Document:

<PAGE>

                                                                     EXHIBIT 4.1
                                                                  EXECUTION COPY

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                       AMERICAN REAL ESTATE PARTNERS, L.P.

                       AMERICAN REAL ESTATE FINANCE CORP.

                                       AND

         AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP, AS GUARANTOR

                          8-1/8% SENIOR NOTES DUE 2012

                           --------------------------

                                    INDENTURE

                            Dated as of May 12, 2004

                           --------------------------

                           --------------------------

                            WILMINGTON TRUST COMPANY

                                     Trustee

                           --------------------------

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<PAGE>

                             CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>
Trust Indenture
Act Section                                                                       Indenture Section
<S>                                                                               <C>
310(a)(1).................................................................             7.10
   (a)(2).................................................................             7.10
   (a)(3).................................................................             N.A.
   (a)(4).................................................................             N.A.
   (a)(5).................................................................             7.10
   (b)....................................................................             7.10
   (c)....................................................................             N.A.
311(a)....................................................................             7.11
   (b)....................................................................             7.11
   (c)....................................................................             N.A.
312(a)....................................................................             2.05
   (b)....................................................................            12.03
   (c)....................................................................            12.03
313(a)....................................................................             7.06
   (b)(2).................................................................          7.06; 7.07
   (c)....................................................................         7.06; 12.02
   (d)....................................................................             7.06
314(a)....................................................................        4.03;12.02; 12.05
   (c)(1).................................................................            12.04
   (c)(2).................................................................            12.04
   (c)(3).................................................................             N.A.
   (e)....................................................................            12.05
   (f)....................................................................             N.A.
315(a)....................................................................             7.01
   (b)....................................................................         7.05; 12.02
   (c)....................................................................             7.01
   (d)....................................................................             7.01
   (e)....................................................................             6.11
316(a) (last sentence)....................................................             2.09
   (a)(1)(A)..............................................................             6.05
   (a)(1)(B)..............................................................             6.04
   (a)(2).................................................................             N.A.
   (b)....................................................................             6.07
   (c)....................................................................             2.12
317(a)(1).................................................................             6.08
   (a)(2).................................................................             6.09
   (b)....................................................................             2.04
318(a)....................................................................            12.01
   (b)....................................................................             N.A.
   (c)....................................................................            12.01
</TABLE>

N.A. means not applicable.

* This Cross Reference Table is not part of the Indenture.

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 Page
<S>                                                                                                              <C>
                                                  ARTICLE 1
                                        DEFINITIONS AND INCORPORATION
                                                 BY REFERENCE
Section 1.01       Definitions................................................................................    .1
Section 1.02       Other Definitions..........................................................................    16
Section 1.03       Incorporation by Reference of Trust Indenture Act..........................................    17
Section 1.04       Rules of Construction......................................................................    17

                                                  ARTICLE 2
                                                  THE NOTES

Section 2.01       Form and Dating............................................................................    18
Section 2.02       Execution and Authentication...............................................................    19
Section 2.03       Registrar and Paying Agent.................................................................    19
Section 2.04       Paying Agent to Hold Money in Trust........................................................    20
Section 2.05       Holder Lists...............................................................................    20
Section 2.06       Transfer and Exchange......................................................................    20
Section 2.07       Replacement Notes..........................................................................    32
Section 2.08       Outstanding Notes..........................................................................    33
Section 2.09       Treasury Notes.............................................................................    33
Section 2.10       Temporary Notes............................................................................    33
Section 2.11       Cancellation...............................................................................    33
Section 2.12       Defaulted Interest.........................................................................    34

                                                  ARTICLE 3
                                          REDEMPTION AND PREPAYMENT

Section 3.01       Notices to Trustee.........................................................................    34
Section 3.02       Selection of Notes to Be Redeemed or Purchased.............................................    34
Section 3.03       Notice of Redemption.......................................................................    35
Section 3.04       Effect of Notice of Redemption.............................................................    35
Section 3.05       Deposit of Redemption or Purchase Price....................................................    36
Section 3.06       Notes Redeemed or Purchased in Part........................................................    36
Section 3.07       Optional Redemption........................................................................    36
Section 3.08       Redemption Pursuant to Gaming Laws.........................................................    37
Section 3.09       Mandatory Redemption.......................................................................    38

                                                  ARTICLE 4
                                                  COVENANTS

Section 4.01       Payment of Notes...........................................................................    38
Section 4.02       Maintenance of Office or Agency............................................................    38
Section 4.03       Reports....................................................................................    39
Section 4.04       Compliance Certificate.....................................................................    40
Section 4.05       Taxes......................................................................................    40
Section 4.06       Stay, Extension and Usury Laws.............................................................    40
Section 4.07       Restricted Payments........................................................................    41
Section 4.08       [Intentionally Omitted]....................................................................    43
Section 4.09       Incurrence of Indebtedness and Issuance of Preferred Stock.................................    43
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                               <C>
Section 4.10       [Intentionally Omitted]....................................................................    45
Section 4.11       Transactions with Affiliates...............................................................    45
Section 4.12       Liens......................................................................................    47
Section 4.13       [Intentionally Omitted]....................................................................    48
Section 4.14       Corporate Existence........................................................................    48
Section 4.15       Offer to Repurchase Upon Change of Control.................................................    49
Section 4.16       Maintenance of Interest Coverage...........................................................    50
Section 4.17       Maintenance of Total Unencumbered Assets...................................................    51
Section 4.18       Compliance with Law........................................................................    51
Section 4.19       No Investment Company......................................................................    51

                                                  ARTICLE 5
                                                  SUCCESSORS

Section 5.01       Merger, Consolidation, or Sale of Assets...................................................    51
Section 5.02       Relief from Obligation.....................................................................    54

                                                  ARTICLE 6
                                            DEFAULTS AND REMEDIES

Section 6.01       Events of Default..........................................................................    54
Section 6.02       Acceleration...............................................................................    56
Section 6.03       Other Remedies.............................................................................    56
Section 6.04       Waiver of Past Defaults....................................................................    57
Section 6.05       Control by Majority........................................................................    57
Section 6.06       Limitation on Suits........................................................................    57
Section 6.07       Rights of Holders of Notes to Receive Payment..............................................    57
Section 6.08       Collection Suit by Trustee.................................................................    58
Section 6.09       Trustee May File Proofs of Claim...........................................................    58
Section 6.10       Priorities.................................................................................    58
Section 6.11       Undertaking for Costs......................................................................    59

                                                  ARTICLE 7
                                                   TRUSTEE

Section 7.01       Duties of Trustee..........................................................................    59
Section 7.02       Rights of Trustee..........................................................................    60
Section 7.03       Individual Rights of Trustee...............................................................    60
Section 7.04       Trustee's Disclaimer.......................................................................    61
Section 7.05       Notice of Defaults.........................................................................    61
Section 7.06       Reports by Trustee to Holders of the Notes.................................................    61
Section 7.07       Compensation and Indemnity.................................................................    61
Section 7.08       Replacement of Trustee.....................................................................    62
Section 7.09       Successor Trustee by Merger, etc...........................................................    63
Section 7.10       Eligibility; Disqualification..............................................................    63
Section 7.11       Preferential Collection of Claims Against Company..........................................    63

                                                  ARTICLE 8
                                   LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01       Option to Effect Legal Defeasance or Covenant Defeasance...................................    63
Section 8.02       Legal Defeasance and Discharge.............................................................    63
Section 8.03       Covenant Defeasance........................................................................    64
Section 8.04       Conditions to Legal or Covenant Defeasance.................................................    64
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                               <C>
Section 8.05       Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
                   Provisions. ...............................................................................    66
Section 8.06       Repayment to Company.......................................................................    66
Section 8.07       Reinstatement..............................................................................    66

                                                  ARTICLE 9
                                       AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01       Without Consent of Holders of Notes........................................................    67
Section 9.02       With Consent of Holders of Notes...........................................................    68
Section 9.03       Compliance with Trust Indenture Act........................................................    69
Section 9.04       Revocation and Effect of Consents..........................................................    69
Section 9.05       Notation on or Exchange of Notes...........................................................    69
Section 9.06       Trustee to Sign Amendments, etc............................................................    69

