder a brief report dated as of such June 30 that complies with
Section 313(a) of the TIA if and to the extent required thereby. The Trustee
shall also comply with Section 313(b) of the TIA.

 

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A copy of each report at the time of its mailing to the holders shall be filed
with the SEC and each stock exchange (if any) on which the Notes are listed. The
Issuer agrees to notify promptly the Trustee whenever the Notes become listed on
any stock exchange and of any delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the Trustee
from time to time such compensation, as the Issuer and the Trustee shall from
time to time agree in writing, for the Trustee’s acceptance of this Indenture
and its services hereunder. The Trustee’s compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Issuer shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
Incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee’s agents,
counsel, accountants and experts. The Issuer and each Note Guarantor, jointly
and severally shall indemnify the Trustee against any and all loss, liability,
claim, damage or expense (including reasonable attorneys’ fees and expenses)
Incurred by or in connection with the acceptance or administration of this trust
and the performance of its duties hereunder, including the costs and expenses of
enforcing this Indenture or Note Guarantee against the Issuer or a Note
Guarantor (including this Section 7.07) and defending itself against or
investigating any claim (whether asserted by the Issuer, any Note Guarantor, any
holder or any other Person). The obligation to pay such amounts shall survive
the payment in full or defeasance of the Notes or the removal or resignation of
the Trustee. The Trustee shall notify the Issuer of any claim for which it may
seek indemnity promptly upon obtaining actual knowledge thereof; provided,
however, that any failure so to notify the Issuer shall not relieve the Issuer
or any Note Guarantor of its indemnity obligations hereunder. The Issuer shall
defend the claim and the indemnified party shall provide reasonable cooperation
at the Issuer’s expense in the defense. Such indemnified parties may have
separate counsel and the Issuer and the Note Guarantors, as applicable shall pay
the fees and expenses of such counsel; provided, however, that the Issuer shall
not be required to pay such fees and expenses if it assumes such indemnified
parties’ defense and, in such indemnified parties’ reasonable judgment, there is
no conflict of interest between the Issuer and the Note Guarantors, as
applicable, and such parties in connection with such defense. The Issuer needs
not reimburse any expense or indemnify against any loss, liability or expense
Incurred by an indemnified party through such party’s own willful misconduct,
negligence or bad faith.

To secure the Issuer’s and the Note Guarantors’ payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest on particular Notes.

The Issuer’s and the Note Guarantors’ payment obligations pursuant to this
Section shall survive the satisfaction or discharge of this Indenture, any
rejection or termination of this Indenture under any bankruptcy law or the
resignation or removal of the Trustee. Without prejudice to any other rights
available to the Trustee under applicable law, when the Trustee Incurs expenses
after the occurrence of a Default specified in Section 6.01(f) or (g) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.

No provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise Incur any financial liability in the performance of any
of its duties hereunder, or in the exercise of any of its rights or powers, if
repayment of such funds or adequate indemnity against such risk or liability is
not assured to its satisfaction.

 

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SECTION 7.08. Replacement of Trustee.

(a) The Trustee may resign at any time by so notifying the Issuer. The holders
of a majority in principal amount of the Notes may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee. The Issuer shall
remove the Trustee if:

(i) the Trustee fails to comply with Section 7.10;

(ii) the Trustee is adjudged bankrupt or insolvent;

(iii) a receiver or other public officer takes charge of the Trustee or its
property; or

(iv) the Trustee otherwise becomes incapable of acting.

(b) If the Trustee resigns, is removed by the Issuer or by the holders of a
majority in principal amount of the Notes and such holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.

(c) A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Issuer. Thereupon the resignation or removal of
the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to the holders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the Lien provided for in Section 7.07.

(d) If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the holders of
10% in principal amount of the Notes may petition at the expense of the Issuer
any court of competent jurisdiction for the appointment of a successor Trustee.

(e) If the Trustee fails to comply with Section 7.10, unless the Trustee’s duty
to resign is stayed as provided in Section 310(b) of the TIA, any holder who has
been a bona fide holder of a Note for at least six months may petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.

(f) Notwithstanding the replacement of the Trustee pursuant to this Section, the
Issuer’s obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.

SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.

In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.

 

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SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of Section 310(a) of the TIA. The Trustee shall have a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with
Section 310(b) of the TIA, subject to its right to apply for a stay of its duty
to resign under the penultimate paragraph of Section 310(b) of the TIA;
provided, however, that there shall be excluded from the operation of
Section 310(b)(1) of the TIA any series of securities issued under this
Indenture and any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in
Section 310(b)(1) of the TIA are met.

SECTION 7.11. Preferential Collection of Claims Against the Issuer. The Trustee
shall comply with Section 311(a) of the TIA, excluding any creditor relationship
listed in Section 311(b) of the TIA. A Trustee who has resigned or been removed
shall be subject to Section 311(a) of the TIA to the extent indicated.

ARTICLE 8

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01. Discharge of Liability on Notes; Defeasance.

(a) This Indenture shall be discharged and shall cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes,
as expressly provided for in this Indenture) as to all outstanding Notes when:

(i) either (a) all the Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
of the Notes (1) have become due and payable, (2) will become due and payable at
their stated maturity within one year or (3) if redeemable at the option of the
Issuer, are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Issuer, and the Issuer has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuer directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;

(ii) the Issuer and/or the Note Guarantors have paid all other sums payable
under this Indenture; and

(iii) the Issuer has delivered to the Trustee an Officer’s Certificate and an
Opinion of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with.

 

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Subject to Sections 8.01(c) and 8.02, the Issuer at any time may terminate
(i) all of its obligations under the Notes and this Indenture (with respect to
the holders of the Notes) (“legal defeasance option”) or (ii) its obligations
under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.11, 4.12 and
4.13 and the operation of Section 5.01 and Sections 6.01(c), 6.01(d), 6.01(e),
6.01(f) (with respect to Significant Subsidiaries of the Issuer only), 6.01(g)
(with respect to Significant Subsidiaries of the Issuer only), 6.01(h) and
6.01(i) (“covenant defeasance option”). The Issuer may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option. In the event that the Issuer terminates all of its obligations under the
Notes and this Indenture (with respect to such Notes) by exercising its legal
defeasance option or its covenant defeasance option, the obligations of each
Note Guarantor under its Note Guarantee shall be terminated simultaneously with
the termination of such obligations.

If the Issuer exercises its legal defeasance option, payment of the Notes so
defeased may not be accelerated because of an Event of Default. If the Issuer
exercises its covenant defeasance option, payment of the Notes so defeased may
not be accelerated because of an Event of Default specified in Section 6.01(c),
6.01(d), 6.01(e), 6.01(f) (with respect to Significant Subsidiaries of the
Issuer only), 6.01(g) (with respect to Significant Subsidiaries of the Issuer
only), 6.01(h) or 6.01(i) or because of the failure of the Issuer to comply with
Section 5.01.

Upon satisfaction of the conditions set forth herein and upon request of the
Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.

(b) Notwithstanding clauses (a) and (b) above, the Issuer’s obligations in
Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08 and in this Article 8
shall survive until the Notes have been paid in full. Thereafter, the Issuer’s
obligations in Sections 7.07, 8.05 and 8.06 shall survive such satisfaction and
discharge.

SECTION 8.02. Conditions to Defeasance.

(a) The Issuer may exercise its legal defeasance option or its covenant
defeasance option only if:

(i) the Issuer irrevocably deposits in trust with the Trustee cash in U.S.
Dollars, U.S. Government Obligations or a combination thereof in an amount
sufficient or U.S. Government Obligations, the principal of and the interest on
which will be sufficient, or a combination thereof sufficient, to pay the
principal of and premium (if any) and interest on the Notes when due at maturity
or redemption, as the case may be, including interest thereon to maturity or
such redemption date;

(ii) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal, premium, if any, and interest when due on all the
Notes to maturity or redemption, as the case may be;

(iii) 123 days pass after the deposit is made and during the 123-day period no
Default specified in Section 6.01(f) or (g) with respect to the Issuer occurs
which is continuing at the end of the period;

 

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(iv) the deposit does not constitute a default under any other agreement binding
on the Issuer and is not prohibited by Article 10;

(v) in the case of the legal defeasance option, the Issuer shall have delivered
to the Trustee an Opinion of Counsel stating that (1) the Issuer have received
from, or there has been published by, the Internal Revenue Service a ruling, or
(2) since the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the holders will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred. Notwithstanding the foregoing, the
Opinion of Counsel required by the immediately preceding sentence with respect
to a legal defeasance need not be delivered if all of the Notes not theretofore
delivered to the Trustee for cancellation (x) have become due and payable or
(y) will become due and payable at their Stated Maturity within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Issuer;

(vi) impair the right of any holder to receive payment of principal of, premium,
if any, and interest on such holder’s Notes on or after the due dates therefore
or to institute suit for the enforcement of any payment on or with respect to
such holder’s Notes;

(vii) in the case of the covenant defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel to the effect that the holders
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; and

(viii) the Issuer delivers to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the defeasance
and discharge of the Notes to be so defeased and discharged as contemplated by
this Article 8 have been complied with.

(b) Before or after a deposit, the Issuer may make arrangements satisfactory to
the Trustee for the redemption of such Notes at a future date in accordance with
Article 3.

SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money
or U.S. Government Obligations (including proceeds thereof) deposited with it
pursuant to this Article 8. It shall apply the deposited money and the money
from U.S. Government Obligations through each Paying Agent and in accordance
with this Indenture to the payment of principal of and interest on the Notes so
discharged or defeased. Money and securities so held in trust are not subject to
Article 10 or 12.

SECTION 8.04. Repayment to Issuer. Each of the Trustee and each Paying Agent
shall promptly turn over to the Issuer upon request any money or U.S. Government
Obligations held by it as provided in this Article which, in the written opinion
of nationally recognized firm of independent public accountants delivered to the
Trustee (which delivery shall only be required if U.S. Government Obligations
have been so deposited), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent discharge or defeasance in
accordance with this Article.

Subject to any applicable abandoned property law, the Trustee and each Paying
Agent shall pay to the Issuer upon written request any money held by them for
the payment of principal or interest

 

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that remains unclaimed for two years, and, thereafter, holders entitled to the
money must look to the Issuer for payment as general creditors, and the Trustee
and each Paying Agent shall have no further liability with respect to such
monies.

SECTION 8.05. Indemnity for U.S. Government Obligations. The Issuer shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.

SECTION 8.06. Reinstatement. If the Trustee or any Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuer’s obligations under this Indenture and the Notes so
discharged or defeased shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 8 until such time as the Trustee or any Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Issuer has made
any payment of principal of, or interest on, any such Notes because of the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or any Paying Agent.

ARTICLE 9

AMENDMENTS AND WAIVERS

SECTION 9.01. Without Consent of the Holders.

(a) The Issuer and the Trustee may amend this Indenture, the Intercreditor
Agreement or the Notes without notice to or consent of any holder:

(i) to cure any ambiguity, omission, defect or inconsistency;

(ii) to provide for the assumption by a Successor Issuer of the obligations of
the Issuer under this Indenture and the Notes;

(iii) to provide for the assumption by a Successor Note Guarantor of the
obligations of a Note Guarantor under this Indenture and its Note Guarantee;

(iv) [reserved];

(v) to provide for uncertificated Notes in addition to or in place of
certificated Notes; provided, however, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code;

(vi) to conform the text of this Indenture, the Note Guarantees, the Notes or
the Intercreditor Agreement, to any provision of the “Description of Notes” in
the Offering Memorandum to the extent that such provision in the “Description of
Notes” was intended to be a verbatim recitation of a provision of this
Indenture, the Note Guarantees, the Notes or the Intercreditor Agreement;

 

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(vii) to add a Note Guarantee with respect to the Notes or to secure the Notes;

(viii) to add to the covenants of the Issuer for the benefit of the holders or
to surrender any right or power herein conferred upon the Issuer;

(ix) to comply with any requirement of the SEC in connection with qualifying or
maintaining the qualification of, this Indenture under the TIA;

(x) to make any change that does not adversely affect the rights of any holder;
or

(xi) to provide for the issuance of the Exchange Notes or Additional Notes,
which shall have terms substantially identical in all material respects to the
Initial Notes, and which shall be treated, together with any outstanding Initial
Notes, as a single issue of securities;

provided that in the case of any amendment or supplement under clause (i), (ii),
(iii), (vi), (vii), (viii) or (x) or, unless such change would be inapplicable
to the Senior Interim Loan Facility as a result of its status as a credit
agreement, the Issuer shall provide an Officer’s Certificate to the Trustee to
the effect that the Issuer is concurrently making a corresponding change to the
Senior Interim Loan Facility to the extent necessary so that Holders of Notes
and holders of loans under the Senior Interim Loan Facility are treated
similarly.

(b) After an amendment under this Section 9.01 becomes effective, the Issuer
shall mail to the holders a notice briefly describing such amendment. The
failure to give such notice to all holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.

SECTION 9.02. With Consent of the Holders.

(a) The Issuer and the Trustee may, with respect to each series of Notes, amend
this Indenture or the Notes of such series with the written consent of the
holders of at least a majority in principal amount of the Notes of such series
and loans under the Senior Interim Loan Facility then outstanding voting as a
single class (including consents obtained in connection with a tender offer or
exchange for the Notes). However, without the consent of each holder of an
outstanding Note affected, an amendment may not:

(1) reduce the amount of Notes whose holders must consent to an amendment,

(2) reduce the rate of or extend the time for payment of interest on any Note,

(3) reduce the principal of or change the Stated Maturity of any Note,

(4) reduce the premium payable upon the redemption of any Note or change the
time at which any Note may be redeemed in accordance with Article 3,

(5) make any Note payable in money other than that stated in such Note,

(6) expressly subordinate the Notes or any Note Guarantee to any other
Indebtedness of the Issuer or any Note Guarantor;

 

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(7) impair the right of any holder to receive payment of principal of, premium,
if any, and interest on such holder’s Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect to
such holder’s Notes, or

(8) make any change in the amendment provisions which require each holder’s
consent or in the waiver provisions or

(9) except as expressly permitted by this Indenture, modify or release the Note
Guarantee of any Significant Subsidiary in any manner adverse to the holders of
the Notes.

In addition, without the consent of at least 75% in aggregate principal amount
of Notes and loans under the Senior Interim Loan Facility then outstanding, an
amendment, supplement or waiver may not

(1) modify any provisions of this Indenture or Intercreditor Agreement dealing
with the application of trust moneys in any manner materially adverse to the
holders other than in accordance with this Indenture and the Intercreditor
Agreement; or

(2) modify the Intercreditor Agreement in any manner materially adverse to the
holders other than in accordance with this Indenture and the Intercreditor
Agreement.

It shall not be necessary for the consent of the holders under this Section 9.02
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.

After an amendment under this Section 9.02 becomes effective, the Issuer shall
mail to the holders a notice briefly describing such amendment. The failure to
give such notice to all holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section 9.02.

SECTION 9.03. Compliance with Trust Indenture Act. From the date on which this
Indenture is qualified under the TIA, every amendment, waiver or supplement to
this Indenture or the Notes shall comply with the TIA as then in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers.

(a) A consent to an amendment or a waiver by a holder of a Note shall bind the
holder and every subsequent holder of that Note or portion of the Note that
evidences the same debt as the consenting holder’s Note, even if notation of the
consent or waiver is not made on the Note. However, any such holder or
subsequent holder may revoke the consent or waiver as to such holder’s Note or
portion of the Note if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officers’ Certificate from the Issuer
certifying that the requisite principal amount of Notes have consented. After an
amendment or waiver becomes effective, it shall bind every holder. An amendment
or waiver becomes effective upon the (i) receipt by the Issuer or the Trustee of
consents by the holders of the requisite principal amount of securities,
(ii) satisfaction of conditions to effectiveness as set forth in this Indenture
and any indenture supplemental hereto containing such amendment or waiver and
(iii) execution of such amendment or waiver (or supplemental indenture) by the
Issuer and the Trustee.