                                                  ARTICLE 10
                                               NOTE GUARANTEES

Section 10.01.     Guarantee..................................................................................    70
Section 10.02.     Limitation on Guarantor Liability..........................................................    71
Section 10.03.     Execution and Delivery of Note Guarantee...................................................    71
Section 10.04.     Guarantors May Consolidate, etc., on Certain Terms.........................................    71
Section 10.05.     Releases...................................................................................    72

                                                  ARTICLE 11
                                          SATISFACTION AND DISCHARGE

Section 11.01      Satisfaction and Discharge.................................................................    73
Section 11.02      Application of Trust Money.................................................................    73

                                                  ARTICLE 12
                                                MISCELLANEOUS

Section 12.01      Trust Indenture Act Controls...............................................................    74
Section 12.02      Notices....................................................................................    74
Section 12.03      Communication by Holders of Notes with Other Holders of Notes..............................    75
Section 12.04      Certificate and Opinion as to Conditions Precedent.........................................    75
Section 12.05      Statements Required in Certificate or Opinion..............................................    76
Section 12.06      Rules by Trustee and Agents................................................................    76
Section 12.07      No Personal Liability of Directors, Officers, Employees and Stockholders...................    76
Section 12.08      Governing Law..............................................................................    76
Section 12.09      No Adverse Interpretation of Other Agreements..............................................    76
Section 12.10      Successors.................................................................................    77
Section 12.11      Severability...............................................................................    77
Section 12.12      Counterpart Originals......................................................................    77
Section 12.13      Table of Contents, Headings, etc...........................................................    77
Section 12.14      Clarity....................................................................................    77
</TABLE>

                                    EXHIBITS

Exhibit A1    FORM OF NOTE
Exhibit A2    FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B     FORM OF CERTIFICATE OF TRANSFER
Exhibit C     FORM OF CERTIFICATE OF EXCHANGE

                                      iii
<PAGE>

Exhibit D     FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E     FORM OF NOTATION OF GUARANTEE
Exhibit F     FORM OF SUPPLEMENTAL INDENTURE
Exhibit G     FORM OF SECURITY AND CONTROL AGREEMENT

                                       iv
<PAGE>

      INDENTURE dated as of May 12, 2004 among American Real Estate Partners,
L.P., a Delaware limited partnership, as issuer ("AREP"), American Real Estate
Finance Corp., a Delaware corporation, as co-issuer ("AREP Finance", and
together with AREP, the "Company"), American Real Estate Holdings Limited
Partnership, as Guarantor and Wilmington Trust Company, as trustee.

      The Company, the Guarantor and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders (as
defined) of the 8-1/8% Senior Notes due 2012 (the "Notes"):

                                    ARTICLE 1
                          DEFINITIONS AND INCORPORATION
                                  BY REFERENCE

Section 1.01 Definitions.

      "144A Global Note" means a Global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.

      "Acquired Debt" means, with respect to any specified Person:

      (1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and

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

      "Additional Notes" means additional Notes (other than the Initial Notes)
issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as
part of the same series as the Initial Notes.

      "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,"
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; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling, "controlled by" and "under common control
with" have correlative meanings.

      "Agent" means any Registrar, co-registrar, Paying Agent or additional
paying agent.

      "API" means American Property Investors, Inc. (and not any of its
subsidiaries).

      "AREH" means American Real Estate Holdings Limited Partnership (and not
any of its subsidiaries).

      "AREP" means American Real Estate Partners, L.P. (and not any of its
subsidiaries).

      "AREP Finance" means American Real Estate Finance Corp.

                                       1
<PAGE>

      "AREP Partnership Agreement" means AREP's Amended and Restated Agreement
of Limited Partnership, dated May 12, 1987 as amended February 22, 1995 and
August 16, 1996.

      "Bad Boy Guarantees" means the Indebtedness of any specified Person
attributable to "bad boy" indemnification or Guarantees, which Indebtedness
would be non-recourse to the AREP and the Guarantor other than recourse relating
to the specific events specified therein, which such events shall be usual and
customary exceptions typically found in non-recourse financings at such time as
determined by management in its reasonable judgment.

      "Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

      "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.

      "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms "Beneficially Owns" and
"Beneficially Owned" have a corresponding meaning.

      "Board of Directors" means:

            (1) with respect to a corporation, the board of directors of the
      corporation or any committee thereof duly authorized to act on behalf of
      such board;

            (2) with respect to a partnership, the Board of Directors of the
      general partner of the partnership;

            (3) with respect to a limited liability company, the managing member
      or members or any controlling committee of managing members thereof or the
      Board of Directors of the managing member; and

            (4) with respect to any other Person, the board or committee of such
      Person serving a similar function.

      "Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.

      "Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such jurisdictions are authorized or required by
law or other governmental action to close.

      "Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet prepared in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a
penalty.

      "Capital Stock" means:

                                       2
<PAGE>

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

            (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 interests (whether general or limited) or membership
      interests; 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 but excluding from all of the foregoing any
      debt securities convertible into Capital Stock, whether or not such debt
      securities include any right of participation with Capital Stock.

      "Cash Equivalents" means:

            (1) United States dollars;

            (2) securities issued or directly and fully guaranteed or insured by
      the United States government or any agency or instrumentality of the
      United States government (provided that the full faith and credit of the
      United States is pledged in support of those securities) having maturities
      of not more than one year from the date of acquisition;

            (3) certificates of deposit and eurodollar time deposits with
      maturities of one year or less from the date of acquisition, bankers'
      acceptances with maturities not exceeding one year and overnight bank
      deposits, in each case, with any domestic commercial bank having capital
      and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of
      "B" or better;

            (4) repurchase obligations with a term of not more than seven days
      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 having one of the two highest ratings
      obtainable from Moody's Investors Service, Inc. or Standard & Poor's
      Rating Services and, in each case, maturing within one year after the date
      of acquisition; and

            (6) money market funds at least 95% of the assets of which
      constitute Cash Equivalents of the kinds described in clauses (1) through
      (5) of this definition.

      "Cash Flow of AREP and the Guarantors" means, with respect to any period,
the Net Income of AREP and the Guarantors for such period plus, without
duplication:

            (1) provision for taxes based on income or profits of AREP and the
      Guarantors or any payments of Tax Amounts by AREP for such period, to the
      extent that such provision for taxes or such payments of Tax Amounts were
      deducted in computing such Net Income of AREP or any Guarantor; plus

            (2) the Fixed Charges of AREP or any Guarantor for such period, to
      the extent that such Fixed Charges of AREP and such Guarantor were
      deducted in computing such Net Income of AREP and such Guarantor; plus

                                       3
<PAGE>

            (3) depreciation, amortization (including amortization of
      intangibles but excluding amortization of prepaid cash expenses that were
      paid in a prior period) and other non-cash expenses (excluding any such
      non-cash expense to the extent that it represents an accrual of or reserve
      for cash expenses in any future period or amortization of a prepaid cash
      expense that was paid in a prior period) of AREP and any Guarantor for
      such period to the extent that such depreciation, amortization and other
      non-cash expenses were deducted in computing such Net Income of AREP and
      any Guarantor; minus

            (4) non-cash items increasing such Net Income of AREP and any
      Guarantor for such period, other than the accrual of revenue in the
      ordinary course of business,

in each case, consolidating such amounts for AREP and any Guarantor but
excluding any net income, provision for taxes, fixed charges, depreciation,
amortization or other amounts of any of the Subsidiaries of AREP (other than any
Guarantor) and otherwise determined in accordance with GAAP; provided, further,
that the Net Income of AREP and any Guarantor shall include income from
investments or Subsidiaries of AREP (other than any Guarantor) but only to the
extent such income is realized in Cash Equivalents by AREP or any Guarantor.