(b) The Issuer may, but shall not be obligated to, fix a record date for the
purpose of determining the holders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Indenture. If a record date is fixed, then notwithstanding the

 

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immediately preceding paragraph, those Persons who were holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.

SECTION 9.05. Notation on or Exchange of Notes. If an amendment, supplement or
waiver changes the terms of a Note, the Issuer may require the holder of the
Note to deliver it to the Trustee. The Trustee may place an appropriate notation
on the Note regarding the changed terms and return it to the holder.
Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or to
issue a new Note shall not affect the validity of such amendment, supplement or
waiver.

SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any amendment,
supplement or waiver authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment, the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and shall be provided with, and (subject to Section 7.01)
shall be fully protected in relying upon, an Officers’ Certificate and an
Opinion of Counsel stating that such amendment, supplement or waiver is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver is the legal, valid and binding obligation of the Issuer and the Note
Guarantors, enforceable against them in accordance with its terms, subject to
customary exceptions, and complies with the provisions hereof (including
Section 9.03).

SECTION 9.07. Payment for Consent. Neither the Issuer nor any Affiliate of the
Issuer shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any holder for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
to all holders that so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.

SECTION 9.08. Additional Voting Terms; Calculation of Principal Amount. All
Notes issued under this Indenture shall vote and consent together on all matters
(as to which any of such Notes may vote) as one class and no series of Notes
will have the right to vote or consent as a separate class on any matter.
Holders of loans under the Senior Interim Loan Facility shall vote and consent
together with the Holders of Notes under the Indenture on all matters as a
single class. Determinations as to whether holders of the requisite aggregate
principal amount of Notes and loans under the Senior Interim Loan Facility have
concurred in any direction, waiver or consent shall be made in accordance with
this Article 9 and Section 2.14.

 

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ARTICLE 10

[RESERVED]

ARTICLE 11

GUARANTEES

SECTION 11.01. Guarantees.

(a) Each Note Guarantor hereby jointly and severally, irrevocably and
unconditionally guarantees on a unsecured senior basis, as a primary obligor and
not merely as a surety, to each holder and to the Trustee and its successors and
assigns (i) the full and punctual payment when due, whether at Stated Maturity,
by acceleration, by redemption or otherwise, of all obligations of the Issuer
under this Indenture (including obligations to the Trustee) and the Notes,
whether for payment of principal of, premium, if any, or interest on in respect
of the Notes and all other monetary obligations of the Issuer under this
Indenture and the Notes and (ii) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer whether for
fees, expenses, indemnification or otherwise under this Indenture and the Notes
(all the foregoing being hereinafter collectively called the “Guaranteed
Obligations”). Each Note Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from each such Note Guarantor, and that each such Note Guarantor
shall remain bound under this Article 11 notwithstanding any extension or
renewal of any Guaranteed Obligation.

(b) Each Note Guarantor waives presentation to, demand of payment from and
protest to the Issuer of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Note Guarantor waives notice of any
default under the Notes or the Guaranteed Obligations. The obligations of each
Note Guarantor hereunder shall not be affected by (i) the failure of any holder
or the Trustee to assert any claim or demand or to enforce any right or remedy
against the Issuer or any other Person under this Indenture, the Notes or any
other agreement or otherwise; (ii) any extension or renewal of this Indenture,
the Notes or any other agreement; (iii) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Indenture, the Notes or
any other agreement; (iv) the release of any security held by any holder or the
Trustee for the Guaranteed Obligations or any Note Guarantor; (v) the failure of
any holder or Trustee to exercise any right or remedy against any other
guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of
such Note Guarantor, except as provided in Section 11.02(b).

(c) Each Note Guarantor hereby waives any right to which it may be entitled to
have its obligations hereunder divided among the Note Guarantors, such that such
Note Guarantor’s obligations would be less than the full amount claimed. Each
Note Guarantor hereby waives any right to which it may be entitled to have the
assets of the Issuer first be used and depleted as payment of the Issuer’s or
such Note Guarantor’s obligations hereunder prior to any amounts being claimed
from or paid by such Note Guarantor hereunder. Each Note Guarantor hereby waives
any right to which it may be entitled to require that the Issuer be sued prior
to an action being initiated against such Note Guarantor.

(d) Each Note Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any holder or the Trustee to any security held for payment of the
Guaranteed Obligations.

 

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(e) The Note Guarantee of each Note Guarantor is, to the extent and in the
manner set forth in Article 12, equal in right of payment to all existing and
future Pari Passu Indebtedness, senior in right of payment to all existing and
future Subordinated Indebtedness of the Issuer and subordinated and subject in
right of payment to the prior payment in full of the principal of and premium,
if any, and interest on all Secured Indebtedness of the relevant Note Guarantor
and is made subject to such provisions of this Indenture.

(f) Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the
obligations of each Note Guarantor 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 of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Note Guarantor herein shall not be discharged
or impaired or otherwise affected by the failure of any holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Notes or any other agreement, by any waiver or modification of any thereof, by
any default, failure or delay, willful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
any Note Guarantor or would otherwise operate as a discharge of any Note
Guarantor as a matter of law or equity.

(g) Each Note Guarantor agrees that its Note Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. Each
Note Guarantor further agrees that its Note Guarantee herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any holder or the Trustee upon the
bankruptcy or reorganization of the Issuer or otherwise.

(h) In furtherance of the foregoing and not in limitation of any other right
which any holder or the Trustee has at law or in equity against any Note
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, each Note Guarantor
hereby promises to and shall, upon receipt of written demand by the Trustee,
forthwith pay, or cause to be paid, in cash, to the holders or the Trustee an
amount equal to the sum of (i) the unpaid principal amount of such Guaranteed
Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations
(but only to the extent not prohibited by applicable law) and (iii) all other
monetary obligations of the Issuer to the holders and the Trustee.

(i) Each Note Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the holders in respect of any Guaranteed Obligations
guaranteed hereby until payment in full of all Guaranteed Obligations and all
obligations to which the Guaranteed Obligations are subordinated as provided in
Article 12. Each Note Guarantor further agrees that, as between it, on the one
hand, and the holders and the Trustee, on the other hand, (i) the maturity of
the Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of any Note Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Note Guarantor for the purposes of this
Section 11.01.

 

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(j) Each Note Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys’ fees and expenses) Incurred by the Trustee or
any holder in enforcing any rights under this Section 11.01.

(k) Upon request of the Trustee, each Note Guarantor shall execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.

SECTION 11.02. Limitation on Liability.

(a) Any term or provision of this Indenture to the contrary notwithstanding, the
maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by
any Note Guarantor shall not exceed the maximum amount that can be hereby
guaranteed without rendering this Indenture, as it relates to such Note
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.

(b) A Note Guarantee as to any Subsidiary Note Guarantor shall terminate and be
of no further force or effect and such Note Guarantor shall be deemed to be
released from all obligations under this Article 11 upon:

(i) the sale, disposition, exchange or other transfer (including through merger,
consolidation, amalgamation or otherwise) of the Capital Stock (including any
sale, disposition or other transfer following which the applicable Subsidiary
Note Guarantor is no longer a Restricted Subsidiary), of the applicable
Subsidiary Note Guarantor if such sale, disposition, exchange or other transfer
is made in a manner not in violation of this Indenture;

(ii) the sale, disposition, exchange or other transfer (including through
merger, consolidation, amalgamation or otherwise) of the Capital Stock of the
applicable Subsidiary Note Guarantor in connection with the Post-Closing CMBS
Transaction;

(iii) the Issuer designating such Subsidiary Note Guarantor to be an
Unrestricted Subsidiary in accordance with the provisions of Section 4.04 and
the definition of “Unrestricted Subsidiary”;

(iv) the release or discharge of the pledge by such Subsidiary Note Guarantor of
the Credit Agreement or other Indebtedness or the guarantee of any other
Indebtedness which resulted in the obligation to guarantee the Notes; and

(v) the Issuer’s exercise of its legal defeasance option or covenant defeasance
option under Article 8 or if the Issuer’s obligations under this Indenture are
discharged in accordance with the terms of this Indenture.

A Subsidiary Note Guarantee also will be automatically released upon the
applicable Subsidiary ceasing to be a Subsidiary as a result of any foreclosure
of any pledge or security interest securing Bank Indebtedness or other exercise
of remedies in respect thereof.

 

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(c) A Note Guarantee as to any Parent Note Guarantor shall terminate and be of
no further force or effect and such Note Guarantor shall be deemed to be
released from all obligations under this Article 11 upon:

(i) the Issuer ceasing to be a Wholly Owned Subsidiary of Harrah’s
Entertainment;

(ii) the Issuer’s transfer of all or substantially all of its assets to, or
merger with, an entity that is not a Wholly Owned Subsidiary of Harrah’s
Entertainment in accordance with Section 5.01 and such transferee entity assumes
the Issuer’s obligations under this Indenture; and

(iii) the Issuer’s exercise of its legal defeasance option or covenant
defeasance option under Article 8 or if the Issuer’s obligations under this
Indenture are discharged in accordance with the terms of this Indenture.

In addition, the Parent Note Guarantee will be automatically released upon the
election of the Issuer and Notice to the Trustee if the guarantee by Harrah’s
Entertainment of the Credit Agreement, the Retained Notes or any Indebtedness
which resulted in the obligation to guarantee the Notes has been released or
discharged.

SECTION 11.03. Successors and Assigns. This Article 11 shall be binding upon
each Note Guarantor and its successors and assigns and shall inure to the
benefit of the successors and assigns of the Trustee and the holders and, in the
event of any transfer or assignment of rights by any holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture and in the
Notes shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.

SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either
the Trustee or the holders in exercising any right, power or privilege under
this Article 11 shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the holders
herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article 11 at law, in
equity, by statute or otherwise.

SECTION 11.05. Modification. No modification, amendment or waiver of any
provision of this Article 11, nor the consent to any departure by any Note
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Note Guarantor in any case shall entitle such Note
Guarantor to any other or further notice or demand in the same, similar or other
circumstances.

SECTION 11.06. Execution of Supplemental Indenture for Future Note Guarantors.
Each Subsidiary and other Person which is required to become a Guarantor
pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a
joinder to the Intercreditor Agreement and a supplemental indenture in the form
of Exhibit D hereto pursuant to which such Subsidiary or other Person shall
become a Guarantor under this Article 11 and shall guarantee the Notes.
Concurrently with the execution and delivery of such supplemental indenture, the
Issuers shall deliver to the Trustee an Opinion of Counsel and an Officer’s
Certificate to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary or other Person and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors’ rights

 

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generally and to the principles of equity, whether considered in a proceeding at
law or in equity, the Note Guarantee of such Note Guarantor is a valid and
binding obligation of such Note Guarantor, enforceable against such Note
Guarantor in accordance with its terms and/or to such other matters as the
Trustee may reasonably request.

SECTION 11.07. Non-Impairment. The failure to endorse a Note Guarantee on any
Note shall not affect or impair the validity thereof.

ARTICLE 12

[RESERVED]

ARTICLE 13

MISCELLANEOUS

SECTION 13.01. Trust Indenture Act Controls. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by, or with another provision (an “incorporated provision”) included in
this Indenture by operation of, Sections 310 to 318 of the TIA, inclusive, such
imposed duties or incorporated provision shall control.

SECTION 13.02. Notices.

(a) Any notice or communication required or permitted hereunder shall be in
writing and delivered in person, via facsimile or mailed by first-class mail
addressed as follows:

if to the Issuer or a Note Guarantor:

Harrah’s Operating Company, Inc.

One Caesar’s Palace Drive

Las Vegas, Nevada 89101-8969

Telephone: (702) 407-6000

Facsimile: (702) 407-6418

Attn: General Counsel

if to the Trustee:

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota 55107-1419

Telephone: (651) 495-3909

Facsimile: (651) 495-8097

Attn: Corporate Trust Services, Raymond S. Haverstock

The Issuer or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.

(b) Any notice or communication mailed to a holder shall be mailed, first class
mail, to the holder at the holder’s address as it appears on the registration
books of the Registrar and shall be sufficiently given if so mailed within the
time prescribed.

 

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(c) Failure to mail a notice or communication to a holder or any defect in it
shall not affect its sufficiency with respect to other holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it, except that notices to the Trustee are
effective only if received.

SECTION 13.03. Communication by the Holders with Other Holders. The holders may
communicate pursuant to Section 312(b) of the TIA with other holders with
respect to their rights under this Indenture or the Notes. The Issuer, the
Trustee, the Registrar and other Persons shall have the protection of
Section 312(c) of the TIA.

SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Issuer to the Trustee to take or refrain from
taking any action under this Indenture, the Issuer shall furnish to the Trustee
at the request of the Trustee:

(a) an Officers’ Certificate in form reasonably satisfactory to the Trustee
stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with; and

(b) an Opinion of Counsel in form reasonably satisfactory to the Trustee stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with.

SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate
or opinion with respect to compliance with a covenant or condition provided for
in this Indenture (other than pursuant to Section 4.09) shall include:

(a) a statement that the individual making such certificate or opinion has read
such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(c) a statement that, in the opinion of such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

(d) a statement as to whether or not, in the opinion of such individual, such
covenant or condition has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers’
Certificate or certificates of public officials.

SECTION 13.06. When Notes Disregarded. In determining whether the holders of the
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Issuer, any Note Guarantor or by any Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Issuer or any Note Guarantor shall be disregarded and deemed
not to be outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which the Trustee knows are so owned shall be so disregarded. Subject
to the foregoing, only Notes outstanding at the time shall be considered in any
such determination.

 

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SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may
make reasonable rules for action by or a meeting of the holders. The Registrar
and a Paying Agent may make reasonable rules for their functions.

SECTION 13.08. Legal Holidays. If a payment date is not a Business Day, payment
shall be made on the next succeeding day that is a Business Day, and no interest
shall accrue on any amount that would have been otherwise payable on such
payment date if it were a Business Day for the intervening period. If a regular
record date is not a Business Day, the record date shall not be affected.

SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

SECTION 13.10. No Recourse Against Others. No director, officer, employee,
manager, incorporator or holder of any Equity Interests in the Issuer or of any
Note Guarantor or any direct or indirect parent corporation, as such, shall have
any liability for any obligations of the Issuer or the Note Guarantors under the
Notes or this Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.

SECTION 13.11. Successors. All agreements of the Issuer and each Note Guarantor
in this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.

SECTION 13.12. Multiple Originals. The parties may sign any number of copies of
this Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement. One signed copy is enough to prove this Indenture.

SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.

SECTION 13.14. Indenture Controls. If and to the extent that any provision of
the Notes limits, qualifies or conflicts with a provision of this Indenture,
such provision of this Indenture shall control.

SECTION 13.15. Severability. In case any provision in this Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and such provision shall be ineffective only to the extent of such invalidity,
illegality or unenforceability.

SECTION 13.16. Intercreditor Agreement. The terms of this Indenture are subject
to the terms of the Intercreditor Agreement, dated as of January 28, 2008, by
and many Bank of America, N.A., U.S. Bank National Association, Citibank N.A.,
and other parties thereto from time to time.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

Harrah’s Operating Company, Inc. By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

[Signature Page to Indenture]

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Harrah’s Entertainment, Inc. By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

[Signature Page to Indenture]

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B I Gaming Corporation Bally’s Midwest Casino, Inc. Bally’s Operator, Inc.
Bally’s Park Place, Inc. Bally’s Tunica, Inc. Benco, Inc. BL Development Corp.
Boardwalk Regency Corporation Caesars Entertainment Golf, Inc.
Caesars Entertainment Akwesasne Consulting Corp. Caesars Entertainment Canada
Holding, Inc. Caesars Entertainment Finance Corp. Caesars Entertainment Retail,
Inc. Caesars New Jersey, Inc. Caesars Palace Corporation Caesars Palace Realty
Corp. Caesars Palace Sports Promotions, Inc. Caesars United Kingdom, Inc.
Caesars World, Inc. Caesars World Marketing Corporation Caesars World
Merchandising, Inc. California Clearing Corporation Casino Computer Programming,
Inc. CEI-Sullivan County Development Company Consolidated Supplies, Services and
Systems Dusty Corporation East Beach Development Corporation FHR Corporation
Flamingo-Laughlin, Inc. GCA Acquisition Subsidiary, Inc. GNOC, Corp. Grand
Casinos, Inc. Grand Media Buying, Inc. Harrah’s Alabama Corporation Harrah’s
Arizona Corporation Harrah’s Illinois Corporation Harrah’s Interactive
Investment Company Harrah’s Investments, Inc. Harrah’s Kansas Casino Corporation
Harrah’s Management Company Harrah’s Marketing Services Corporation Harrah’s
Maryland Heights Operating Company Harrah’s New Orleans Management Company
Harrah’s Pittsburgh Management Company Harrah’s Reno Holding Company, Inc.
Harrah’s Southwest Michigan Casino Corporation Harrah’s Travel, Inc. Harrah’s
Tunica Corporation Harrah’s Vicksburg Corporation Harveys BR Management Company,
Inc. Harveys C.C. Management Company, Inc.

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Harveys Iowa Management Company, Inc. HBR Realty Company, Inc. HCR Services
Company, Inc. HEI Holding Company One, Inc. HEI Holding Company Two, Inc. LVH
Corporation Martial Development Corporation Players Bluegrass Downs, Inc.
Players Development, Inc. Players Resources, Inc. Players Services, Inc. Reno
Projects, Inc. Rio Development Company, Inc. Robinson Property Group Corp. Roman
Entertainment Corporation of Indiana Roman Holding Corporation of Indiana
Sheraton Tunica Corporation Southern Illinois Riverboat/Casino Cruises, Inc.
Tele/Info, Inc. Trigger Real Estate Corporation By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President or Vice President

[Signature Page to Indenture]

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Desert Palace, Inc. Harrah’s Imperial Palace Corp. Harrah’s International
Holding Company, Inc. Harrah’s Laughlin, Inc. Las Vegas Resort Development, Inc.
Parball Corporation By:  

/s/ Michael D. Cohen

Name:   Michael D. Cohen Title:   Secretary

 

[Signature Page to Indenture]

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190 Flamingo, LLC AJP Parent, LLC Chester Facility Holding Company, LLC Corner
Investment Company, LLC DCH Exchange, LLC Desert Club, LLC
Harrah’s Bossier City Management Company, LLC
Harrah’s Chester Downs Investment Company, LLC
Harrah’s Chester Downs Management Company, LLC Harrah’s License Company, LLC
Harrah’s MH Project, LLC Harrah’s North Kansas City, LLC Harrah’s Operating
Company Memphis, LLC Harrah’s Shreveport Investment Company, LLC
Harrah’s Shreveport Management Company, LLC
Harrah’s Shreveport/Bossier City Holding Company, LLC Harrah’s Sumner Investment
Company, LLC Harrah’s Sumner Management Company, LLC Harrah’s West Warwick
Gaming Company, LLC H-BAY, LLC HCAL, LLC HHLV Management Company, LLC Hole In
The Wall, LLC Horseshoe Gaming Holding, LLC JCC Holding Company II LLC Koval
Holdings Company, LLC Nevada Marketing, LLC Players International, LLC Reno
Crossroads, LLC Roman Empire Development, LLC TRB Flamingo, LLC Winnick Parent,
LLC By:   Harrah’s Operating Company, Inc.   its Sole Member or Manager By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Las Vegas Golf Management, LLC By:  

/s/ Michael D. Cohen

Name:   Michael D. Cohen Title:   Manager

 

[Signature Page to Indenture]

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AJP Holdings, LLC By:   AJP Parent, LLC   its Sole Member By:   Harrah’s
Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Biloxi Hammond, LLC Biloxi Village Walk Development, LLC Village Walk
Construction, LLC By:   Grand Casinos of Biloxi, LLC   its Sole Member By:  
Grand Casinos, Inc.   its Sole Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President and Treasurer

 

[Signature Page to Indenture]

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Harrah’s Maryland Heights LLC By:   Harrah’s Maryland Heights Operating Company
  its Managing Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President & Treasurer

 

[Signature Page to Indenture]

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Harrah’s Shreveport/Bossier City Investment
Company, LLC By:   Harrah’s Shreveport/Bossier City Holding Company, LLC   its
Managing Member By:   Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Winnick Holdings, LLC By:   Winnick Parent, LLC   its Sole Member By:   Harrah’s
Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Bally’s Olympia Limited Partnership By:   Bally’s Operator, Inc.   its General
Partner By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President & Treasurer

 

[Signature Page to Indenture]

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Caesars Riverboat Casino, LLC By:   Roman Holding Corporation of Indiana   its
Managing Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:  

Senior Vice President & Treasurer

As Agent of Caesars Riverboat Casino, LLC

 

[Signature Page to Indenture]

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Horseshoe GP, LLC Horseshoe Hammond, LLC By:   Horseshoe Gaming Holding, LLC  
its Sole Member By:   Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Harrah’s Bossier City Investment Company, L.L.C. By:  

Harrah’s Shreveport/Bossier City Investment

Company, LLC

  its Sole Member By:   Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Horseshoe Shreveport, L.L.C. By:   Horseshoe Gaming Holding, LLC   its Sole
Member By:   Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Jazz Casino Company, LLC JCC Fulton Development, LLC By:   JCC Holding Company
II LLC   its Sole Member By:   Harrah’s Operating Company, Inc.   its Sole
Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Players Riverboat II, LLC By:   Players Riverboat Management, LLC   its Member  
By:   Players Holding, LLC     its Sole Member   By:   Players International,
LLC     its Sole Member   By:   Harrah’s Operating Company, Inc.     its Sole
Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel By:
  Players Riverboat, LLC   its Member   By:   Players Holding, LLC     its Sole
Member   By:   Players International, LLC     its Sole Member   By:   Harrah’s
Operating Company, Inc.     its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Horseshoe Entertainment By:   New Gaming Capital Partnership   its General
Partner By:   Horseshoe GP, LLC   its General Partner By:   Horseshoe Gaming
Holding, LLC   its Sole Member By:   Harrah’s Operating Company, Inc.   its Sole
Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Grand Casinos of Biloxi, LLC Grand Casinos of Mississippi, LLC - Gulfport By:  
Grand Casinos, Inc.   its Sole Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President & Treasurer

 

[Signature Page to Indenture]

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Caesars India Sponsor Company, LLC By:   California Clearing Corporation   its
Sole Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President & Treasurer

 

[Signature Page to Indenture]

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Koval Investment Company, LLC By:   Koval Holding Company, LLC   its Sole Member
By:   Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Players Holding, LLC By:   Players International, LLC   its Sole Member By:  
Harrah’s Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Players LC, LLC Players Maryland Heights Nevada, LLC Players Riverboat
Management, LLC Players Riverboat, LLC By:   Players Holding, LLC   its Sole
Member By:   Players International, LLC   its Sole Member By:   Harrah’s
Operating Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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New Gaming Capital Partnership By:   Horseshoe GP, LLC   its General Partner By:
  Horseshoe Gaming Holding, LLC   its Sole Member By:   Harrah’s Operating
Company, Inc.   its Sole Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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Atlantic City Country Club 1, LLC By:   Bally’s Park Place, Inc.   its Sole
Member By:  

/s/ Charles L. Atwood

Name:   Charles L. Atwood Title:   Senior Vice President & Treasurer

 

[Signature Page to Indenture]

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Harrah’s NC Casino Company, LLC By:   Harrah’s Operating Company, Inc.   its
Managing Member By:  

/s/ Stephen H. Brammell

Name:   Stephen H. Brammell Title:   Senior Vice President & General Counsel

 

[Signature Page to Indenture]

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U.S. BANK NATIONAL ASSOCIATION, as Trustee By:  

/s/ Raymond S. Haverstock

Name:   Raymond S. Haverstock Title:   Vice President

 

[Signature Page to Indenture]

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APPENDIX A

PROVISIONS RELATING TO INITIAL SECURITIES, ADDITIONAL SECURITIES

AND EXCHANGE SECURITIES

1. Definitions.

1.1 Definitions.

For the purposes of this Appendix A the following terms shall have the meanings
indicated below:

“Additional Interest” has the meaning set forth in the Registration Rights
Agreement.

“Definitive Note” means a certificated Initial Note or Exchange Note (bearing
the Restricted Notes Legend if the transfer of such Note is restricted by
applicable law) that does not include the Global Notes Legend.

“Depository” means The Depository Trust Issuer, its nominees and their
respective successors.

“Global Notes Legend” means the legend set forth under that caption in the
applicable Exhibit to this Indenture.

“IAI” means an institutional “accredited investor” as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.

“Initial Purchasers” means Citigroup Global Markets Inc., Banc of America
Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities
Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Bear, Stearns & Co., Inc., Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated, and such other initial purchasers party to the
Purchase Agreement entered into in connection with the offer and sale of the
Notes.

“Purchase Agreement” means (a) the Purchase Agreement dated January 25, 2008,
among the Issuer and the Initial Purchasers and (b) any other similar Purchase
Agreement relating to Additional Notes.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Registered Exchange Offer” means the offer by the Issuer, pursuant to the
Registration Agreement, to certain holders of Initial Notes, to issue and
deliver to such holders, in exchange for their Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.

“Registration Rights Agreement” means (a) the Registration Rights Agreement
dated as of February 1, 2008 among the Issuer, the Note Guarantors and the
representatives of the Initial Purchasers relating to the Notes and (b) any
other similar Registration Rights Agreement relating to Additional Notes.

“Regulation S” means Regulation S under the Securities Act.

--------------------------------------------------------------------------------

“Regulation S Notes” means all Initial Notes offered and sold outside the United
States in reliance on Regulation S.

“Restricted Period,” with respect to any Notes, means the period of 40
consecutive days beginning on and including the later of (a) the day on which
such Notes are first offered to persons other than distributors (as defined in
Regulation S under the Securities Act) in reliance on Regulation S, notice of
which day shall be promptly given by the Issuer to the Trustee, and (b) the
Issue Date, and with respect to any Additional Notes that are Transfer
Restricted Notes, it means the comparable period of 40 consecutive days.

“Restricted Notes Legend” means the legend set forth in Section 2.2(f)(i)
herein.

“Rule 501” means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“Rule 144A” means Rule 144A under the Securities Act.

“Rule 144A Notes” means all Initial Notes offered and sold to QIBs in reliance
on Rule 144A.

“Notes Custodian” means the custodian with respect to a Global Note (as
appointed by the Depository) or any successor person thereto, who shall
initially be the Trustee.

“Shelf Registration Statement” means a registration statement filed by the
Issuer in connection with the offer and sale of Initial Notes pursuant to the
Registration Agreement.

“Transfer Restricted Notes” means Definitive Notes and any other Notes that bear
or are required to bear or are subject to the Restricted Notes Legend.

“Unrestricted Definitive Note” means Definitive Notes and any other Notes that
are not required to bear, or are not subject to, the Restricted Notes Legend.

1.2 Other Definitions.

 

Term:

  

Defined in Section:

Agent Members    2.1(b) Global Notes    2.1(b) Regulation S Global Notes   
2.1(b) Rule 144A Global Notes    2.1(b) Regulation S Permanent Global Note   
2.1(b) Regulation S Temporary Global Note    2.1(b)

2. The Notes.

2.1 Form and Dating; Global Notes.

(a) The Initial Notes issued on the date hereof will be (i) offered and sold by
the Issuer pursuant to the Purchase Agreement and (ii) resold, initially only to
(1) QIBs in reliance on Rule 144A and (2) Persons other than U.S. Persons (as
defined in Regulation S) in reliance on Regulation S. Such Initial Notes may
thereafter be transferred to, among others, QIBs, purchasers in reliance on
Regulation S

 

Appendix A-2

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and, except as set forth below, IAIs in accordance with Rule 501. Additional
Notes offered after the date hereof may be offered and sold by the Issuer from
time to time pursuant to one or more Purchase Agreements in accordance with
applicable law.

(b) Global Notes. (i) Rule 144A Notes initially shall be represented by one or
more Notes in definitive, fully registered, global form without interest coupons
(collectively, the “Rule 144A Global Notes”).

Regulation S Notes initially shall be represented by one or more Notes in fully
registered, global form without interest coupons (collectively, the “Regulation
S Temporary Global Note” and, together with the Regulation S Permanent Global
Note (defined below), the “Regulation S Global Notes”), which shall be
registered in the name of the Depository or the nominee of the Depository for
the accounts of designated agents holding on behalf of Euroclear or Clearstream.

The Restricted Period shall be terminated upon the receipt by the Trustee of:
(1) a written certificate from the Depository, together with copies of
certificates from Euroclear and Clearstream certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who shall take delivery of a beneficial ownership interest in
a 144A Global Note bearing a Private Placement Legend, all as contemplated by
this Appendix A); and (2) an Officers’ Certificate from the Issuer.

Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in a permanent Global Note (the “Regulation S Permanent Global Note”) pursuant
to the applicable procedures of the Depository. Simultaneously with the
authentication of the Regulation S Permanent Global Note, the Trustee shall
cancel the Regulation S Temporary Global Note. The aggregate principal amount of
the Regulation S Temporary Global Note and the Regulation S Permanent Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms
and Conditions Governing Use of Euroclear” and the “General Terms and Conditions
of Clearstream Banking” and “Customer Handbook” of Clearstream shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Note that are held by
Participants through Euroclear or Clearstream.

The term “Global Notes” means the Rule 144A Global Notes and the Regulation S
Global Notes. The Global Notes shall bear the Global Note Legend. The Global
Notes initially shall (i) be registered in the name of the Depository or the
nominee of such Depository, in each case for credit to an account of an Agent
Member, (ii) be delivered to the Trustee as custodian for such Depository and
(iii) bear the Restricted Notes Legend.

Members of, or direct or indirect participants in, the Depository shall have no
rights under this Indenture with respect to any Global Note held on their behalf
by the Depository, or the Trustee as its custodian, or under the Global Notes.
The Depository may be treated by the Issuer, the Trustee and any agent of the
Issuer or the Trustee as the absolute owner of the Global Notes for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuer, the Trustee or any agent of

 

Appendix A-3

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the Issuer or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depository, or impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Note.

(ii) Transfers of Global Notes shall be limited to transfer in whole, but not in
part, to the Depository, its successors or their respective nominees. Interests
of beneficial owners in the Global Notes may be transferred or exchanged for
Definitive Notes only in accordance with the applicable rules and procedures of
the Depository and the provisions of Section 2.2. In addition, a Global Note
shall be exchangeable for Definitive Notes if (x) the Depository (1) notifies
the Issuer that it is unwilling or unable to continue as depository for such
Global Note and the Issuer thereupon fails to appoint a successor depository or
(2) has ceased to be a clearing agency registered under the Exchange Act or
(y) there shall have occurred and be continuing an Event of Default with respect
to such Global Note; provided that in no event shall the Regulation S Temporary
Global Note be exchanged by the Issuer for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities
Act. In all cases, Definitive Notes delivered in exchange for any Global Note or
beneficial interests therein shall be registered in the names, and issued in any
approved denominations, requested by or on behalf of the Depository in
accordance with its customary procedures.

(iii) In connection with the transfer of a Global Note as an entirety to
beneficial owners pursuant to subsection (i) of this Section 2.1(b), such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Issuer shall execute, and the Trustee shall authenticate and make available for
delivery, to each beneficial owner identified by the Depository in writing in
exchange for its beneficial interest in such Global Note, an equal aggregate
principal amount of Definitive Notes of authorized denominations.

(iv) Any Transfer Restricted Note delivered in exchange for an interest in a
Global Note pursuant to Section 2.2 shall, except as otherwise provided in
Section 2.2, bear the Restricted Notes Legend.

(v) Notwithstanding the foregoing, through the Restricted Period, a beneficial
interest in such Regulation S Global Note may be held only through Euroclear or
Clearstream unless delivery is made in accordance with the applicable provisions
of Section 2.2.