      "Change of Control" means the occurrence of any of the following:

            (1) the sale, lease, transfer, conveyance or other disposition by
      AREP or the Guarantor (other than by way of merger or consolidation), in
      one or a series of related transactions, of all or substantially all of
      the properties or assets of AREP or AREH to any "person" (as that term is
      used in Section 13(d) of the Exchange Act) other than the Principal or a
      Related Party; provided, however, that (x) if AREP or AREH receives
      consideration in Cash Equivalents and marketable securities with an
      aggregate Fair Market Value determined at the time of the execution of
      each relevant agreement of at least $1.0 billion for such sale, lease,
      transfer, conveyance or other disposition of properties or assets, then
      such transaction shall not be deemed a Change of Control and (y) any sale,
      assignment, transfer or other disposition of Cash Equivalents, including,
      without limitation, any investment or capital contribution of Cash
      Equivalents or purchase of property, assets or Capital Stock with Cash
      Equivalents, will not constitute a sale, assignment, transfer, conveyance
      or other disposition of all or substantially all of the properties or
      assets for purposes of this clause (1);

            (2) the adoption of a plan relating to the liquidation or
      dissolution of AREP;

            (3) the consummation of any transaction (including, without
      limitation, any merger or consolidation), the result of which is that any
      "person" (as defined above), other than the Principal or the Related
      Parties, becomes the Beneficial Owner, directly or indirectly, of more
      than 50% of the Voting Stock of a Controlling Entity of AREP, measured by
      voting power rather than number of shares;

            (4) the first day on which a majority of the members of the Board of
      Directors of the Controlling Entity are not Continuing Directors; or

            (5) for so long as the Company is a partnership, upon any general
      partner of AREP ceasing to be an Affiliate of the Principal or a Related
      Party.

      "Change of Control Offer" has the meaning assigned to that term in this
Indenture governing the Notes.

                                       4
<PAGE>

      "Clearstream" means Clearstream Banking, S.A.

      "Company" means, collectively AREP and AREP Finance, and any and all
successors thereto.

      "Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of net income (loss) of such Person, on a consolidated
basis with its Subsidiaries, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends; provided that:

            (1) the Net Income of any Person that is accounted for by the equity
      method of accounting or that is a Subsidiary will be included only to the
      extent of the amount of dividends or similar distributions paid in cash to
      the specified Person or a Subsidiary of the Person;

            (2) the Net Income of any of its Subsidiaries will be excluded to
      the extent that the declaration or payment of dividends or similar
      distributions by that Subsidiary of that Net Income is not at the date of
      determination permitted without any prior governmental approval (that has
      not been obtained) or, directly or indirectly, by operation of the terms
      of its charter or any agreement, instrument, judgment, decree, order,
      statute, rule or governmental regulation applicable to that Subsidiary or
      its stockholders; and

            (3) the cumulative effect of a change in accounting principles will
      be excluded.

      "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of AREP who:

            (1) was a member of such Board of Directors on the date of this
      Indenture; or

            (2) was nominated for election or elected to such Board of Directors
      with the approval of the Principal or any of the Related Parties or with
      the approval of a majority of the Continuing Directors who were members of
      such Board of Directors at the time of such nomination or election.

      "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a Person, whether
through the ownership of Voting Stock, by agreement or otherwise.

      "Controlling Entity" means (1) for so long as AREP is a partnership, any
general partner of AREP, (2) if AREP is a limited liability company, any
managing member of AREP or (3) if AREP is a corporation, AREP.

      "Corporate Trust Office of the Trustee" will be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.

      "Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced (whether upon or after
termination or otherwise) or refinanced (including by means of sales of debt
securities to institutional investors) in whole or in part from time to time.

                                       5
<PAGE>

      "Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.

      "Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

      "Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.

      "Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.

      "Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case, at the option of the holder of the Capital Stock),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder of the Capital Stock, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require AREP
or any Guarantor to repurchase such Capital Stock upon the occurrence of a
change of control, event of loss, an asset sale or other special redemption
event will not constitute Disqualified Stock if the terms of such Capital Stock
provide that AREP or any Guarantor may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption complies
with Section 4.07 hereof or where the funds to pay for such repurchase was from
the net cash proceeds of such Capital Stock and such net cash proceeds was set
aside in a separate account to fund such repurchase. Furthermore, any Capital
Stock that would constitute Disqualified Stock solely because the holders of the
Capital Stock have the right to require AREP or any Guarantor to redeem such
Capital Stock, including, without limitation, upon maturity will not constitute
Disqualified Stock if the terms of such Capital Stock provide that AREP or any
Guarantor may redeem such Capital Stock for other Capital Stock that is not
Disqualified Stock. The amount of Disqualified Stock deemed to be outstanding at
any time for purposes of this Indenture will be the maximum amount that AREP and
its Subsidiaries (including any Guarantor) may become obligated to pay upon the
maturity of, or pursuant to any mandatory redemption provisions of, such
Disqualified Stock, exclusive of accrued dividends. For the avoidance of doubt,
and by way of example, the Preferred Units, as in effect on the date of this
Indenture, do not constitute Disqualified Stock.

      "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).

      "Equity Offering" means an offer and sale of Capital Stock (other than
Disqualified Stock) of AREP (other than an offer and sale relating to equity
securities issuable under any employee benefit plan of AREP) or a capital
contribution in respect of Capital Stock (other than Disqualified Stock) of
AREP.

      "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear
system.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

                                       6
<PAGE>

      "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.

      "Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.

      "Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.

      "Existing Indebtedness" means up to $43.8 million in aggregate principal
amount of Indebtedness of AREP and any Guarantor, in existence on the Issuance
Date, until such amounts are repaid.

      "Fair Market Value" means the value that would be paid by a willing buyer
to an unaffiliated willing seller in a transaction not involving distress or
necessity of either party, determined in good faith by the Board of Directors of
AREP (unless otherwise provided in this Indenture).

      "Fixed Charge Coverage Ratio of AREP and the Guarantors" means the ratio
of the Cash Flow of AREP and the Guarantors for such period to the Fixed Charges
of AREP and the Guarantors for such period. In the event that AREP or any
Guarantor incurs, assumes, guarantees, repays, repurchases, redeems, defeases or
otherwise discharges any Indebtedness (other than ordinary working capital
borrowings) or issues, repurchases or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio of AREP and
the Guarantors is being calculated and on or prior to the Quarterly
Determination Date for which the calculation of the Fixed Charge Coverage Ratio
of AREP and the Guarantors is being made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio of AREP and the Guarantors will be calculated giving
pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase, redemption, defeasance or other discharge of Indebtedness, or such
issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom, as if the same had occurred at the beginning of the
applicable four-quarter reference period.

      In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

            (1) acquisitions that have been made by the specified Person,
      including through mergers or consolidations, or any Person acquired by the
      specified Person, and including any related financing transactions, during
      the four-quarter reference period or subsequent to such reference period
      and on or prior to the Calculation Date shall be given pro forma effect
      (in accordance with Regulation S-X under the Securities Act) as if they
      had occurred on the first day of the four-quarter reference period;

            (2) the Cash Flow of AREP and the Guarantors attributable to
      discontinued operations, as determined in accordance with GAAP, and
      operations or businesses (and ownership interests therein) disposed of
      prior to the Calculation Date, shall be excluded;

            (3) the Fixed Charges of AREP and the Guarantors attributable to
      discontinued operations, as determined in accordance with GAAP, and
      operations or businesses (and ownership interests therein) disposed of
      prior to the Calculation Date, will be excluded, but only to the extent
      that such Fixed Charges of AREP and the Guarantors are equal to or less
      than the Cash Flow of AREP and the Guarantors from the related
      discontinued operation excluded under this clause (3) for such period; and

            (4) if any Indebtedness bears a floating rate of interest, the
      interest expense on such Indebtedness will be calculated as if the rate in
      effect on the Calculation Date had been the

                                       7
<PAGE>

      applicable rate for the entire period (taking into account any Hedging
      Obligation applicable to such Indebtedness if such Hedging Obligation has
      a remaining term as at the Calculation Date in excess of 12 months).