(vi) The holder of any Global Note may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a holder is entitled to take under this
Indenture or the Notes.

2.2 Transfer and Exchange.

(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred
as a whole except as set forth in Section 2.1(b). Global Notes will not be
exchanged by the Issuer for Definitive Notes except under the circumstances
described in Section in Section 2.1(b)(ii). Global Notes also may be exchanged
or replaced, in whole or in part, as provided in Sections 2.08 and 2.10 of this
Indenture. Beneficial interests in a Global Note may be transferred and
exchanged as provided in Section 2.2(b) or 2.2(g).

(b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer
and exchange of beneficial interests in the Global Notes shall be effected
through the Depository, in accordance with the provisions of this Indenture and
the applicable rules and procedures of the Depository. Beneficial interests in
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Beneficial interests in Global Notes

 

Appendix A-4

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shall be transferred or exchanged only for beneficial interests in Global Notes.
Transfers and exchanges of beneficial interests in the Global Notes also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
well as one or more of the other following subparagraphs, as applicable:

(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Restricted Notes Legend; provided, however, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in a Regulation S Global
Note may not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). A beneficial interest in an
Unrestricted Global Note may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.2(b)(i).

(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes.
In connection with all transfers and exchanges of beneficial interests in any
Global Note that is not subject to Section 2.2(b)(i), the transferor of such
beneficial interest must deliver to the Registrar (1) a written order from an
Agent Member given to the Depository in accordance with the applicable rules and
procedures of the Depository directing the Depository to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given in
accordance with the applicable rules and procedures of the Depository containing
information regarding the Agent Member account to be credited with such
increase. Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall adjust
the principal amount of the relevant Global Note pursuant to Section 2.2(g).

(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A
beneficial interest in a Transfer Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Transfer Restricted Global Note if the transfer complies with the
requirements of Section 2.2(b)(ii) above and the Registrar receives the
following:

(A) if the transferee will take delivery in the form of a beneficial interest in
a Rule 144A Global Note, then the transferor must deliver a certificate in the
form attached to the applicable Note; and

(B) if the transferee will take delivery in the form of a beneficial interest in
a Regulation S Global Note, then the transferor must deliver a certificate in
the form attached to the applicable Note.

(iv) Transfer and Exchange of Beneficial Interests in a Transfer Restricted
Global Note for Beneficial Interests in an Unrestricted Global Note. A
beneficial interest in a Transfer Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or transfer complies
with the requirements of Section 2.2(b)(ii) above and the Registrar receives the
following:

(A) if the holder of such beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form attached to
the applicable Note; or

 

Appendix A-5

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(B) if the holder of such beneficial interest in a Restricted Global Note
proposes to transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form attached to the applicable
Note,

and, in each such case, if the Issuer or the Registrar so requests or if the
applicable rules and procedures of the Depository so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Restricted Notes Legend are
no longer required in order to maintain compliance with the Securities Act. If
any such transfer or exchange is effected pursuant to this subparagraph (iv) at
a time when an Unrestricted Global Note has not yet been issued, the Issuer
shall issue and, upon receipt of an written order of the Issuer in the form of
an Officers’ Certificate in accordance with Section 2.01, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the aggregate principal amount of beneficial interests
transferred or exchanged pursuant to this subparagraph (iv).

(v) Transfer and Exchange of Beneficial Interests in an Unrestricted Global Note
for Beneficial Interests in a Restricted Global Note. Beneficial interests in an
Unrestricted Global Note cannot be exchanged for, or transferred to Persons who
take delivery thereof in the form of, a beneficial interest in a Restricted
Global Note.

(c) Transfer and Exchange of Beneficial Interests in Global Notes for Definitive
Notes. A beneficial interest in a Global Note may not be exchanged for a
Definitive Note except under the circumstances described in Section 2.1(b)(ii).
A beneficial interest in a Global Note may not be transferred to a Person who
takes delivery thereof in the form of a Definitive Note except under the
circumstances described in Section 2.1(b)(ii). In any case, beneficial interests
in Global Notes shall be transferred or exchanged only for Definitive Notes.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global
Notes. Transfers and exchanges of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i), (ii) or (ii) below, as
applicable:

(i) Transfer Restricted Notes to Beneficial Interests in Restricted Global
Notes. If any holder of a Transfer Restricted Note proposes to exchange such
Transfer Restricted Note for a beneficial interest in a Restricted Global Note
or to transfer such Transfer Restricted Note to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note, then,
upon receipt by the Registrar of the following documentation:

(A) if the holder of such Transfer Restricted Note proposes to exchange such
Transfer Restricted Note for a beneficial interest in a Restricted Global Note,
a certificate from such holder in the form attached to the applicable Note;

(B) if such Transfer Restricted Note is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A under the Securities Act, a
certificate from such holder in the form attached to the applicable Note;

(C) if such Transfer Restricted Note is being transferred to a Non-U.S. Person
in an offshore transaction in accordance with Rule 903 or Rule 904 under the
Securities Act, a certificate from such holder in the form attached to the
applicable Note;

 

Appendix A-6

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(D) if such Transfer Restricted Note is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in accordance
with Rule 144 under the Securities Act, a certificate from such holder in the
form attached to the applicable Note;

(E) if such Transfer Restricted Note is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration
requirements of the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate from such holder in the form attached to
the applicable Note, including the certifications, certificates and Opinion of
Counsel, if applicable; or

(F) if such Transfer Restricted Note is being transferred to the Issuer or a
Subsidiary thereof, a certificate from such holder in the form attached to the
applicable Note;

the Trustee shall cancel the Transfer Restricted Note, and increase or cause to
be increased the aggregate principal amount of the appropriate Restricted Global
Note.

(ii) Transfer Restricted Notes to Beneficial Interests in Unrestricted Global
Notes. A holder of a Transfer Restricted Note may exchange such Transfer
Restricted Definitive Note for a beneficial interest in an Unrestricted Global
Note or transfer such Transfer Restricted Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note only
if the Registrar receives the following:

(A) if the holder of such Transfer Restricted Note proposes to exchange such
Transfer Restricted Note for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form attached to the applicable
Note; or

(B) if the holder of such Transfer Restricted Notes proposes to transfer such
Transfer Restricted Note to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a certificate from such
holder in the form attached to the applicable Note,

and, in each such case, if the Issuer or the Registrar so requests or if the
applicable rules and procedures of the Depository so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Restricted Notes Legend are
no longer required in order to maintain compliance with the Securities Act. Upon
satisfaction of the conditions of this subparagraph (ii), the Trustee shall
cancel the Transfer Restricted Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note. If any such transfer
or exchange is effected pursuant to this subparagraph (ii) at a time when an
Unrestricted Global Note has not yet been issued, the Issuer shall issue and,
upon receipt of an written order of the Issuer in the form of an Officers’
Certificate, the Trustee shall authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the aggregate principal amount
of Transfer Restricted Notes transferred or exchanged pursuant to this
subparagraph (ii).

(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A holder of an Unrestricted Definitive Note may exchange such
Unrestricted Definitive Note for a beneficial interest in an Unrestricted Global
Note or transfer such Unrestricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or transfer,
the

 

Appendix A-7

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Trustee shall cancel the applicable Unrestricted Definitive Note and increase or
cause to be increased the aggregate principal amount of one of the Unrestricted
Global Notes. If any such transfer or exchange is effected pursuant to this
subparagraph (iii) at a time when an Unrestricted Global Note has not yet been
issued, the Issuer shall issue and, upon receipt of an written order of the
Issuer in the form of an Officers’ Certificate, the Trustee shall authenticate
one or more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of Unrestricted Definitive Notes transferred or
exchanged pursuant to this subparagraph (iii).

(iv) Unrestricted Definitive Notes to Beneficial Interests in Restricted Global
Notes. An Unrestricted Definitive Note cannot be exchanged for, or transferred
to a Person who takes delivery thereof in the form of, a beneficial interest in
a Restricted Global Note.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request
by a holder of Definitive Notes and such holder’s compliance with the provisions
of this Section 2.2(e), the Registrar shall register the transfer or exchange of
Definitive Notes. Prior to such registration of transfer or exchange, the
requesting holder shall present or surrender to the Registrar the Definitive
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such holder or by its attorney,
duly authorized in writing. In addition, the requesting holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 2.2(e).

(i) Transfer Restricted Notes to Transfer Restricted Notes. A Transfer
Restricted Note may be transferred to and registered in the name of a Person who
takes delivery thereof in the form of a Transfer Restricted Note if the
Registrar receives the following:

(A) if the transfer will be made pursuant to Rule 144A under the Securities Act,
then the transferor must deliver a certificate in the form attached to the
applicable Note;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904 under the
Securities Act, then the transferor must deliver a certificate in the form
attached to the applicable Note;

(C) if the transfer will be made pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate in the form attached to the applicable Note;

(D) if the transfer will be made to an IAI in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (A) through (D) above, a certificate in the form attached to the
applicable Note; and

(E) if such transfer will be made to the Issuer or a Subsidiary thereof, a
certificate in the form attached to the applicable Note.

(ii) Transfer Restricted Notes to Unrestricted Definitive Notes. Any Transfer
Restricted Note may be exchanged by the holder thereof for an Unrestricted
Definitive Note or transferred to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note if the Registrar receives the following:

(1) if the holder of such Transfer Restricted Note proposes to exchange such
Transfer Restricted Note for an Unrestricted Definitive Note, a certificate from
such holder in the form attached to the applicable Note; or

 

Appendix A-8

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(2) if the holder of such Transfer Restricted Note proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such holder in the form attached to the
applicable Note,

and, in each such case, if the Registrar so requests, an Opinion of Counsel in
form reasonably acceptable to the Issuer to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Restricted Notes Legend are no longer
required in order to maintain compliance with the Securities Act.

(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A holder
of an Unrestricted Definitive Note may transfer such Unrestricted Definitive
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note at any time. Upon receipt of a request to register such a
transfer, the Registrar shall register the Unrestricted Definitive Notes
pursuant to the instructions from the holder thereof.

(iv) Unrestricted Definitive Notes to Transfer Restricted Notes. An Unrestricted
Definitive Note cannot be exchanged for, or transferred to a Person who takes
delivery thereof in the form of, a Transfer Restricted Note.

At such time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall be
returned to or retained and canceled by the Trustee in accordance with
Section 2.11. At any time prior to such cancellation, if any beneficial interest
in a Global Note is exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note or
for Definitive Notes, the principal amount of Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee or by the Depository at the direction of the Trustee
to reflect such reduction; and if the beneficial interest is being exchanged for
or transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depository at the direction of the Trustee to reflect such
increase.

(f) Legend.

(i) Except as permitted by the following paragraph (ii), (iii) or (iv), each
Note certificate evidencing the Global Notes and the Definitive Notes (and all
Notes issued in exchange therefor or in substitution thereof) shall bear a
legend in substantially the following form (each defined term in the legend
being defined as such for purposes of the legend only):

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE

 

Appendix A-9

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WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN ONE
YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY (OR SUCH SHORTER PERIOD THEN
REQUIRED UNDER RULE 144 OR ITS SUCCESSOR RULE) RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE),
(D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE ISSUER SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED
STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.”

Each Definitive Note shall bear the following additional legends:

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

“THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR
AGREEMENT, DATED JANUARY 28, 2008, BY AND AMONG BANK OF AMERICA, N.A., U.S. BANK
NATIONAL ASSOCIATION, CITIBANK, N.A. AND THE OTHER PARTIES THERETO FROM TIME TO
TIME.”

(ii) Upon any sale or transfer of a Transfer Restricted Note that is a
Definitive Note, the Registrar shall permit the holder thereof to exchange such
Transfer Restricted Note for a Definitive Note that does not bear the legends
set forth above and rescind any restriction on the transfer of such Transfer
Restricted Note if the holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Note).

(iii) After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to such Initial
Notes, all requirements pertaining to the Restricted Notes Legend on such
Initial Notes shall cease to apply and the requirements that any such Initial
Notes be issued in global form shall continue to apply.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the
Initial Notes pursuant to which holders of such Initial Notes are offered
Exchange Notes in exchange for their Initial Notes, all requirements pertaining
to Initial Notes that Initial Notes be issued in global form shall continue to
apply, and Exchange Notes in global form without the Restricted Notes Legend
shall be available to holders that exchange such Initial Notes in such
Registered Exchange Offer.

 

Appendix A-10

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(v) Upon a sale or transfer after the expiration of the Restricted Period of any
Initial Note acquired pursuant to Regulation S, all requirements that such
Initial Note bear the Restricted Notes Legend shall cease to apply and the
requirements requiring any such Initial Note be issued in global form shall
continue to apply.

(vi) Any Additional Notes sold in a registered offering shall not be required to
bear the Restricted Notes Legend.

(g) Cancellation or Adjustment of Global Note. At such time as all beneficial
interests in a particular Global Note have been exchanged for Definitive Notes
or a particular Global Note has been redeemed, repurchased or canceled in whole
and not in part, each such Global Note shall be returned to or retained and
canceled by the Trustee in accordance with Section 2.11 of this Indenture. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depository at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depository at the direction of the Trustee to reflect such increase.

(h) Obligations with Respect to Transfers and Exchanges of Notes.

(i) To permit registrations of transfers and exchanges, the Issuer shall execute
and the Trustee shall authenticate, Definitive Notes and Global Notes at the
Registrar’s request.

(ii) No service charge shall be made for any registration of transfer or
exchange, but the Issuer may require payment of a sum sufficient to cover any
transfer tax, assessments, or similar governmental charge payable in connection
therewith (other than any such transfer taxes, assessments or similar
governmental charge payable upon exchanges pursuant to Sections 3.06, 4.06, 4.08
and 9.05 of this Indenture).

(iii) Prior to the due presentation for registration of transfer of any Note,
the Issuer, the Trustee, a Paying Agent or the Registrar may deem and treat the
person in whose name a Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on such Note and
for all other purposes whatsoever, whether or not such Note is overdue, and none
of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected
by notice to the contrary.

(iv) All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.

(i) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial
owner of a Global Note, a member of, or a participant in the Depository or any
other Person with respect to the accuracy of the records of the Depository or
its nominee or of any participant or member thereof, with respect to any
ownership interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption or repurchase) or
the payment of any amount, under or with respect to such Notes. All notices and
communications to be given to the holders and all payments to be made to the
holders under the Notes shall be given or made only to the registered holders
(which shall be the Depository or its nominee

 

Appendix A-11

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in the case of a Global Note). The rights of beneficial owners in any Global
Note shall be exercised only through the Depository subject to the applicable
rules and procedures of the Depository. The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Depository participants,
members or beneficial owners in any Global Note) 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 this
Indenture, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.

 

Appendix A-12

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EXHIBIT A-1

[FORM OF FACE OF INITIAL CASH PAY NOTE]

[Global Notes Legend]

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 COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR 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.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO DTC, 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
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Notes Legend]

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY (OR SUCH SHORTER PERIOD THEN REQUIRED UNDER RULE 144
OR ITS SUCCESSOR RULE) RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

 

A-1-1

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UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND
“U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.”

Each Definitive Note shall bear the following additional legend:

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

“THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR
AGREEMENT, DATED JANUARY 28, 2008, BY AND AMONG BANK OF AMERICA, N.A., U.S. BANK
NATIONAL ASSOCIATION, CITIBANK, N.A. AND THE OTHER PARTIES THERETO FROM TIME TO
TIME.”

 

A-1-2

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[FORM OF INITIAL CASH PAY NOTE]

 

No.   $                    

10.75% Senior Cash Pay Note due 2016

144A CUSIP No. 413627AY6

144A ISIN No. US 413627AY65

REG S CUSIP No. U24658 AJ2

REG S ISIN No. USU24658AJ23

HARRAH’S OPERATING COMPANY, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum of [            ] Dollars
on February 1, 2016.

Interest Payment Dates: February 1 and August 1

Record Dates: January 15 and July 15

Additional provisions of this Note are set forth on the other side of this Note.