      "Fixed Charges of AREP and the Guarantors" means, with respect to any
period, the sum, without duplication, of:

            (1) the interest expense of AREP, and any Guarantor for such period,
      whether paid or accrued, including, without limitation, amortization of
      debt issuance costs and original issue discount, non-cash interest
      payments, the interest component of any deferred payment obligations, the
      interest component of all payments associated with Capital Lease
      Obligations, commissions, discounts and other fees and charges incurred in
      respect of letter of credit or bankers' acceptance financings, and net of
      the effect of all payments made or received pursuant to Hedging
      Obligations in respect of interest rates; plus

            (2) the interest expense of AREP and any Guarantor that was
      capitalized during such period; plus

            (3) any interest on Indebtedness of another Person that is
      guaranteed by AREP or any Guarantor (other than Bad Boy Guarantees unless
      such Bad Boy Guarantee is called upon) or secured by a Lien on assets of
      AREP or any additional Guarantor, whether or not such Guarantee or Lien is
      called upon; provided that for purposes of calculating interest with
      respect to Indebtedness that is Guaranteed or secured by a Lien, the
      principal amount of Indebtedness will be calculated in accordance with the
      last two paragraphs of the definition of Indebtedness; plus

            (4) the product of (a) all dividends, whether paid or accrued and
      whether or not in cash, on any series of preferred equity of AREP, other
      than dividends on preferred stock to the extent payable in Equity
      Interests of AREP (other than Disqualified Stock) or dividends on
      preferred equity payable to AREP, times (b) a fraction, the numerator of
      which is one and the denominator of which is one minus the then current
      combined federal, state and local statutory income tax rate of AREP
      (however, for so long as AREP is a partnership or otherwise a pass through
      entity for federal income tax purposes, the combined federal, state and
      local income tax rate shall be the rate that was utilized to calculate the
      Tax Amount of such Person to the extent that the Tax Amount was actually
      distributed with respect to such period (and if less than the Tax Amount
      is distributed, such rate shall be proportionately reduced) and if no Tax
      Amount was actually distributed during such period, such combined federal,
      state and local income tax rate shall be zero), expressed as a decimal;
      provided that this clause (4) will not include any Preferred Unit
      Distribution paid in additional Preferred Units,

in each case, determined on a consolidated basis between AREP and any Guarantor
but on a nonconsolidated basis with the Subsidiaries of AREP (other than any
Guarantor) and otherwise in accordance with GAAP.

      "GAAP" means generally accepted accounting principles in the United States
set forth in the 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 Issuance Date. For the purposes of this Indenture, the term
"consolidated" with respect to any Person shall mean such Person consolidated
with its Subsidiaries.

      "Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or other national government, any state,

                                       8
<PAGE>

province or any city or other political subdivision, including, without
limitation, the State of Nevada, or the State of New Jersey, whether now or
hereafter existing, or any officer or official thereof and any other agency with
authority thereof to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Principal, its Related Parties, the
Company or any of their respective Subsidiaries or Affiliates.

      "Gaming Law" means any gaming law or regulation of any jurisdiction or
jurisdictions to which the Company or any of its Subsidiaries (including AREH)
is, or may at any time after the issue date be, subject.

      "GB Securities" means the 11% notes due 2005 issued by GB Property Funding
Corp.

      "Global Note Legend" means the legend set forth in Section 2.06(g)(2)
hereof, which is required to be placed on all Global Notes issued under this
Indenture.

      "Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes deposited with or on
behalf of and registered in the name of the Depository or its nominee,
substantially in the form of Exhibit A1 hereto and that bears the Global Note
Legend and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, issued in accordance with Section 2.01, 2.06(b)(3),
2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.

      "Government Instrumentality" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, court, tribunal, commission, bureau or entity or any
arbitrator with authority to bind a party at law.

      "Government Securities" 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 either 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 Government Security
or a specific payment of principal of or interest on any such Government
Security 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
Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.

      "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, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take or pay or to maintain financial statement
conditions or otherwise).

      "Guarantor" means any Subsidiary of AREP (initially only AREH) that
executes a Note Guarantee in accordance with the provisions of this Indenture,
and their respective successors and assigns, in each case, until the Note
Guarantee of such Person has been released in accordance with the provisions of
this Indenture.

                                       9
<PAGE>

      "Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:

            (1) interest rate swap agreements (whether from fixed to floating or
      from floating to fixed), interest rate cap agreements and interest rate
      collar agreements;

            (2) other agreements or arrangements designed to manage interest
      rates or interest rate risk; and

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

      "Holder" means a Person in whose name a Note is registered.

      "IAI Global Note" means a Global Note substantially in the form of Exhibit
A1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.

      "Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person (excluding accrued expenses and trade payables),
whether or not contingent:

            (1) in respect of borrowed money;

            (2) evidenced by bonds, notes, debentures or similar instruments or
      letters of credit (or reimbursement agreements in respect thereof);

            (3) in respect of banker's acceptances;

            (4) representing Capital Lease Obligations;

            (5) representing the balance deferred and unpaid of the purchase
      price of any property or services due more than six months after such
      property is acquired or such services are completed; or

            (6) representing any Hedging Obligations,

      if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person.

      "Indenture" means this Indenture, as amended or supplemented from time to
time.

      "Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.

      "Initial Notes" means the first $353,000,000 aggregate principal amount of
Notes issued under this Indenture on the date hereof.

                                       10
<PAGE>

      "Initial Purchaser" means Bear, Stearns & Co. Inc.

      "Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.

      "Issuance Date" means the closing date for the sale and original issuance
of the Notes.

      "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.

      "Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.

      "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or 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.

      "Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.

      "NEG" means National Energy Group, Inc.

      "NEG Credit Agreement" means the credit agreement, dated as of December
29, 2003, among NEG Operating LLC, certain commercial lending institutions party
thereto, including Mizuho Corporate Bank, Ltd. as the administrative agent, Bank
of Texas N.A. and Bank of Nova Scotia as co-agents.

      "NEG Management Agreements" means the management agreement dated September
12, 2001, between NEG and NEG Operating LLC and the management agreement dated
August 28, 2003, between NEG and TransTexas Gas Corporation, each as in effect
on the date of this Indenture.

      "Net Income" means, with respect to any specified Person for any four
consecutive fiscal quarter period, the net income (loss) of such Person
determined in accordance with GAAP and before any reduction in respect of
preferred stock dividends.

      "Non-U.S. Person" means a Person who is not a U.S. Person.

      "Note Guarantee" means the Guarantee by any Subsidiary of AREP of the
Company's obligations under this Indenture and the Notes, executed pursuant to
the provisions of this Indenture; which initially will only be by AREH.

      "Notes" has the meaning assigned to it in the preamble to this Indenture.
The Initial Notes, the Exchange Notes and the Additional Notes shall be treated
as a single class for all purposes under this Indenture, and unless the context
otherwise requires, all references to the Notes shall include the Initial Notes,
the Exchange Notes and any Additional Notes.

                                       11
<PAGE>

      "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

      "Offering Memorandum" means the offering memorandum dated May 6, 2004, as
supplemented by the Offering Memorandum supplement dated May 10, 2004, relating
to the issuance of the Notes.

      "Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.

      "Officers' Certificate" means a certificate signed on behalf of API or
AREP Finance by two Officers (or if AREP is (x) a limited liability company, two
Officers of the managing member of such limited liability company or (y) a
corporation, by two Officers thereof) of API or AREP Finance, one of whom must
be the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of API or AREP Finance that meets
the requirements of Section 12.05 hereof.

      "Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or any of its Affiliates or the Trustee.

      "Other Liquidated Damages" means liquidated damages arising from a
registration default under a registration rights agreement with respect to the
registration of subordinated Indebtedness permitted to be incurred under this
Indenture.

      "Participant" means, with respect to the Depositary, Euroclear or
Clearstream, a Person who has an account with the Depositary, Euroclear or
Clearstream, respectively (and, with respect to DTC, shall include Euroclear and
Clearstream).

      "Partners' Equity" with respect to any Person means as of any date, the
partners' equity as of such date shown on the consolidated balance sheet of such
Person and its Subsidiaries or if such Person is not a partnership, the
comparable line-item on a balance sheet, each prepared in accordance with GAAP.