 

A-1-3

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IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

 

HARRAH’S OPERATING COMPANY, INC. By:  

 

Name:   Title:  

Dated: February 1, 2008

 

A-1-4

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

U.S. BANK NATIONAL ASSOCIATION

as Trustee, certifies that this is one of the Notes referred to in the
Indenture.

By:  

 

  Authorized Signatory

 

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned “TO BE ATTACHED TO GLOBAL SECURITIES –
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY.”

 

A-1-5

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[FORM OF REVERSE SIDE OF INITIAL CASH PAY NOTE]

10.75% Senior Cash Pay Note Due 2016

 

1. Interest

HARRAH’S OPERATING COMPANY, INC., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the “Issuer”), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. The Issuer shall pay interest
semiannually on February 1 and August 1 of each year (each an “Interest Payment
Date”), commencing August 1, 2008. Interest on the Notes shall accrue from the
most recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from February 1, until the
principal hereof is due. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months. The Issuer shall pay interest on overdue principal
at the rate borne by the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.

 

2. Method of Payment

The Issuer shall pay interest on the Notes (except defaulted interest) to the
Persons who are registered holders at the close of business on January 15 or
July 15 (each a “Record Date”) next preceding the interest payment date even if
Notes are canceled after the record date and on or before the interest payment
date (whether or not a Business Day). Holders must surrender Notes to the Paying
Agent to collect principal payments. The Issuer shall pay principal, premium, if
any, and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Note (including principal, premium,
if any, and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Issuer or any successor
depositary. The Issuer shall make all payments in respect of a certificated Note
(including principal, premium, if any, and interest) at the office of the Paying
Agent, except that, at the option of the Issuer, payment of interest may be made
by mailing a check to the registered address of each holder thereof; provided,
however, that payments on the Notes may also be made, in the case of a holder of
at least $1,000,000 aggregate principal amount of Notes, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such holder elects payment by wire transfer by giving written notice to the
Trustee or Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

 

3. Paying Agent and Registrar

Initially, U.S. Bank National Association (the “Trustee”), will act as Paying
Agent and Registrar. The Issuer may appoint and change any Paying Agent or
Registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

 

4. Indenture

The Issuer issued the Notes under an Indenture dated as of February 1, 2008 (the
“Indenture”), among the Issuer, the Guarantors and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as
in effect on the date of the Indenture (the “TIA”). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all terms and provisions of the Indenture,
and the holders (as defined in the Indenture) are referred to the Indenture and
the TIA for a statement of such terms and provisions

 

A-1-6

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The Notes are senior unsecured obligations of the Issuer. This Note is one of
the Initial Notes referred to in the Indenture. The Notes include the Initial
Notes, any Additional Notes and any Exchange Notes issued in exchange for the
Initial Notes or any Additional Notes pursuant to the Indenture. The Initial
Notes, any Additional Notes and any Exchange Notes are treated as a single class
of securities under the Indenture. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, make certain Investments and other Restricted Payments, pay dividends
and other distributions, Incur Indebtedness, enter into consensual restrictions
upon the payment of certain dividends and distributions by such Restricted
Subsidiaries, issue or sell shares of capital stock of the Issuer and such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or Incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Issuer and each Note Guarantor to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of its property.

To guarantee the due and punctual payment of the principal and interest on the
Notes and all other amounts payable by the Issuer under the Indenture and the
Notes when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Notes and the
Indenture, the Note Guarantors have, jointly and severally, unconditionally
guaranteed the Guaranteed Obligations on a senior unsecured basis pursuant to
the terms of the Indenture.

 

5. Optional Redemption

On or after February 1, 2012, the Issuer may redeem the Cash Pay Notes at its
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60 days’ prior notice mailed by first-class mail to each holder’s
registered address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest and additional
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
February 1 of the years set forth below:

 

Period

   Redemption Price  

2012

   105.375 %

2013

   102.688 %

2014 and thereafter

   100.000 %

In addition, prior to February 1, 2012 the Issuer may redeem the Cash Pay Notes
at its option, in whole at any time or in part from time to time, upon not less
than 30 nor more than 60 days’ prior notice mailed by first-class mail to each
holder’s registered address, at a redemption price equal to 100% of the
principal amount of the Cash Pay Notes redeemed plus the Applicable Premium as
of, and accrued and unpaid interest and additional interest, if any, to, the
applicable redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

Notwithstanding the foregoing, at any time and from time to time on or prior to
February 1, 2011, the Issuer may redeem in the aggregate up to 35% of the
original aggregate principal amount of the Cash Pay Notes (calculated after
giving effect to any issuance of additional Cash Pay Notes) with the

 

A-1-7

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net cash proceeds of one or more Equity Offerings (1) by the Issuer or (2) by
any direct or indirect parent of the Issuer to the extent the net cash proceeds
thereof are contributed to the common equity capital of the Issuer or used to
purchase Capital Stock (other than Disqualified Stock) of the Issuer from it, at
a redemption price (expressed as a percentage of principal amount thereof) of
110.75%, plus accrued and unpaid interest and additional interest, if any, to
the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 50% of the original aggregate principal amount
of the Cash Pay Notes (calculated after giving effect to any issuance of
additional Cash Pay Notes) must remain outstanding after each such redemption;
provided, further, that such redemption shall occur within 90 days after the
date on which any such Equity Offering is consummated upon not less than 30 nor
more than 60 days’ notice mailed to each holder of Cash Pay Notes being redeemed
and otherwise in accordance with the procedures set forth in the Indenture.

 

6. Mandatory Redemption

The Notes are not subject to any mandatory redemption or sinking fund payments.

 

7. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at his, her or its registered address. Notes in denominations larger
than $2,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued and unpaid interest
on all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with a Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date, interest ceases to accrue on
such Notes (or such portions thereof) called for redemption.

 

8. Repurchase of Notes at the Option of the holders upon Change of Control and
Asset Sales

Upon the occurrence of a Change of Control, each holder shall have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer to
repurchase all or any part of such holder’s Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of the holders of record
on the relevant record date to receive interest due on the relevant interest
payment date), as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to
offer to purchase Notes upon the occurrence of certain events.

 

9. [Reserved]

 

10. Denominations; Transfer; Exchange

The Notes are in registered form, without coupons, in denominations of $2,000
and any integral multiple of $1,000. A holder shall register the transfer of or
exchange of Notes in accordance with the Indenture. Upon any registration of
transfer or exchange, the Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay

 

A-1-8

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any taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Notes selected for redemption (except,
in the case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) or to transfer or exchange any Notes for a period of 15 days prior to
a selection of Notes to be redeemed.

 

11. Persons Deemed Owners

The registered holder of this Note shall be treated as the owner of it for all
purposes.

 

12. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two
years, the Trustee and a Paying Agent shall pay the money back to the Issuer at
their written request unless an abandoned property law designates another
Person. After any such payment, the holders entitled to the money must look to
the Issuer for payment as general creditors and the Trustee and a Paying Agent
shall have no further liability with respect to such monies.

 

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time may terminate some of or
all its obligations under the Notes and the Indenture if the Issuer deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.

 

14. Amendment; Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or
the Notes may be amended with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding Notes of such series
and (ii) any past default or compliance with any provisions may be waived with
the written consent of the holders of at least a majority in principal amount of
the outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any holder, the Issuer and the Trustee may amend the
Indenture, the Intercreditor Agreement or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
Successor Issuer of the obligations of the Issuer under the Indenture and the
Notes; (iii) to provide for the assumption by a Successor Note Guarantor of the
obligations of a Note Guarantor under the Indenture and its Note Guarantee;
(iv) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code); (v) to conform the text of the Indenture, Note Guarantees, the Notes or
the Intercreditor Agreement, to any provision of the “Description of Notes” in
the Offering Memorandum to the extent that such provision in the “Description of
Notes” was intended to be a verbatim recitation of a provision of the Indenture,
Note Guarantees, the Notes or the Intercreditor Agreement; (vi) to add a Note
Guarantee with respect to the Notes; (vii) to add additional covenants of the
Issuer for the benefit of the holders or to surrender rights and powers
conferred on the Issuer; (viii) to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA;
(ix) to make any change that does not adversely affect the rights of any holder;
or (x) to provide for the issuance of the Exchange Notes or Additional Notes.

 

A-1-9

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15. Defaults and Remedies

If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Issuer) and is
continuing, the Trustee or the holders of at least 30% in principal amount of
the outstanding Notes of such series, in each case, by notice to the Issuer, may
declare the principal of, premium, if any, and accrued but unpaid interest on
all the Notes to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Issuer occurs, the
principal of, premium, if any, and interest on all the Notes shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any holders. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.

If an Event of Default occurs and is continuing, the Trustee shall be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense and certain other conditions are complied with. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due, no
holder may pursue any remedy with respect to the Indenture or the Notes unless
(i) such holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) the holders of at least 30% in principal amount of the
outstanding Notes of the applicable series have requested the Trustee in writing
to pursue the remedy, (iii) such holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Trustee
has not complied with such request within 60 days after the receipt of the
request and the offer of security or indemnity and (v) the holders of a majority
in principal amount of the outstanding Notes of the applicable series have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

 

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.

 

17. No Recourse Against Others

No director, officer, employee, incorporator or holder of any equity interests
in the Issuer or of any Note Guarantor or any direct or indirect parent
corporation, as such, shall have any liability for any obligations of the Issuer
or the Note Guarantors under the Notes, the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability.

 

A-1-10

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18. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Note.

 

19. Abbreviations

Customary abbreviations may be used in the name of a holder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

21. CUSIP Numbers; ISINs

The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and has
directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as
a convenience to the holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

The Issuer will furnish to any holder of Notes upon written request and without
charge to the holder a copy of the Indenture which has in it the text of this
Note.

 

A-1-11

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

 

 

(Print or type assignee’s name, address and zip code)

 

 

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                     agent to transfer this Note on the
books of the Issuer. The agent may substitute another to act for him.

 

Date:  

 

       Your Signature:   

 

 

 

Sign exactly as your name appears on the other side of this Note.

Signature Guarantee:

 

Date:  

 

      

 

Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor program reasonably acceptable to
the Trustee      Signature of Signature Guarantee

 

A-1-12

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER RESTRICTED SECURITIES

This certificate relates to $                     principal amount of Notes held
in (check applicable space)              book-entry or              definitive
form by the undersigned.

The undersigned (check one box below):

 

¨ has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or Notes in
definitive, registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above);

 

¨ has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.

In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:

CHECK ONE BOX BELOW

 

(1)    ¨    to the Issuer; or (2)    ¨    to the Registrar for registration in
the name of the holder, without transfer; or (3)    ¨    pursuant to an
effective registration statement under the Securities Act of 1933; or (4)    ¨
   inside the United States to a “qualified institutional buyer” (as defined in
Rule 144A under the Securities Act of 1933) that purchases for its own account
or for the account of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A, in each case pursuant
to and in compliance with Rule 144A under the Securities Act of 1933; or (5)   
¨    outside the United States in an offshore transaction within the meaning of
Regulation S under the Securities Act in compliance with Rule 904 under the
Securities Act of 1933 and such Note shall be held immediately after the
transfer through Euroclear or Clearstream until the expiration of the Restricted
Period (as defined in the Indenture); or (6)    ¨    to an institutional
“accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or (7)    ¨    pursuant to
another available exemption from registration provided by Rule 144 under the
Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any Person other than the
registered holder thereof; provided, however, that if box (5), (6) or (7) is
checked, the Issuer or the Trustee may require, prior to registering any such
transfer of the Notes, such legal opinions, certifications and other information
as the Issuer or the Trustee have reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.

 

A-1-13

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Date:  

 

       Your Signature:   

 

Signature Guarantee:

 

Date:  

 

      

 

Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor program reasonably acceptable to
the Trustee      Signature of Signature Guarantee

 

A-1-14

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TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned’s foregoing representations in order to claim the exemption from
registration provided by Rule 144A.

 

Dated:  

 

     

 

      NOTICE: To be executed by an executive officer

 

A-1-15

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[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount of this Global Note is $                    . The
following increases or decreases in this Global Note have been made:

 

Date of Exchange

 

Amount of decrease in
Principal Amount of this
Global Note

 

Amount of increase in
Principal Amount of this
Global Note

 

Principal amount of this
Global Note following

such decrease or increase

 

Signature of authorized
signatory of Trustee or

Notes Custodian

 

A-1-16

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to
Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:

 

Asset Sale ¨    Change of Control ¨

If you want to elect to have only part of this Note purchased by the Issuer
pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, state the amount ($2,000 or any integral multiple of $1,000):

 

$                   Date:  

 

     Your Signature:   

 

          (Sign exactly as your name appears on the other side of this Note)

 

Signature Guarantee:   

 

        Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee   

 

A-1-17

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EXHIBIT A-2

[FORM OF FACE OF INITIAL TOGGLE NOTE]

[Global Notes Legend]

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 COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR 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.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO DTC, 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
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Notes Legend]

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY (OR SUCH SHORTER PERIOD THEN REQUIRED UNDER RULE 144
OR ITS SUCCESSOR RULE) RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

 

A-2-1

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UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND
“U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.”

Each Definitive Note shall bear the following additional legend:

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

“THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR
AGREEMENT, DATED JANUARY 28, 2008, BY AND AMONG BANK OF AMERICA, N.A., U.S. BANK
NATIONAL ASSOCIATION, CITIBANK, N.A. AND THE OTHER PARTIES THERETO FROM TIME TO
TIME.”

“THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271
ET SEQ. OF THE INTERNAL REVENUE CODE. A HOLDER MAY OBTAIN THE ISSUE PRICE,
AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY FOR SUCH
NOTES BY SUBMITTING A REQUEST FOR SUCH INFORMATION TO THE BORROWER AT THE
FOLLOWING ADDRESS: HARRAH’S OPERATING COMPANY, INC., ONE CAESAR’S PALACE DRIVE,
LAS VEGAS, NEVADA, 89101-8969, ATTENTION: GENERAL COUNSEL.”

 

A-2-2

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[FORM OF INITIAL TOGGLE NOTE]

 

No.    $                    

10.75% / 11.5% Senior Toggle Note due 2018

 

               CUSIP No. 413627 AZ3       ISIN No. US413627AZ31       Reg S
CUSIP No. U24658 AK9       Reg S ISIN No. USU24658AK95

HARRAH’S OPERATING COMPANY, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum listed on the Schedule of
Increases or Decreases in Global Note attached hereto on February 1, 2018.

Interest Payment Dates: February 1 and August 1

Record Dates: January 15 and July 15

Additional provisions of this Note are set forth on the other side of this Note.

 

A-2-3

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IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

 

HARRAH’S OPERATING COMPANY, INC. By:  

 

Name:   Title:  

Dated:

 

A-2-4

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

U.S. BANK NATIONAL ASSOCIATION

as Trustee, certifies that this is one of the Notes referred to in the
Indenture.

By:  

 

  Authorized Signatory

 

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned “TO BE ATTACHED TO GLOBAL SECURITIES –
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY.”

 

A-2-5

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[FORM OF REVERSE SIDE OF INITIAL TOGGLE NOTE]

10.75% / 11.5% Senior Toggle Note Due 2018

 

1. Interest

(a) HARRAH’S OPERATING COMPANY, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the “Issuer”), promises to pay interest on the principal
amount of this Toggle Note at the rate per annum shown above.

(b) Cash Interest on this Toggle Note will accrue at the rate of 10.75% per
annum and be payable in cash. PIK Interest on this Toggle Note will accrue at
the rate of 11.5% per annum and be payable (x) with respect to Toggle Notes
represented by one or more global notes registered in the name of, or held by,
the Depository Trust Company (“DTC”) or its nominee on the relevant record date,
by increasing the principal amount of the outstanding global Toggle Note by an
amount equal to the amount of PIK Interest for the applicable interest period
(rounded up to the nearest $1) and (y) with respect to Toggle Notes represented
by certificated notes, by issuing PIK Notes in certificated form in an aggregate
principal amount equal to the amount of PIK Interest for the period (rounded up
to the nearest whole dollar), and the Trustee will, at the request of the
Issuer, authenticate and deliver such PIK Notes in certificated form for
original issuance to the holders on the relevant record date, as shown by the
records of the register of holders. In the event that the Issuer elects to pay
Partial PIK Interest for any interest period, each holder will be entitled to
receive Cash Interest in respect of 50% of the principal amount of the Toggle
Notes held by such holder on the relevant record date and PIK Interest in
respect of 50% of the principal amount of the Toggle Notes held by such holder
on the relevant record date. Following an increase in the principal amount of
the outstanding global Toggle Notes as a result of a PIK Payment, the global
Toggle Notes will bear interest on such increased principal amount from and
after the date of such PIK Payment. All Toggle Notes issued pursuant to a PIK
Payment will mature on February 1, 2018 and will be governed by, and subject to
the terms, provisions and conditions of, the Indenture and shall have the same
rights and benefits as the Toggle Notes issued on the Issue Date. Any
certificated PIK Notes will be issued with the description PIK on the face of
such PIK Note.

(c) The Issuer shall pay interest semiannually on February 1 and August 1 of
each year (each an “Interest Payment Date”), commencing August 1, 2008. Interest
on the Notes shall accrue from the most recent date to which interest has been
paid or duly provided for or, if no interest has been paid or duly provided for,
from February 1, 2008 until the principal hereof is due. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. The Issuer
shall pay interest on overdue principal at the rate borne by the Notes, and it
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.

 

2. Method of Payment

For any interest payment period after the initial interest payment period and
prior to February 1, 2013, the Issuer may, at its option, elect to pay interest
on this Toggle Note:

 

  •  

entirely in cash (“Cash Interest”);

 

  •  

entirely by increasing the principal amount of the outstanding Toggle Notes or
by issuing PIK Notes (“PIK Interest”); or

 

A-2-6

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  •  

on 50% of the outstanding principal amount of the Toggle Notes in cash and on
50% of the principal amount by increasing the principal amount of the
outstanding Toggle Notes or by issuing PIK Notes (“Partial PIK Interest”).

The Issuer must elect the form of interest payment with respect to each interest
period by delivering a notice to the Trustee at least 30 days prior to the
beginning of each interest period. The Trustee shall promptly deliver a
corresponding notice to the holders. In the absence of such election for any
interest period, interest on the Toggle Notes shall be payable according to the
election for the previous interest period. Interest for the first interest
period commencing on the Issue Date shall be payable entirely in cash. After
February 1, 2013, the Issuer will make all interest payments on the Toggle Notes
entirely in cash.

The Issuer shall pay interest on the Notes (except defaulted interest) to the
Persons who are registered holders at the close of business on January 15 or
July 15 (each a “Record Date”) next preceding the interest payment date even if
Notes are canceled after the record date and on or before the interest payment
date (whether or not a Business Day). holders must surrender Notes to the Paying
Agent to collect principal payments. The Issuer shall pay principal, premium, if
any, and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Note (including principal, premium,
if any, and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Issuer or any successor
depositary. The Issuer shall make all payments in respect of a certificated Note
(including principal, premium, if any, and interest) at the office of the Paying
Agent, except that, at the option of the Issuer, payment of interest may be made
by mailing a check to the registered address of each holder thereof; provided,
however, that payments on the Notes may also be made, in the case of a holder of
at least $1,000,000 aggregate principal amount of Notes, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such holder elects payment by wire transfer by giving written notice to the
Trustee or Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

 

3. Paying Agent and Registrar

Initially, U.S. Bank National Association (the “Trustee”), will act as Paying
Agent and Registrar. The Issuer may appoint and change any Paying Agent or
Registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

 

4. Indenture

The Issuer issued the Notes under an Indenture dated as of February 1, 2008 (the
“Indenture”), among the Issuer, the Guarantors and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as
in effect on the date of the Indenture (the “TIA”). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all terms and provisions of the Indenture,
and the holders (as defined in the Indenture) are referred to the Indenture and
the TIA for a statement of such terms and provisions

The Notes are senior unsecured obligations of the Issuer. This Note is one of
the Initial Notes referred to in the Indenture. The Notes include the Initial
Notes, any Additional Notes and any Exchange Notes issued in exchange for the
Initial Notes or any Additional Notes pursuant to the Indenture.

 

A-2-7

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The Initial Notes, any Additional Notes and any Exchange Notes are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Issuer and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, Incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of the Issuer and
such Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or Incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Issuer and each Note Guarantor to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of its property.

To guarantee the due and punctual payment of the principal and interest on the
Notes and all other amounts payable by the Issuer under the Indenture and the
Notes when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Notes and the
Indenture, the Note Guarantors have, jointly and severally, unconditionally
guaranteed the Guaranteed Obligations on a senior unsecured basis pursuant to
the terms of the Indenture.

 

5. Optional Redemption

On or after February 1, 2013, the Issuer may redeem the Toggle Notes at its
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60 days’ prior notice mailed by first-class mail to each holder’s
registered address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest and additional
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
                     of the years set forth below:

 

Period

   Redemption Price  

2013

   105.375 %

2014

   103.583 %

2015

   101.792 %

2016 and thereafter

   100.000 %

In addition, prior to February 1, 2013, the Issuer may redeem the Cash Pay Notes
at its option, in whole at any time or in part from time to time, upon not less
than 30 nor more than 60 days’ prior notice mailed by first-class mail to each
holder’s registered address, at a redemption price equal to 100% of the
principal amount of the Toggle Notes redeemed plus the Applicable Premium as of,
and accrued and unpaid interest and additional interest, if any, to, the
applicable redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

Notwithstanding the foregoing, at any time and from time to time on or prior to
February 1, 2011, the Issuer may redeem in the aggregate up to 35% of the
original aggregate principal amount of the Toggle Notes (calculated after giving
effect to any issuance of additional Toggle Notes) with the net cash proceeds of
one or more Equity Offerings (1) by the Issuer or (2) by any direct or indirect
parent of the Issuer to the extent the net cash proceeds thereof are contributed
to the common equity capital of the Issuer or used to purchase Capital Stock
(other than Disqualified Stock) of the Issuer from it, at a redemption price
(expressed as a percentage of principal amount thereof) of 110.75%, plus accrued
and unpaid interest and additional interest, if any, to the redemption date
(subject to the right of holders of record on

 

A-2-8

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the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least 50% of the original aggregate
principal amount of the Toggle Notes (calculated after giving effect to any
issuance of additional Toggle Notes) must remain outstanding after each such
redemption; provided, further, that such redemption shall occur within 90 days
after the date on which any such Equity Offering is consummated upon not less
than 30 nor more than 60 days’ notice mailed to each holder of Toggle Notes
being redeemed and otherwise in accordance with the procedures set forth in the
Indenture.

 

6. Mandatory Redemption

(a) Except as set forth below, the Issuer shall not be required to make
mandatory redemption or sinking fund payments with respect to the Toggle Notes.

(b) If the Toggle Notes would otherwise constitute “applicable high yield
discount obligations” within the meaning of 163(i)(1) of the Code, at the end of
each accrual period ending after the fifth anniversary of the Toggle Notes’
issuance (each, any “AHYDO redemption date”), the Issuer will be required to
redeem for cash a portion of each Toggle Note then outstanding equal to the
“Mandatory Principal Redemption Amount” (such redemption a “Mandatory Principal
Redemption”). The redemption price for the portion of each Toggle Note redeemed
pursuant to a Mandatory Principal Redemption will be 100% of the principal
amount of such portion plus any accrued interest thereon on the date of
redemption. The “Mandatory Principal Redemption Amount” means the portion of a
Toggle Note that must be required to be redeemed to prevent such Toggle Note
from being treated as an “applicable high yield discount obligation” within the
meaning of Section 163(i)(1) of the Code. No partial redemption or repurchase of
the Toggle Notes prior to the AHYDO redemption date pursuant to any other
provision of the indenture will alter the Issuer’s obligation to make the
Mandatory Principal Redemption with respect to any Toggle Notes that remain
outstanding on the AHYDO redemption date.

 

7. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at his, her or its registered address. Notes in denominations larger
than $2,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued and unpaid interest
on all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with a Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date, interest ceases to accrue on
such Notes (or such portions thereof) called for redemption.

 

8. Repurchase of Notes at the Option of the holders upon Change of Control and
Asset Sales

Upon the occurrence of a Change of Control, each holder shall have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer to
repurchase all or any part of such holder’s Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of the holders of record
on the relevant record date to receive interest due on the relevant interest
payment date), as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to
offer to purchase Notes upon the occurrence of certain events.

 

A-2-9

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9. [Reserved]

 

10. Denominations; Transfer; Exchange

The Notes are in registered form, without coupons, in denominations of $2,000
and any integral multiple of $1,000. A holder shall register the transfer of or
exchange of Notes in accordance with the Indenture. Upon any registration of
transfer or exchange, the Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Notes selected for redemption
(except, in the case of a Note to be redeemed in part, the portion of the Note
not to be redeemed) or to transfer or exchange any Notes for a period of 15 days
prior to a selection of Notes to be redeemed.

 

11. Persons Deemed Owners

The registered holder of this Note shall be treated as the owner of it for all
purposes.

 

12. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two
years, the Trustee and a Paying Agent shall pay the money back to the Issuer at
their written request unless an abandoned property law designates another
Person. After any such payment, the holders entitled to the money must look to
the Issuer for payment as general creditors and the Trustee and a Paying Agent
shall have no further liability with respect to such monies.

 

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time may terminate some of or
all its obligations under the Notes and the Indenture if the Issuer deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.

 

14. Amendment; Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or
the Notes may be amended with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding Notes of each series
and (ii) any past default or compliance with any provisions may be waived with
the written consent of the holders of at least a majority in principal amount of
the outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any holder, the Issuer and the Trustee may amend the
Indenture, the Intercreditor Agreement or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
Successor Issuer of the obligations of the Issuer under the Indenture and the
Notes; (iii) to provide for the assumption by a Successor Note Guarantor of the
obligations of a Note Guarantor under the Indenture and its Note Guarantee;
(iv) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code); (v) to conform the text of the Indenture, Note Guarantees, the Notes or
the Intercreditor Agreement, to any provision of the “Description of Notes” in
the Offering Memorandum to the extent that such provision in the

 

A-2-10

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“Description of Notes” was intended to be a verbatim recitation of a provision
of the Indenture, Note Guarantees, the Notes or the Intercreditor Agreement;
(vi) to add a Note Guarantee with respect to the Notes; (vii) to add additional
covenants of the Issuer for the benefit of the holders or to surrender rights
and powers conferred on the Issuer; (viii) to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the TIA; (ix) to make any change that does not adversely affect the rights of
any holder; or (x) to provide for the issuance of the Exchange Notes or
Additional Notes.

 

15. Defaults and Remedies

If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Issuer) and is
continuing, the Trustee or the holders of at least 30% in principal amount of
the outstanding Notes of such series, in each case, by notice to the Issuer, may
declare the principal of, premium, if any, and accrued but unpaid interest on
all the Notes to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Issuer occurs, the
principal of, premium, if any, and interest on all the Notes shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any holders. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.

If an Event of Default occurs and is continuing, the Trustee shall be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense and certain other conditions are complied with. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due, no
holder may pursue any remedy with respect to the Indenture or the Notes unless
(i) such holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) the holders of at least 30% in principal amount of the
outstanding Notes of the applicable series have requested the Trustee in writing
to pursue the remedy, (iii) such holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Trustee
has not complied with such request within 60 days after the receipt of the
request and the offer of security or indemnity and (v) the holders of a majority
in principal amount of the outstanding Notes of the applicable series have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

 

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.

 

A-2-11

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17. No Recourse Against Others

No director, officer, employee, incorporator or holder of any equity interests
in the Issuer or of any Note Guarantor or any direct or indirect parent
corporation, as such, shall have any liability for any obligations of the Issuer
or the Note Guarantors under the Notes, the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability.

 

18. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Note.

 

19. Abbreviations

Customary abbreviations may be used in the name of a holder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

21. CUSIP Numbers; ISINs

The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and has
directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as
a convenience to the holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

The Issuer will furnish to any holder of Notes upon written request and without
charge to the holder a copy of the Indenture which has in it the text of this
Note.

 

A-2-12

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

 

 

(Print or type assignee’s name, address and zip code)

 

 

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Note on the
books of the Issuer. The agent may substitute another to act for him.

 

Date:

 

 

    Your Signature:  

 

 

 

 

 

Sign exactly as your name appears on the other side of this Note.

Signature Guarantee:

 

Date:

 

 

   

 

  Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee     Signature of Signature Guarantee  

 

A-2-13

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER RESTRICTED SECURITIES

This certificate relates to $                      principal amount of Notes
held in (check applicable space)              book-entry or             
definitive form by the undersigned.

The undersigned (check one box below):

 

¨ has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or Notes in
definitive, registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above);

 

¨ has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.

In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:

CHECK ONE BOX BELOW

 

(1)    ¨    to the Issuer; or (2)    ¨    to the Registrar for registration in
the name of the holder, without transfer; or (3)    ¨    pursuant to an
effective registration statement under the Securities Act of 1933; or (4)    ¨
   inside the United States to a “qualified institutional buyer” (as defined in
Rule 144A under the Securities Act of 1933) that purchases for its own account
or for the account of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A, in each case pursuant
to and in compliance with Rule 144A under the Securities Act of 1933; or (5)   
¨    outside the United States in an offshore transaction within the meaning of
Regulation S under the Securities Act in compliance with Rule 904 under the
Securities Act of 1933 and such Note shall be held immediately after the
transfer through Euroclear or Clearstream until the expiration of the Restricted
Period (as defined in the Indenture); or (6)    ¨    to an institutional
“accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or (7)    ¨    pursuant to
another available exemption from registration provided by Rule 144 under the
Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any Person other than the
registered holder thereof; provided, however, that if box (5), (6) or (7) is
checked, the Issuer or the Trustee may require, prior to registering any such
transfer of the Notes, such legal opinions, certifications and other information
as the Issuer or the Trustee have reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.

 

A-2-14

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Date:  

 

    Your Signature:  

 

 

Signature Guarantee:

 

Date:

 

 

   

 

  Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee     Signature of Signature Guarantee  

 

A-2-15

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TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned’s foregoing representations in order to claim the exemption from
registration provided by Rule 144A.

 

Dated:  

 

    

 

       NOTICE: To be executed by an executive officer

 

A-2-16

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[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount of this Global Note is $                     . The
following increases or decreases in this Global Note have been made:

 

Date of Exchange

   Amount of decrease in
Principal Amount of this
Global Note    Amount of increase in
Principal Amount of this
Global Note    Principal amount of this
Global Note following
such decrease or increase    Signature of authorized
signatory of Trustee or
Notes Custodian

 

A-2-17

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to
Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:

 

Asset Sale ¨    Change of Control ¨

If you want to elect to have only part of this Note purchased by the Issuer
pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, state the amount ($2,000 or any integral multiple of $1,000):

 

$                   Date:  

 

     Your Signature:   

 

          (Sign exactly as your name appears on the other side of this Note)

 

Signature Guarantee:   

 

        Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee   

 

A-2-18

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EXHIBIT B-1

[FORM OF FACE OF CASH PAY EXCHANGE NOTE]

[Global Notes Legend]

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 COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR 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.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO DTC, 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
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR
AGREEMENT, DATED JANUARY 28, 2008, BY AND AMONG BANK OF AMERICA, N.A., U.S. BANK
NATIONAL ASSOCIATION, CITIBANK, N.A. AND THE OTHER PARTIES THERETO FROM TIME TO
TIME.

 

B-1-1

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No.    $                    

10.75% Senior Cash Pay Note due 2016

 

CUSIP No.              ISIN No.                 

HARRAH’S OPERATING COMPANY, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum of                  Dollars
on February 1, 2016.

Interest Payment Dates: February 1 and August 1

Record Dates: January 15 and July 15

Additional provisions of this Note are set forth on the other side of this Note.