      "Permitted Refinancing Indebtedness" means any Indebtedness of AREP or any
Guarantor issued in exchange for, or the net proceeds of which are used to
renew, refund, refinance, replace, defease or discharge other Indebtedness of
AREP or any Guarantor (other than intercompany Indebtedness); provided that:

            (1) the principal amount (or accreted value, if applicable) of such
      Permitted Refinancing Indebtedness does not exceed the principal amount
      (or accreted value, if applicable) of the Indebtedness renewed, refunded,
      refinanced, replaced, defeased or discharged (plus all accrued interest on
      the Indebtedness and the amount of all fees and expenses, including
      premiums, and Other Liquidated Damages, incurred in connection therewith);

            (2) in the case of any Indebtedness other than Notes redeemed in
      accordance with Section 3.08 hereof, such Permitted Refinancing
      Indebtedness has a final maturity date later than the final maturity date
      of, and has a Weighted Average Life to Maturity equal to or greater than
      the Weighted Average Life to Maturity of, the Indebtedness being renewed,
      refunded, refinanced, replaced, defeased or discharged; and

            (3) if the Indebtedness being renewed, refunded, refinanced,
      replaced, defeased or discharged is subordinated in right of payment to
      the Notes, such Permitted Refinancing

                                       12
<PAGE>

      Indebtedness has a final maturity date later than the final maturity date
      of, and is subordinated in right of payment to, the Notes on terms at
      least as favorable to the Holders of Notes as those contained in the
      documentation governing the Indebtedness being renewed, refunded,
      refinanced, replaced, defeased or discharged.

      "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.

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

      "Preferred Units" means AREP's 5% Cumulative Pay-in-Kind Redeemable
Preferred Units payable on or before March 31, 2010.

      "Preferred Unit Distribution" means the scheduled annual Preferred Unit
distribution, payable on March 31 of each year in additional Preferred Units at
the rate of 5% of the liquidation preference of $10.00 per Preferred Unit.

      "Principal" means Carl Icahn.

      "Principal Property" of a specified Person means any property, assets or
revenue of such Person now owned or hereafter acquired.

      "Private Placement Legend" means the legend set forth in Section
2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.

      "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

      "Quarterly Determination Date" means, in connection with AREP's first,
second and third fiscal quarters (commencing with the second fiscal quarter of
2004), the earlier of (i) the date AREP would have been required to file a
quarterly report with the SEC on Form 10-Q if AREP were required to file such
reports and (ii) the date AREP files its quarterly report with the SEC on Form
10-Q. In connection with AREP's fourth fiscal quarter, the earlier of (i) the
date AREP would have been required to file an annual report with the SEC on Form
10-K if AREP were required to file such a report and (ii) the date AREP files
its annual report with the SEC on Form 10-K.

      "Registration Rights Agreement" means the Registration Rights Agreement,
dated as of May __, 2004, among the Company, the Guarantor and the other parties
named on the signature pages thereof, as such agreement may be amended, modified
or supplemented from time to time and, with respect to any Additional Notes, one
or more registration rights agreements among the Company, the Guarantor and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.

      "Regulation S" means Regulation S promulgated under the Securities Act.

      "Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.

                                       13
<PAGE>

      "Regulation S Permanent Global Note" means a permanent Global Note in the
form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.

      "Regulation S Temporary Global Note" means a temporary Global Note in the
form of Exhibit A2 hereto deposited with or on behalf of and registered in the
name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule 903
of Regulation S.

      "Related Parties" means (1) Carl Icahn, any spouse and any child,
stepchild, sibling or descendant of Carl Icahn, (2) any estate of Carl Icahn or
any person under clause (1), (3) any person who receives a beneficial interest
in any estate under clause (2) to the extent of such interest, (4) any executor,
personal administrator or trustee who holds such beneficial interest in AREP for
the benefit of, or as fiduciary for, any person under clauses (1), (2) or (3) to
the extent of such interest and (5) any corporation, partnership, limited
liability company, trust, or similar entity, directly or indirectly owned or
Controlled by Carl Icahn or any other person or persons identified in clauses
(1), (2) or (3).

      "Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

      "Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.

      "Restricted Global Note" means a Global Note bearing the Private Placement
Legend.

      "Restricted Period" means the 40-day distribution compliance period as
defined in Regulation S.

      "Rule 144" means Rule 144 promulgated under the Securities Act.

      "Rule 144A" means Rule 144A promulgated under the Securities Act.

      "Rule 903" means Rule 903 promulgated under the Securities Act.

      "Rule 904" means Rule 904 promulgated under the Securities Act.

      "SEC" means the United States Securities and Exchange Commission.

      "Secured Indebtedness" of any specified Person means any Indebtedness
secured by a Lien upon the property of such Person.

      "Securities Act" means the Securities Act of 1933, as amended.

      "Security and Control Agreement" means a security and control agreement
substantially in the form of Exhibit G hereto.

      "Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.

                                       14
<PAGE>

      "Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the Issuance Date.

      "Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest, accreted value, or principal
prior to the date originally scheduled for the payment or accretion thereof.

      "Subordinated Indebtedness" means any Indebtedness that by its terms is
expressly subordinated in right of payment in any respect (either in the payment
of principal or interest) to the payment of principal, Liquidated Damages or
interest on the Notes.

      "Subsidiary" means, with respect to any specified Person:

            (1) any corporation, association or other business entity of which
      more than 50% of the total Voting Stock is at the time owned or
      Controlled, directly or indirectly, by that Person or one or more of the
      other Subsidiaries of that Person (or a combination thereof); and

            (2) any partnership (a) the sole general partner or the managing
      general partner of which is such Person or a Subsidiary of such Person or
      (b) the only general partners of which are that Person or one or more
      Subsidiaries of that Person (or any combination thereof).

      For the avoidance of doubt, AREH will be deemed to be a Subsidiary of AREP
so long as AREH remains a Guarantor.

      "Tangible Net Worth" of any specified Person as of any date means, the
total shareholders' equity (or if such Person were not a corporation, the
equivalent account) of such Person and its Subsidiaries on a consolidated basis
determined in conformity with GAAP less any and all goodwill and other
intangible assets reflected on the consolidated balance sheet of such Person as
of the last day of the fiscal quarter most recently completed before the date of
determination for which financial statements are then available, but taking into
account any change in total shareholders' equity (or the equivalent account) as
a result of any (x) Restricted Payments made, (y) asset sales or (z)
contributions to equity or from the issuance or sale of Equity Interests
(excluding Disqualified Stock) or from the exchange or conversion (other than to
Disqualified Stock) of Disqualified Stock or debt securities, completed since
such fiscal quarter end.

      "Tax Amount" means, for any period, the combined federal, state and local
income taxes, including estimated taxes, that would be payable by AREP if it
were a Delaware corporation filing separate tax returns with respect to its
Taxable Income for such period and owned 100% of AREH; provided, that in
determining the Tax Amount, the effect thereon of any net operating loss
carryforwards or other carryforwards or tax attributes, such as alternative
minimum tax carryforwards, that would have arisen if AREP were a Delaware
corporation shall be taken into account; provided, further that (i) if there is
an adjustment in the amount of the Taxable Income for any period, an appropriate
positive or negative adjustment shall be made in the Tax Amount, and if the Tax
Amount is negative, then the Tax Amount for succeeding periods shall be reduced
to take into account such negative amount until such negative amount is reduced
to zero and (ii) any Tax Amount other than amounts relating to estimated taxes
shall be computed by a nationally recognized accounting firm (but, including in
any event, AREP's auditors). Notwithstanding anything to the contrary, the Tax
Amount shall not include taxes resulting from AREP's change in the status to a
corporation for tax purposes.

                                       15
<PAGE>

      "Taxable Income" means, for any period, the taxable income or loss of AREP
for such period for federal income tax purposes.

      "TIA" means the Trust Indenture Act of 1939, as amended (15
U.S.C. Sections 77aaa-77bbbb).

      "Total Unencumbered Assets" means, as of any Quarterly Determination Date,
the book value of all of the assets of AREP and any Guarantor (including,
without limitation, the Capital Stock of their Subsidiaries, but excluding
goodwill and intangibles) that do not secure, by a Lien, any portion of any
Indebtedness (other than assets secured by a Lien in favor of the Notes and such
assets are not secured by a Lien in favor of any other Indebtedness) as of such
date (determined on a consolidated basis between AREP and any Guarantor but not
on a consolidated basis with their Subsidiaries and otherwise in accordance with
GAAP).

      "Trustee" means Wilmington Trust Company until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means
the successor serving hereunder.

      "Unrestricted Definitive Note" means a Definitive Note that does not bear
and is not required to bear the Private Placement Legend.

      "Unrestricted Global Note" means a Global Note that does not bear and is
not required to bear the Private Placement Legend.

      "Unsecured Indebtedness" of AREP, AREH and any additional Guarantor means
any Indebtedness of such Person that is not Secured Indebtedness.

      "U.S. Person" means a U.S. Person as defined in Rule 902(k) promulgated
under the Securities Act.

      "Voting Stock" means, with respect to any Person that is (a) a
corporation, any class or series of capital stock of such Person that is
ordinarily entitled to vote in the election of directors thereof at a meeting of
stockholders called for such purpose, without the occurrence of any additional
event or contingency, (b) a limited liability company, membership interests
entitled to manage, or to elect or appoint the Persons that will manage the
operations or business of the limited liability company, or (c) a partnership,
partnership interests entitled to elect or replace the general partner thereof.

      "Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the number
of years (calculated to the nearest one-twelfth) obtained by dividing (1) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal or liquidation preference, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment,
by (2) the then outstanding principal amount or liquidation preference, as
applicable, of such Indebtedness or Disqualified Stock, as the case may be.

Section 1.02 Other Definitions.

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Defined in
Term                                                                                      Section
----                                                                                      -------
<S>                                                                                     <C>
"Affiliate Transaction".............................................................       4.11
"Application Date"..................................................................       3.08
"Authentication Order"..............................................................       2.02
"Calculation Date"..................................................................       1.01
"Change of Control Offer"...........................................................       4.15
"Change of Control Payment".........................................................       4.15
"Change of Control Payment Date"....................................................       4.15
"Covenant Defeasance"...............................................................       8.03
"DTC"...............................................................................       2.03
"Event of Default"..................................................................       6.01
"incur".............................................................................       4.09
"Legal Defeasance"..................................................................       8.02
"Paying Agent"......................................................................       2.03
"Permitted Debt"....................................................................       4.09
"Payment Default" ..................................................................       6.01
"Registrar".........................................................................       2.03
"Restricted Payments"...............................................................       4.07
</TABLE>

Section 1.03 Incorporation by Reference of Trust Indenture Act.

      Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

      The following TIA terms used in this Indenture have the following
meanings:

      "indenture securities" means the Notes;

      "indenture security Holder" means a Holder of a Note;

      "indenture to be qualified" means this Indenture;

      "indenture trustee" or "institutional trustee" means the Trustee; and

      "obligor" on the Notes and the Note Guarantees means the Company and any
Guarantor, respectively, and any successor obligor upon the Notes and the Note
Guarantees, respectively.

Section 1.04 Rules of Construction.

      Unless the context otherwise requires:

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

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

            (3) "or" is not exclusive;

            (4) words in the singular include the plural, and in the plural
      include the singular;

                                       17
<PAGE>

            (5) "will" shall be interpreted to express a command;

            (6) provisions apply to successive events and transactions; and

            (7) references to sections of or rules under the Securities Act will
      be deemed to include substitute, replacement of successor sections or
      rules adopted by the SEC from time to time.

                                   ARTICLE 2
                                   THE NOTES

Section 2.01 Form and Dating.

      (a) General. The Notes and the Trustee's certificate of authentication
will be substantially in the form of Exhibits A1 and A2 hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note will be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.

      The terms and provisions contained in the Notes will constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantor
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.

      (b) Global Notes. Notes issued in global form will be substantially in the
form of Exhibits A1 or A2 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form will be substantially in the form of
Exhibit A1 hereto (but without the Global Note Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Each
Global Note will represent such of the outstanding Notes as will be specified
therein and each shall provide that it represents the aggregate principal amount
of outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby will be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.

      (c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S will be issued initially in the form of the Regulation S Temporary
Global Note, which will be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Clearstream, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period will be terminated upon
the receipt by the Trustee of:

            (1) a written certificate from the Depositary, 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 will take
      delivery of a beneficial ownership interest in a 144A Global

                                       18
<PAGE>

      Note or an IAI Global Note bearing a Private Placement Legend, all as
      contemplated by Section 2.06(b) hereof); and

            (2) an Officers' Certificate from the Company.

      Following the termination of the Restricted Period, beneficial interests
in the Regulation S Temporary Global Note will be exchanged for beneficial
interests in the Regulation S Permanent Global Note pursuant to the Applicable
Procedures. Simultaneously with the authentication of the Regulation S Permanent
Global Note, the Trustee will 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 Depositary
or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.

            (3) Euroclear and Clearstream Procedures Applicable. 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
      will 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.

Section 2.02 Execution and Authentication.

      At least one Officer must sign the Notes for the Company by manual or
facsimile signature.

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

      A Note will not be valid until authenticated by the manual signature of
the Trustee. The signature will be conclusive evidence that the Note has been
authenticated under this Indenture.

      The Trustee will, upon receipt of a written order of the Company signed by
two Officers (an "Authentication Order"), authenticate Notes for original issue
that may be validly issued under this Indenture, including any Additional Notes
up to the aggregate principal amount stated in such Authentication Order. The
aggregate principal amount of Notes outstanding at any time may not exceed the
aggregate principal amount of Notes authorized for issuance by the Company
pursuant to one or more Authentication Orders, except as provided in Section
2.07 hereof.

      The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. 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 an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03 Registrar and Paying Agent.

      The Company will maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
will keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company

                                       19
<PAGE>

will notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.

      The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.

      The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.

Section 2.04 Paying Agent to Hold Money in Trust.

      The Company will require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary) will have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it
will segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee will serve as Paying Agent for
the Notes.

Section 2.05 Holder Lists.

      The Trustee will preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company will furnish to the Trustee at least seven
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 the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).

Section 2.06 Transfer and Exchange.

      (a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred except as a whole by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if:

            (1) the Company delivers to the Trustee notice from the Depositary
      that it is unwilling or unable to continue to act as Depositary or that it
      is no longer a clearing agency registered under the Exchange Act and, in
      either case, a successor Depositary is not appointed by the Company within
      120 days after the date of such notice from the Depositary;

            (2) the Company in its sole discretion determines that the Global
      Notes (in whole but not in part) should be exchanged for Definitive Notes
      and delivers a written notice to such effect to the Trustee; provided that
      in no event shall the Regulation S Temporary Global Note be exchanged by
      the Company for Definitive Notes prior to (A) the expiration of the
      Restricted

                                       20
<PAGE>

      Period and (B) the receipt by the Registrar of any certificates required
      pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or

            (3) there has occurred and is continuing a Default or Event of
      Default with respect to the Notes.

      Upon the occurrence of either of the preceding events in (1) or (2) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

      (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes will be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes will be subject to restrictions on transfer comparable to those set
forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also will require compliance with
either subparagraph (1) or (2) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:

            (1) 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 Private Placement Legend; provided, however,
      that prior to the expiration of the Restricted Period, transfers of
      beneficial interests in the Regulation S Temporary 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). Beneficial interests in any
      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
      2.06(b)(1).

            (2) All Other Transfers and Exchanges of Beneficial Interests in
      Global Notes. In connection with all transfers and exchanges of beneficial
      interests that are not subject to Section 2.06(b)(1) above, the transferor
      of such beneficial interest must deliver to the Registrar either:

                  (A) both:

                        (i) a written order from a Participant or an Indirect
                  Participant given to the Depositary in accordance with the
                  Applicable Procedures directing the Depositary 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

                        (ii) instructions given in accordance with the
                  Applicable Procedures containing information regarding the
                  Participant account to be credited with such increase; or

                  (B) both:

                                       21
<PAGE>

                        (i) a written order from a Participant or an Indirect
                  Participant given to the Depositary in accordance with the
                  Applicable Procedures directing the Depositary to cause to be
                  issued a Definitive Note in an amount equal to the beneficial
                  interest to be transferred or exchanged; and

                        (ii) instructions given by the Depositary to the
                  Registrar containing information regarding the Person in whose
                  name such Definitive Note shall be registered to effect the
                  transfer or exchange referred to in (1) above; provided that
                  in no event shall Definitive Notes be issued upon the transfer
                  or exchange of beneficial interests in the Regulation S
                  Temporary Global Note prior to (A) the expiration of the
                  Restricted Period and (B) the receipt by the Registrar of any
                  certificates required pursuant to Rule 903 under the
                  Securities Act. Upon consummation of an Exchange Offer by the
                  Company in accordance with Section 2.06(f) hereof, the
                  requirements of this Section 2.06(b)(2) shall be deemed to
                  have been satisfied upon receipt by the Registrar of the
                  instructions contained in the Letter of Transmittal delivered
                  by the Holder of such beneficial interests in the Restricted
                  Global Notes. 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(s) pursuant
                  to Section 2.06(h) hereof.