 

B-1-2

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IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

 

HARRAH’S OPERATING COMPANY, INC. By:  

 

Name:   Title:  

Dated:

 

B-1-3

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

U.S. BANK NATIONAL ASSOCIATION,

as Trustee, certifies that this is one of the Notes referred to in the
Indenture.

By:

 

 

  Authorized Signatory

 

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned “TO BE ATTACHED TO GLOBAL SECURITIES –
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY.”

 

B-1-4

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[FORM OF REVERSE SIDE OF CASH PAY EXCHANGE NOTE]

10.75% Senior Cash Pay Note due 2016

 

1. Interest

HARRAH’S OPERATING COMPANY., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the “Issuer”), promises to pay interest on the principal amount of this
Note at the rate per annum shown above. The Issuer shall pay interest
semiannually on February 1 and August 1 of each year (each an “Interest Payment
Date”), commencing August 1, 2008. Interest on the Notes shall accrue from the
most recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from February 1, 2008 until the
principal hereof is due. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months. The Issuer shall pay interest on overdue principal
at the rate borne by the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.

 

2. Method of Payment

The Issuer shall pay interest on the Notes (except defaulted interest) to the
Persons who are registered holders at the close of business on January 15 or
July 15 (each a “Record Date”) next preceding the interest payment date even if
Notes are canceled after the record date and on or before the interest payment
date (whether or not a Business Day). holders must surrender Notes to the Paying
Agent to collect principal payments. The Issuer shall pay principal, premium, if
any, and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Note (including principal, premium,
if any, and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Issuer or any successor
depositary. The Issuer shall make all payments in respect of a certificated Note
(including principal, premium, if any, and interest), at the office of the
Paying Agent, except that, at the option of the Issuer, payment of interest may
be made by mailing a check to the registered address of each holder thereof;
provided, however, that payments on the Notes may also be made, in the case of a
holder of at least $1,000,000 aggregate principal amount of Notes, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such holder elects payment by wire transfer by giving written
notice to the Trustee or Paying Agent to such effect designating such account no
later than 30 days immediately preceding the relevant due date for payment (or
such other date as the Trustee may accept in its discretion).

 

3. Paying Agent and Registrar

Initially, U.S. Bank National Association (the “Trustee”), will act as Paying
Agent and Registrar. The Issuer may appoint and change any Paying Agent or
Registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

 

4. Indenture

The Issuer issued the Notes under an Indenture dated as of February 1, 2008 (the
“Indenture”), among the Issuer, the Guarantors and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as
in effect on the date of the Indenture (the “TIA”). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all terms and provisions of the Indenture,
and the holders (as defined in the Indenture) are referred to the Indenture and
the TIA for a statement of such terms and provisions.

 

B-1-5

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The Notes are senior unsecured obligations of the Issuer. This Note is one of
the Exchange Notes referred to in the Indenture. The Notes include the Initial
Notes, any Additional Notes and any Exchange Notes issued in exchange for the
Initial Notes or any Additional Notes pursuant to the Indenture. The Initial
Notes, any Additional Notes and any Exchange Notes are treated as a single class
of securities under the Indenture. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, make certain Investments and other Restricted Payments, pay dividends
and other distributions, Incur Indebtedness, enter into consensual restrictions
upon the payment of certain dividends and distributions by such Restricted
Subsidiaries, issue or sell shares of capital stock of the Issuer and such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or Incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Issuer and each Note Guarantor to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of its property.

To guarantee the due and punctual payment of the principal and interest on the
Notes and all other amounts payable by the Issuer under the Indenture and the
Notes when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Notes and the
Indenture, the Note Guarantors have, jointly and severally, unconditionally
guaranteed the Guaranteed Obligations on a senior subordinated basis pursuant to
the terms of the Indenture.

 

5. Optional Redemption

On or after February 1, 2012, the Issuer may redeem the Cash Pay Notes at its
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60 days’ prior notice mailed by first-class mail to each holder’s
registered address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest and additional
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
February 1 of the years set forth below:

 

Period

   Redemption Price  

2012

   105.375 %

2013

   102.688 %

2014 and thereafter

   100.000 %

In addition, prior to February 1, 2012, the Issuer may redeem the Cash Pay Notes
at its option, in whole at any time or in part from time to time, upon not less
than 30 nor more than 60 days’ prior notice mailed by first-class mail to each
holder’s registered address, at a redemption price equal to 100% of the
principal amount of the Cash Pay Notes redeemed plus the Applicable Premium as
of, and accrued and unpaid interest and additional interest, if any, to, the
applicable redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

Notwithstanding the foregoing, at any time and from time to time on or prior to
February 1, 2011, the Issuer may redeem in the aggregate up to 35% of the
original aggregate principal amount of the Cash Pay Notes (calculated after
giving effect to any issuance of additional Cash Pay Notes) with the

 

B-1-6

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net cash proceeds of one or more Equity Offerings (1) by the Issuer or (2) by
any direct or indirect parent of the Issuer to the extent the net cash proceeds
thereof are contributed to the common equity capital of the Issuer or used to
purchase Capital Stock (other than Disqualified Stock) of the Issuer from it, at
a redemption price (expressed as a percentage of principal amount thereof) of
110.75%, plus accrued and unpaid interest and additional interest, if any, to
the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 50% of the original aggregate principal amount
of the Cash Pay Notes (calculated after giving effect to any issuance of
additional Cash Pay Notes) must remain outstanding after each such redemption;
provided, further, that such redemption shall occur within 90 days after the
date on which any such Equity Offering is consummated upon not less than 30 nor
more than 60 days’ notice mailed to each holder of Cash Pay Notes being redeemed
and otherwise in accordance with the procedures set forth in the Indenture.

 

6. Mandatory Redemption

The Notes are not subject to any sinking fund.

 

7. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at his, her or its registered address. Notes in denominations larger
than $2,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued and unpaid interest
on all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with a Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption.

 

8. Repurchase of Notes at the Option of the holders upon Change of Control and
Asset Sales

Upon the occurrence of a Change of Control, each holder shall have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer to
repurchase all or any part of such holder’s Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of the holders of record
on the relevant record date to receive interest due on the relevant interest
payment date), as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to
offer to purchase Notes upon the occurrence of certain events.

 

9. [Reserved]

 

10. Denominations; Transfer; Exchange

The Notes are in registered form, without coupons, in denominations of $2,000
and any integral multiple of $1,000. A holder shall register the transfer of or
exchange of Notes in accordance with the Indenture. Upon any registration of
transfer or exchange, the Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay

 

B-1-7

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any taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Notes selected for redemption (except,
in the case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) or to transfer or exchange any Notes for a period of 15 days prior to
a selection of Notes to be redeemed.

 

11. Persons Deemed Owners

The registered holder of this Note shall be treated as the owner of it for all
purposes.

 

12. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two
years, the Trustee and a Paying Agent shall pay the money back to the Issuer at
their written request unless an abandoned property law designates another
Person. After any such payment, the holders entitled to the money must look to
the Issuer for payment as general creditors and the Trustee and a Paying Agent
shall have no further liability with respect to such monies.

 

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time may terminate some of or
all its obligations under the Notes and the Indenture if the Issuer deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.

 

14. Amendment; Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or
the Notes may be amended with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding Notes of each series
and (ii) any past default or compliance with any provisions may be waived with
the written consent of the holders of at least a majority in principal amount of
the outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any holder, the Issuer and the Trustee may amend the
Indenture, the Intercreditor Agreement or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
Successor Issuer of the obligations of the Issuer under the Indenture and the
Notes; (iii) to provide for the assumption by a Successor Note Guarantor of the
obligations of a Note Guarantor under the Indenture and its Note Guarantee;
(iv) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code); (v) to conform the text of the Indenture, Note Guarantees, the Notes or
the Intercreditor Agreement, to any provision of the “Description of Notes” in
the Offering Memorandum to the extent that such provision in the “Description of
Notes” was intended to be a verbatim recitation of a provision of the Indenture,
Note Guarantees, the Notes or the Intercreditor Agreement; (vi) to add a Note
Guarantee with respect to the Notes; (vii) to add additional covenants of the
Issuer for the benefit of the holders or to surrender rights and powers
conferred on the Issuer; (viii) to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA;
(ix) to make any change that does not adversely affect the rights of any holder;
or (x) to provide for the issuance of the Exchange Notes or Additional Notes.

 

B-1-8

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15. Defaults and Remedies

If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Issuer) and is
continuing, the Trustee or the holders of at least 30% in principal amount of
the outstanding Notes, in each case, by notice to the Issuer, may declare the
principal of, premium, if any, and accrued but unpaid interest on all the Notes
to be due and payable. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of,
premium, if any, and interest on all the Notes shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders. Under certain circumstances, the holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect
to the Notes and its consequences.

If an Event of Default occurs and is continuing, the Trustee shall be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense and certain other conditions are complied with. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due, no
holder may pursue any remedy with respect to the Indenture or the Notes unless
(i) such holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) the holders of at least 30% in principal amount of the
outstanding Notes of the applicable series have requested the Trustee in writing
to pursue the remedy, (iii) such holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Trustee
has not complied with such request within 60 days after the receipt of the
request and the offer of security or indemnity and (v) the holders of a majority
in principal amount of the outstanding Notes of the applicable series have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

 

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.

 

17. No Recourse Against Others

No director, officer, employee, incorporator or holder of any equity interests
in the Issuer or of any Note Guarantor or any direct or indirect parent
corporation, as such, shall have any liability for any obligations of the Issuer
or the Note Guarantors under the Notes, the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability.

 

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18. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Note.

 

19. Abbreviations

Customary abbreviations may be used in the name of a holder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

21. CUSIP Numbers; ISINs

The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and has
directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as
a convenience to the holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

The Issuer will furnish to any holder of Notes upon written request and without
charge to the holder a copy of the Indenture which has in it the text of this
Note.

 

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

 

 

(Print or type assignee’s name, address and zip code)

 

 

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Note on the
books of the Issuer. The agent may substitute another to act for him.

  

 

 

Date:  

 

      Your Signature:  

 

        Sign exactly as your name appears on the other side of this Note.

Signature Guarantee:

 

Date:  

 

      

 

Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor program reasonably acceptable to
the Trustee      Signature of Signature Guarantee

 

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to
Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:

 

Asset Sale ¨    Change of Control ¨

If you want to elect to have only part of this Note purchased by the Issuer
pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, state the amount ($2,000 or any integral multiple of $1,000):

 

$                  Date:  

 

    Your Signature:   

 

         (Sign exactly as your name appears on the other side of this Note)

 

Signature Guarantee:   

 

        Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee   

 

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[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount of this Global Note is $                    . The
following increases or decreases in this Global Note have been made:

 

Date of Exchange

 

Amount of decrease in
Principal Amount of this
Global Note

 

Amount of increase in
Principal Amount of this
Global Note

 

Principal amount of this
Global Note following

such decrease or increase

 

Signature of authorized
signatory of Trustee or

Notes Custodian

 

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EXHIBIT B-2

[FORM OF FACE OF TOGGLE EXCHANGE NOTE]

[Global Notes Legend]

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 COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR 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.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO DTC, 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
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR
AGREEMENT, DATED JANUARY 28, 2008, BY AND AMONG BANK OF AMERICA, N.A., U.S. BANK
NATIONAL ASSOCIATION, CITIBANK, N.A. AND THE OTHER PARTIES THERETO FROM TIME TO
TIME.

 

B-2-1

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No.    $                    

10.75% / 11.5% Senior Toggle Note due 2018

 

CUSIP No.              ISIN No.                 

HARRAH’S OPERATING COMPANY, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum listed on the Schedule of
Increases or Decreases in Global Note attached hereto on February 1, 2018.

Interest Payment Dates: February 1 and August 1

Record Dates: January 15 and July 15

Additional provisions of this Note are set forth on the other side of this Note.

 

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IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

 

HARRAH’S OPERATING COMPANY, INC. By:  

 

Name:   Title:  

Dated:

 

B-2-3

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

U.S. BANK NATIONAL ASSOCIATION,

as Trustee, certifies that this is one of the Notes referred to in the
Indenture.

By:  

 

  Authorized Signatory

 

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned “TO BE ATTACHED TO GLOBAL SECURITIES –
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY.”

 

B-2-4

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[FORM OF REVERSE SIDE OF TOGGLE EXCHANGE NOTE]

10.75% / 11.5% Senior Toggle Note due 2018

 

1. Interest

(a) HARRAH’S OPERATING COMPANY, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the “Issuer”), promises to pay interest on the principal
amount of this Toggle Note at the rate per annum shown above.

(b) Cash Interest on this Toggle Note will accrue at the rate of 10.75% per
annum and be payable in cash. PIK Interest on this Toggle Note will accrue at
the rate of 11.5% per annum and be payable (x) with respect to Toggle Notes
represented by one or more global notes registered in the name of, or held by,
the Depository Trust Company (“DTC”) or its nominee on the relevant record date,
by increasing the principal amount of the outstanding global Toggle Note by an
amount equal to the amount of PIK Interest for the applicable interest period
(rounded up to the nearest $1) and (y) with respect to Toggle Notes represented
by certificated notes, by issuing PIK Notes in certificated form in an aggregate
principal amount equal to the amount of PIK Interest for the period (rounded up
to the nearest whole dollar), and the Trustee will, at the request of the
Issuer, authenticate and deliver such PIK Notes in certificated form for
original issuance to the holders on the relevant record date, as shown by the
records of the register of holders. In the event that the Issuer elects to pay
Partial PIK Interest for any interest period, each holder will be entitled to
receive Cash Interest in respect of 50% of the principal amount of the Toggle
Notes held by such holder on the relevant record date and PIK Interest in
respect of 50% of the principal amount of the Toggle Notes held by such holder
on the relevant record date. Following an increase in the principal amount of
the outstanding global Toggle Notes as a result of a PIK Payment, the global
Toggle Notes will bear interest on such increased principal amount from and
after the date of such PIK Payment. All Toggle Notes issued pursuant to a PIK
Payment will mature on February 1, 2018 and will be governed by, and subject to
the terms, provisions and conditions of, the Indenture and shall have the same
rights and benefits as the Toggle Notes issued on the Issue Date. Any
certificated PIK Notes will be issued with the description PIK on the face of
such PIK Note.

(c) The Issuer shall pay interest semiannually on February 1 and August 1 of
each year (each an “Interest Payment Date”), commencing August 1, 2008. Interest
on the Notes shall accrue from the most recent date to which interest has been
paid or duly provided for or, if no interest has been paid or duly provided for,
from February 1, 2008 until the principal hereof is due. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. The Issuer
shall pay interest on overdue principal at the rate borne by the Notes, and it
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.

 

2. Method of Payment

For any interest payment period after the initial interest payment period and
prior to February 1, 2013, the Issuer may, at its option, elect to pay interest
on this Toggle Note:

 

  •  

entirely in cash (“Cash Interest”);

 

  •  

entirely by increasing the principal amount of the outstanding Toggle Notes or
by issuing PIK Notes (“PIK Interest”); or

 

B-2-5

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  •  

on 50% of the outstanding principal amount of the Toggle Notes in cash and on
50% of the principal amount by increasing the principal amount of the
outstanding Toggle Notes or by issuing PIK Notes (“Partial PIK Interest”).

The Issuer must elect the form of interest payment with respect to each interest
period by delivering a notice to the Trustee at least 30 days prior to the
beginning of each interest period. The Trustee shall promptly deliver a
corresponding notice to the holders. In the absence of such election for any
interest period, interest on the Toggle Notes shall be payable according to the
election for the previous interest period. Interest for the first interest
period commencing on the Issue Date shall be payable entirely in cash. After
February 1, 2013, the Issuer will make all interest payments on the Toggle Notes
entirely in cash.