            (3) Transfer of Beneficial Interests to Another Restricted Global
      Note. A beneficial interest in any Restricted Global Note may be
      transferred to a Person who takes delivery thereof in the form of a
      beneficial interest in another Restricted Global Note if the transfer
      complies with the requirements of Section 2.06(b)(2) above and the
      Registrar receives the following:

                  (A) if the transferee will take delivery in the form of a
            beneficial interest in the 144A Global Note, then the transferor
            must deliver a certificate in the form of Exhibit B hereto,
            including the certifications in item (1) thereof;

                  (B) if the transferee will take delivery in the form of a
            beneficial interest in the Regulation S Temporary Global Note or the
            Regulation S Permanent Global Note, then the transferor must deliver
            a certificate in the form of Exhibit B hereto, including the
            certifications in item (2) thereof; and

                  (C) if the transferee will take delivery in the form of a
            beneficial interest in the IAI Global Note, then the transferor must
            deliver a certificate in the form of Exhibit B hereto, including the
            certifications, certificates and Opinion of Counsel required by item
            (3) thereof, if applicable.

            (4) Transfer and Exchange of Beneficial Interests in a Restricted
      Global Note for Beneficial Interests in an Unrestricted Global Note. A
      beneficial interest in any 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 2.06(b)(2) above and:

                  (A) such exchange or transfer is effected pursuant to the
            Exchange Offer in accordance with the Registration Rights Agreement
            and the holder of the beneficial interest to be transferred, in the
            case of an exchange, or the transferee, in the case of a

                                       22
<PAGE>

            transfer, certifies in the applicable Letter of Transmittal that it
            is not (i) a Broker-Dealer, (ii) a Person participating in the
            distribution of the Exchange Notes or (iii) a Person who is an
            affiliate (as defined in Rule 144) of the Company;

                  (B) such transfer is effected pursuant to the Shelf
            Registration Statement in accordance with the Registration Rights
            Agreement;

                  (C) such transfer is effected by a Broker-Dealer pursuant to
            the Exchange Offer Registration Statement in accordance with the
            Registration Rights Agreement; or

                  (D) the Registrar receives the following:

                        (i) 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 of Exhibit C
                  hereto, including the certifications in item (1)(a) thereof;
                  or

                        (ii) 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 of Exhibit B
                  hereto, including the certifications in item (4) thereof;

            and, in each such case set forth in this subparagraph (D), if the
            Registrar so requests or if the Applicable Procedures 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 Private Placement Legend are no longer required in
            order to maintain compliance with the Securities Act.

      If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, 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 pursuant to subparagraph (B) or (D)
above.

      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 or Exchange of Beneficial Interests for Definitive Notes.

            (1) Beneficial Interests in Restricted Global Notes to Restricted
      Definitive Notes. If any holder of a beneficial interest in a Restricted
      Global Note proposes to exchange such beneficial interest for a Restricted
      Definitive Note or to transfer such beneficial interest to a Person who
      takes delivery thereof in the form of a Restricted Definitive Note, then,
      upon receipt by the Registrar of the following documentation:

                  (A) if the holder of such beneficial interest in a Restricted
            Global Note proposes to exchange such beneficial interest for a
            Restricted Definitive Note, a certificate from such holder in the
            form of Exhibit C hereto, including the certifications in item
            (2)(a) thereof;

                                       23
<PAGE>

                  (B) if such beneficial interest is being transferred to a QIB
            in accordance with Rule 144A, a certificate to the effect set forth
            in Exhibit B hereto, including the certifications in item (1)
            thereof;

                  (C) if such beneficial interest is being transferred to a
            Non-U.S. Person in an offshore transaction in accordance with Rule
            903 or Rule 904, a certificate to the effect set forth in Exhibit B
            hereto, including the certifications in item (2) thereof;

                  (D) if such beneficial interest is being transferred pursuant
            to an exemption from the registration requirements of the Securities
            Act in accordance with Rule 144, a certificate to the effect set
            forth in Exhibit B hereto, including the certifications in item
            (3)(a) thereof;

                  (E) if such beneficial interest 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 to the
            effect set forth in Exhibit B hereto, including the certifications,
            certificates and Opinion of Counsel required by item (3) thereof, if
            applicable;

                  (F) if such beneficial interest is being transferred to the
            Company or any of its Subsidiaries, a certificate to the effect set
            forth in Exhibit B hereto, including the certifications in item
            (3)(b) thereof; or

                  (G) if such beneficial interest is being transferred pursuant
            to an effective registration statement under the Securities Act, a
            certificate to the effect set forth in Exhibit B hereto, including
            the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.

            (2) Beneficial Interests in Regulation S Temporary Global Note to
      Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a
      beneficial interest in the Regulation S Temporary Global Note may not be
      exchanged for a Definitive Note or transferred to a Person who takes
      delivery thereof in the form of a Definitive Note prior to (A) the
      expiration of the Restricted Period and (B) the receipt by the Registrar
      of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the
      Securities Act, except in the case of a transfer pursuant to an exemption
      from the registration requirements of the Securities Act other than Rule
      903 or Rule 904.

            (3) Beneficial Interests in Restricted Global Notes to Unrestricted
      Definitive Notes. A holder of a beneficial interest in a Restricted Global
      Note may exchange such beneficial interest

                                       24
<PAGE>

      for an Unrestricted Definitive Note or may transfer such beneficial
      interest to a Person who takes delivery thereof in the form of an
      Unrestricted Definitive Note only if:

                  (A) such exchange or transfer is effected pursuant to the
            Exchange Offer in accordance with the Registration Rights Agreement
            and the holder of such beneficial interest, in the case of an
            exchange, or the transferee, in the case of a transfer, certifies in
            the applicable Letter of Transmittal that it is not (i) a
            Broker-Dealer, (ii) a Person participating in the distribution of
            the Exchange Notes or (iii) a Person who is an affiliate (as defined
            in Rule 144) of the Company;

                  (B) such transfer is effected pursuant to the Shelf
            Registration Statement in accordance with the Registration Rights
            Agreement;

                  (C) such transfer is effected by a Broker-Dealer pursuant to
            the Exchange Offer Registration Statement in accordance with the
            Registration Rights Agreement; or

                  (D) the Registrar receives the following:

                        (i) if the holder of such beneficial interest in a
                  Restricted Global Note proposes to exchange such beneficial
                  interest for an Unrestricted Definitive Note, a certificate
                  from such holder in the form of Exhibit C hereto, including
                  the certifications in item (1)(b) thereof; or

                        (ii) 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 an Unrestricted Definitive Note, a certificate from
                  such holder in the form of Exhibit B hereto, including the
                  certifications in item (4) thereof;

            and, in each such case set forth in this subparagraph (D), if the
            Registrar so requests or if the Applicable Procedures 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 Private Placement Legend are no longer required in
            order to maintain compliance with the Securities Act.

            (4) Beneficial Interests in Unrestricted Global Notes to
      Unrestricted Definitive Notes. If any holder of a beneficial interest in
      an Unrestricted Global Note proposes to exchange such beneficial interest
      for a Definitive Note or to transfer such beneficial interest to a Person
      who takes delivery thereof in the form of a Definitive Note, then, upon
      satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the
      Trustee will cause the aggregate principal amount of the applicable Global
      Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
      Company will execute and the Trustee will authenticate and deliver to the
      Person designated in the instructions a Definitive Note in the appropriate
      principal amount. Any Definitive Note issued in exchange for a beneficial
      interest pursuant to this Section 2.06(c)(4) will be registered in such
      name or names and in such authorized denomination or denominations as the
      holder of such beneficial interest requests through instructions to the
      Registrar from or through the Depositary and the Participant or Indirect
      Participant. The Trustee will deliver such Definitive Notes to the Persons
      in whose names such Notes are so registered. Any Definitive Note issued in
      exchange for a beneficial interest pursuant to this Section 2.06(c)(4)
      will not bear the Private Placement Legend.