The Issuer shall pay interest on the Notes (except defaulted interest) to the
Persons who are registered holders at the close of business on January 15 or
July 15 (each a “Record Date”) next preceding the interest payment date even if
Notes are canceled after the record date and on or before the interest payment
date (whether or not a Business Day). Holders must surrender Notes to the Paying
Agent to collect principal payments. The Issuer shall pay principal, premium, if
any, and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Note (including principal, premium,
if any, and interest) shall be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Issuer or any successor
depositary. The Issuer shall make all payments in respect of a certificated Note
(including principal, premium, if any, and interest) at the office of the Paying
Agent, except that, at the option of the Issuer, payment of interest may be made
by mailing a check to the registered address of each holder thereof; provided,
however, that payments on the Notes may also be made, in the case of a holder of
at least $1,000,000 aggregate principal amount of Notes, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such holder elects payment by wire transfer by giving written notice to the
Trustee or Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

 

3. Paying Agent and Registrar

Initially, U.S. Bank National Association (the “Trustee”), will act as Paying
Agent and Registrar. The Issuer may appoint and change any Paying Agent or
Registrar without notice. The Issuer or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

 

4. Indenture

The Issuer issued the Notes under an Indenture dated as of February 1, 2008 (the
“Indenture”), among the Issuer, the Guarantors and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as
in effect on the date of the Indenture (the “TIA”). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all terms and provisions of the Indenture,
and the holders (as defined in the Indenture) are referred to the Indenture and
the TIA for a statement of such terms and provisions.

The Notes are senior unsecured obligations of the Issuer. This Note is one of
the Exchange Notes referred to in the Indenture. The Notes include the Initial
Notes, any Additional Notes and any Exchange Notes issued in exchange for the
Initial Notes or any Additional Notes pursuant to the Indenture.

 

B-2-6

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The Initial Notes, any Additional Notes and any Exchange Notes are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Issuer and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, Incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of the Issuer and
such Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or Incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Issuer and each Note Guarantor to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of its property.

To guarantee the due and punctual payment of the principal and interest on the
Notes and all other amounts payable by the Issuer under the Indenture and the
Notes when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Notes and the
Indenture, the Note Guarantors have, jointly and severally, unconditionally
guaranteed the Guaranteed Obligations on a senior subordinated basis pursuant to
the terms of the Indenture.

 

5. Optional Redemption

On or after February 1, 2013, the Issuer may redeem the Toggle Notes at its
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60 days’ prior notice mailed by first-class mail to each holder’s
registered address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest and additional
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on of
the years set forth below:

 

Period

   Redemption Price  

2013

   105.375 %

2014

   103.583 %

2015

   101.792 %

2016 and thereafter

   100.000 %

In addition, prior to February 1, 2013, the Issuer may redeem the Cash Pay Notes
at its option, in whole at any time or in part from time to time, upon not less
than 30 nor more than 60 days’ prior notice mailed by first-class mail to each
holder’s registered address, at a redemption price equal to 100% of the
principal amount of the Toggle Notes redeemed plus the Applicable Premium as of,
and accrued and unpaid interest and additional interest, if any, to, the
applicable redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

Notwithstanding the foregoing, at any time and from time to time on or prior to
February 1, 2011, the Issuer may redeem in the aggregate up to 35% of the
original aggregate principal amount of the Toggle Notes (calculated after giving
effect to any issuance of additional Toggle Notes) with the net cash proceeds of
one or more Equity Offerings (1) by the Issuer or (2) by any direct or indirect
parent of the Issuer to the extent the net cash proceeds thereof are contributed
to the common equity capital of the Issuer or used to purchase Capital Stock
(other than Disqualified Stock) of the Issuer from it, at a redemption price
(expressed as a percentage of principal amount thereof) of 110.75%, plus accrued
and unpaid interest and additional interest, if any, to the redemption date
(subject to the right of holders of record on

 

B-2-7

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the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least 50% of the original aggregate
principal amount of the Toggle Notes (calculated after giving effect to any
issuance of additional Toggle Notes) must remain outstanding after each such
redemption; provided, further, that such redemption shall occur within 90 days
after the date on which any such Equity Offering is consummated upon not less
than 30 nor more than 60 days’ notice mailed to each holder of Toggle Notes
being redeemed and otherwise in accordance with the procedures set forth in the
Indenture.

 

6. Mandatory Redemption

(a) Except as set forth below, the Issuer shall not be required to make
mandatory redemption or sinking fund payments with respect to the Toggle Notes.

(b) If the Toggle Notes would otherwise constitute “applicable high yield
discount obligations” within the meaning of 163(i)(1) of the Code, at the end of
each accrual period ending after the fifth anniversary of the Toggle Notes’
issuance (each, any “AHYDO redemption date”), the Issuer will be required to
redeem for cash a portion of each Toggle Note then outstanding equal to the
“Mandatory Principal Redemption Amount” (such redemption a “Mandatory Principal
Redemption”). The redemption price for the portion of each Toggle Note redeemed
pursuant to a Mandatory Principal Redemption will be 100% of the principal
amount of such portion plus any accrued interest thereon on the date of
redemption. The “Mandatory Principal Redemption Amount” means the portion of a
Toggle Note that must be required to be redeemed to prevent such Toggle Note
from being treated as an “applicable high yield discount obligation” within the
meaning of Section 163(i)(1) of the Code. No partial redemption or repurchase of
the Toggle Notes prior to the AHYDO redemption date pursuant to any other
provision of the indenture will alter the Issuer’s obligation to make the
Mandatory Principal Redemption with respect to any Toggle Notes that remain
outstanding on the AHYDO redemption date.

 

7. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at his, her or its registered address. Notes in denominations larger
than $2,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued and unpaid interest
on all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with a Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption.

 

8. Repurchase of Notes at the Option of the holders upon Change of Control and
Asset Sales

Upon the occurrence of a Change of Control, each holder shall have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer to
repurchase all or any part of such holder’s Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of the holders of record
on the relevant record date to receive interest due on the relevant interest
payment date), as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to
offer to purchase Notes upon the occurrence of certain events.

 

B-2-8

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9. [Reserved]

 

10. Denominations; Transfer; Exchange

The Notes are in registered form, without coupons, in denominations of $2,000
and any integral multiple of $1,000. A holder shall register the transfer of or
exchange of Notes in accordance with the Indenture. Upon any registration of
transfer or exchange, the Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Notes selected for redemption
(except, in the case of a Note to be redeemed in part, the portion of the Note
not to be redeemed) or to transfer or exchange any Notes for a period of 15 days
prior to a selection of Notes to be redeemed.

 

11. Persons Deemed Owners

The registered holder of this Note shall be treated as the owner of it for all
purposes.

 

12. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two
years, the Trustee and a Paying Agent shall pay the money back to the Issuer at
their written request unless an abandoned property law designates another
Person. After any such payment, the holders entitled to the money must look to
the Issuer for payment as general creditors and the Trustee and a Paying Agent
shall have no further liability with respect to such monies.

 

13. Discharge and Defeasance

Subject to certain conditions, the Issuer at any time may terminate some of or
all its obligations under the Notes and the Indenture if the Issuer deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.

 

14. Amendment; Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or
the Notes may be amended with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding Notes of each series
and (ii) any past default or compliance with any provisions may be waived with
the written consent of the holders of at least a majority in principal amount of
the outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any holder, the Issuer and the Trustee may amend the
Indenture, the Intercreditor Agreement or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
Successor Issuer of the obligations of the Issuer under the Indenture and the
Notes; (iii) to provide for the assumption by a Successor Note Guarantor of the
obligations of a Note Guarantor under the Indenture and its Note Guarantee;
(iv) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code); (v) to conform the text of the Indenture, Note Guarantees, the Notes or
the Intercreditor Agreement, to any provision of the “Description of Notes” in
the Offering Memorandum to the extent that such provision in the

 

B-2-9

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“Description of Notes” was intended to be a verbatim recitation of a provision
of the Indenture, Note Guarantees, the Notes or the Intercreditor Agreement;
(vi) to add a Note Guarantee with respect to the Notes; (vii) to add additional
covenants of the Issuer for the benefit of the holders or to surrender rights
and powers conferred on the Issuer; (viii) to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the TIA; (ix) to make any change that does not adversely affect the rights of
any holder; or (x) to provide for the issuance of the Exchange Notes or
Additional Notes.

 

15. Defaults and Remedies

If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Issuer) and is
continuing, the Trustee or the holders of at least 30% in principal amount of
the outstanding Notes, in each case, by notice to the Issuer, may declare the
principal of, premium, if any, and accrued but unpaid interest on all the Notes
to be due and payable. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of,
premium, if any, and interest on all the Notes shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders. Under certain circumstances, the holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect
to the Notes and its consequences.

If an Event of Default occurs and is continuing, the Trustee shall be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense and certain other conditions are complied with. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due, no
holder may pursue any remedy with respect to the Indenture or the Notes unless
(i) such holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) the holders of at least 30% in principal amount of the
outstanding Notes of the applicable series have requested the Trustee in writing
to pursue the remedy, (iii) such holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Trustee
has not complied with such request within 60 days after the receipt of the
request and the offer of security or indemnity and (v) the holders of a majority
in principal amount of the outstanding Notes of the applicable series have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.

 

16. Trustee Dealings with the Issuer

Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.

 

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17. No Recourse Against Others

No director, officer, employee, incorporator or holder of any equity interests
in the Issuer or of any Note Guarantor or any direct or indirect parent
corporation, as such, shall have any liability for any obligations of the Issuer
or the Note Guarantors under the Notes, the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability.

 

18. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Note.

 

19. Abbreviations

Customary abbreviations may be used in the name of a holder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

21. CUSIP Numbers; ISINs

The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and has
directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as
a convenience to the holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

The Issuer will furnish to any holder of Notes upon written request and without
charge to the holder a copy of the Indenture which has in it the text of this
Note.

 

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

 

 

(Print or type assignee’s name, address and zip code)

 

 

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Note on the
books of the Issuer. The agent may substitute another to act for him.

 

 

 

 

Date:

 

 

    Your Signature:  

 

          Sign exactly as your name appears on the other side of this Note.  

Signature Guarantee:

 

Date:

 

 

   

 

  Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee     Signature of Signature Guarantee  

 

B-2-12

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to
Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:

 

Asset Sale ¨    Change of Control ¨

If you want to elect to have only part of this Note purchased by the Issuer
pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the
Indenture, state the amount ($2,000 or any integral multiple of $1,000):

 

$         Date:  

 

    Your Signature:  

 

        (Sign exactly as your name appears on the other side of this Note)

 

Signature Guarantee:   

 

      Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor program reasonably
acceptable to the Trustee   

 

B-2-13

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[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount of this Global Note is $                     . The
following increases or decreases in this Global Note have been made:

 

Date of Exchange

   Amount of decrease in
Principal Amount of this
Global Note    Amount of increase in
Principal Amount of this
Global Note    Principal amount of this
Global Note following
such decrease or increase    Signature of authorized
signatory of Trustee or
Notes Custodian

 

B-2-14

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EXHIBIT C

[FORM OF]

TRANSFEREE LETTER OF REPRESENTATION

Harrah’s Operating Company, Inc.

c/o U.S. Bank National Association

•

•

Attention: Vice President

Ladies and Gentlemen:

This certificate is delivered to request a transfer of $[    ] principal amount
of the [10.75% Senior Cash Pay Notes due 2016] [10.75%/11.5% Toggle Notes due
2018] (the “Notes”) of Harrah’s Operating Company, Inc. (the “Issuer”).

Upon transfer, the Notes would be registered in the name of the new beneficial
owner as follows:

 

Name:                                                                     
Address:                                                                 
Taxpayer ID Number:                                            

The undersigned represents and warrants to you that:

1. We are 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”)), purchasing for our own account or for the account of such an
institutional “accredited investor” at least $100,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.

2. We understand that the Notes have not been registered under the Securities
Act and, unless so registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date that is two years after the later of the date of
original issue and the last date on which either the Issuer or any affiliate of
such Issuer was the owner of such Notes (or any predecessor thereto) (the
“Resale Restriction Termination Date”) only (a) in the United States to a person
whom we reasonably believe is a qualified institutional buyer (as defined in
rule 144A under the Securities Act) in a transaction meeting the requirements of
Rule 144A, (b) outside the United States in an offshore transaction in
accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant
to an exemption from registration under the Securities Act provided by Rule 144
thereunder (if applicable) or (d) pursuant to an effective registration
statement under the Securities Act, in each of cases (a) through (d)

 

C-1

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in accordance with any applicable securities laws of any state of the United
States. In addition, we will, and each subsequent holder is required to, notify
any purchaser of the Note evidenced hereby of the resale restrictions set forth
above. The foregoing restrictions on resale will not apply subsequent to the
Resale Restriction Termination Date. If any resale or other transfer of the
Notes is proposed to be made to an institutional “accredited investor” prior to
the Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee substantially in the form of this letter to the Issuer and
the Trustee, which shall provide, among other things, that the transferee is an
institutional “accredited investor” within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Notes for
investment purposes and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Issuer and the Trustee reserve the right
prior to the offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clause 1(b), 1(c) or 1(d) above to
require the delivery of an opinion of counsel, certifications or other
information satisfactory to the Issuer and the Trustee.

 

Dated:  

 

    TRANSFEREE:  

 

  ,       By:  

 

 

 

C-2

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EXHIBIT D

[FORM OF SUPPLEMENTAL INDENTURE]

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) dated as of
[            ], among [GUARANTOR] (the “New Note Guarantor”), a subsidiary of
HARRAH’S OPERATING COMPANY, INC. (or its successor), a Delaware corporation (the
“Issuer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as trustee under the indenture referred to below (the “Trustee”).

WITNESSETH:

WHEREAS the Issuer and the existing Note Guarantors have heretofore executed and
delivered to the Trustee an indenture (as amended, supplemented or otherwise
modified, the “Indenture”) dated as of February 1, 2008, providing for the
issuance of the Issuer’s Senior Notes due 2016 and Senior Toggle Notes due 2018
(collectively, the “Notes”), initially in the aggregate principal amount of
$6,335,000,000;

WHEREAS Section 4.11 of the Indenture provides that under certain circumstances
the Issuer is required to cause the New Note Guarantor to execute and deliver to
the Trustee a supplemental indenture pursuant to which the New Note Guarantor
shall unconditionally guarantee all the Issuer’s Obligations under the Notes and
the Indenture pursuant to a Guarantee on the terms and conditions set forth
herein; and

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Issuer and
the existing Note Guarantors are authorized to execute and deliver this
Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the New Note
Guarantor, the Issuer and the Trustee mutually covenant and agree for the equal
and ratable benefit of the holders of the Notes as follows:

1. Defined Terms. As used in this Supplemental Indenture, terms defined in the
Indenture or in the preamble or recital hereto are used herein as therein
defined, except that the term “holders” in this Guarantee shall refer to the
term “holders” as defined in the Indenture and the Trustee acting on behalf of
and for the benefit of such holders. The words “herein,” “hereof” and “hereby”
and other words of similar import used in this Supplemental Indenture refer to
this Supplemental Indenture as a whole and not to any particular section hereof.

2. Agreement to Guarantee. The New Note Guarantor hereby agrees, jointly and
severally with all existing Note Guarantors (if any), to unconditionally
guarantee the Issuer’s Obligations under the Notes and the Indenture on the
terms and subject to the conditions set forth in Articles 11 and 12 of the
Indenture and to be bound by all other applicable provisions of the Indenture
and the Notes and to perform all of the obligations and agreements of a Note
Guarantor under the Indenture.

3. Notices. All notices or other communications to the New Note Guarantor shall
be given as provided in Section 13.02 of the Indenture.

 

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4. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except
as expressly amended hereby, the Indenture is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Notes heretofore or hereafter
authenticated and delivered shall be bound hereby.

5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.

6. Trustee Makes No Representation. The Trustee makes no representation as to
the validity or sufficiency of this Supplemental Indenture.

7. Counterparts. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.

8. Effect of Headings. The Section headings herein are for convenience only and
shall not effect the construction thereof.

 

D-2

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed as of the date first above written.

 

[NEW GUARANTOR] By:  

 

Name:   Title:  

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

By:  

 

Name:   Title:  

 

D-3