                                       25
<PAGE>

      (d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

            (1) Restricted Definitive Notes to Beneficial Interests in
      Restricted Global Notes. If any Holder of a Restricted Definitive Note
      proposes to exchange such Note for a beneficial interest in a Restricted
      Global Note or to transfer such Restricted Definitive Notes 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 Restricted Definitive Note proposes
            to exchange such Note for a beneficial interest in a Restricted
            Global Note, a certificate from such Holder in the form of Exhibit C
            hereto, including the certifications in item (2)(b) thereof;

                  (B) if such Restricted Definitive Note is being transferred to
            a QIB in accordance with Rule 144A, a certificate to the effect set
            forth in Exhibit B hereto, including the certifications in item (1)
            thereof;

                  (C) if such Restricted Definitive Note is being transferred to
            a Non-U.S. Person in an offshore transaction in accordance with Rule
            903 or Rule 904, a certificate to the effect set forth in Exhibit B
            hereto, including the certifications in item (2) thereof;

                  (D) if such Restricted Definitive Note is being transferred
            pursuant to an exemption from the registration requirements of the
            Securities Act in accordance with Rule 144, a certificate to the
            effect set forth in Exhibit B hereto, including the certifications
            in item (3)(a) thereof;

                  (E) if such Restricted Definitive 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
            to the effect set forth in Exhibit B hereto, including the
            certifications, certificates and Opinion of Counsel required by item
            (3) thereof, if applicable;

                  (F) if such Restricted Definitive Note is being transferred to
            the Company or any of its Subsidiaries, a certificate to the effect
            set forth in Exhibit B hereto, including the certifications in item
            (3)(b) thereof; or

                  (G) if such Restricted Definitive Note is being transferred
            pursuant to an effective registration statement under the Securities
            Act, a certificate to the effect set forth in Exhibit B hereto,
            including the certifications in item (3)(c) thereof,

            the Trustee will cancel the Restricted Definitive Note, increase or
            cause to be increased the aggregate principal amount of, in the case
            of clause (A) above, the appropriate Restricted Global Note, in the
            case of clause (B) above, the 144A Global Note, in the case of
            clause (C) above, the Regulation S Global Note, and in all other
            cases, the IAI Global Note.

            (2) Restricted Definitive Notes to Beneficial Interests in
      Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
      exchange such Note for a beneficial interest in an Unrestricted Global
      Note or transfer such Restricted Definitive Note to a Person who takes
      delivery thereof in the form of a beneficial interest in an Unrestricted
      Global Note only if:

                                       26
<PAGE>

                  (A) such exchange or transfer is effected pursuant to the
            Exchange Offer in accordance with the Registration Rights Agreement
            and the Holder, in the case of an exchange, or the transferee, in
            the case of a transfer, certifies in the applicable Letter of
            Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
            participating in the distribution of the Exchange Notes or (iii) a
            Person who is an affiliate (as defined in Rule 144) of the Company;

                  (B) such transfer is effected pursuant to the Shelf
            Registration Statement in accordance with the Registration Rights
            Agreement;

                  (C) such transfer is effected by a Broker-Dealer pursuant to
            the Exchange Offer Registration Statement in accordance with the
            Registration Rights Agreement; or

                  (D) the Registrar receives the following:

                        (i) if the Holder of such Definitive Notes proposes to
                  exchange such Notes for a beneficial interest in the
                  Unrestricted Global Note, a certificate from such Holder in
                  the form of Exhibit C hereto, including the certifications in
                  item (1)(c) thereof; or

                        (ii) if the Holder of such Definitive Notes proposes to
                  transfer such Notes to a Person who shall take delivery
                  thereof in the form of a beneficial interest in the
                  Unrestricted Global Note, a certificate from such Holder in
                  the form of Exhibit B hereto, including the certifications in
                  item (4) thereof;

            and, in each such case set forth in this subparagraph (D), if the
            Registrar so requests or if the Applicable Procedures 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 Private Placement Legend are no longer required in
            order to maintain compliance with the Securities Act.

            Upon satisfaction of the conditions of any of the subparagraphs in
      this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and
      increase or cause to be increased the aggregate principal amount of the
      Unrestricted Global Note.

            (3) Unrestricted Definitive Notes to Beneficial Interests in
      Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
      exchange such Note for a beneficial interest in an Unrestricted Global
      Note or transfer such Definitive Notes 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 Trustee will 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 exchange or transfer from a Definitive Note to a
      beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D)
      or (3) above at a time when an Unrestricted Global Note has not yet been
      issued, the Company will issue and, upon receipt of an Authentication
      Order in accordance with Section 2.02 hereof, the Trustee will
      authenticate one or more Unrestricted Global Notes in an aggregate
      principal amount equal to the principal amount of Definitive Notes so
      transferred.

                                       27
<PAGE>

      (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 2.06(e), the Registrar will register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder must 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
must provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).

            (1) Restricted Definitive Notes to Restricted Definitive Notes. Any
      Restricted Definitive Note may be transferred to and registered in the
      name of Persons who take delivery thereof in the form of a Restricted
      Definitive Note if the Registrar receives the following:

                  (A) if the transfer will be made pursuant to Rule 144A, then
            the transferor must deliver a certificate in the form of Exhibit B
            hereto, including the certifications in item (1) thereof;

                  (B) if the transfer will be made pursuant to Rule 903 or Rule
            904, then the transferor must deliver a certificate in the form of
            Exhibit B hereto, including the certifications in item (2) thereof;
            and

                  (C) if the transfer will be made pursuant to any other
            exemption from the registration requirements of the Securities Act,
            then the transferor must deliver a certificate in the form of
            Exhibit B hereto, including the certifications, certificates and
            Opinion of Counsel required by item (3) thereof, if applicable.

            (2) Restricted Definitive Notes to Unrestricted Definitive Notes.
      Any Restricted Definitive Note may be exchanged by the Holder thereof for
      an Unrestricted Definitive Note or transferred to a Person or Persons who
      take delivery thereof in the form of an Unrestricted Definitive Note if:

                  (A) such exchange or transfer is effected pursuant to the
            Exchange Offer in accordance with the Registration Rights Agreement
            and the Holder, in the case of an exchange, or the transferee, in
            the case of a transfer, certifies in the applicable Letter of
            Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
            participating in the distribution of the Exchange Notes or (iii) a
            Person who is an affiliate (as defined in Rule 144) of the Company;

                  (B) any such transfer is effected pursuant to the Shelf
            Registration Statement in accordance with the Registration Rights
            Agreement;

                  (C) any such transfer is effected by a Broker-Dealer pursuant
            to the Exchange Offer Registration Statement in accordance with the
            Registration Rights Agreement; or

                  (D) the Registrar receives the following:

                        (i) if the Holder of such Restricted Definitive Notes
                  proposes to exchange such Notes for an Unrestricted Definitive
                  Note, a certificate from such Holder in the form of Exhibit C
                  hereto, including the certifications in item (1)(d) thereof;
                  or

                                       28
<PAGE>

                        (ii) if the Holder of such Restricted Definitive Notes
                  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 of Exhibit B
                  hereto, including the certifications in item (4) thereof;

            and, in each such case set forth in this subparagraph (D), if the
            Registrar so requests, 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 Private
            Placement Legend are no longer required in order to maintain
            compliance with the Securities Act.

            (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
      A Holder of Unrestricted Definitive Notes may transfer such Notes to a
      Person who takes delivery thereof in the form of an Unrestricted
      Definitive Note. 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.

      (f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company will issue and,
upon receipt of an Authentication Order in accordance with Section 2.02 hereof,
the Trustee will authenticate:

            (1) one or more Unrestricted Global Notes in an aggregate principal
      amount equal to the principal amount of the beneficial interests in the
      Restricted Global Notes accepted for exchange in the Exchange Offer by
      Persons that certify in the applicable Letters of Transmittal that (A)
      they are not Broker-Dealers, (B) they are not participating in a
      distribution of the Exchange Notes and (C) they are not affiliates (as
      defined in Rule 144) of the Company; and

            (2) Unrestricted Definitive Notes in an aggregate principal amount
      equal to the principal amount of the Restricted Definitive Notes accepted
      for exchange in the Exchange Offer by Persons that certify in the
      applicable Letters of Transmittal that (A) they are not Broker-Dealers,
      (B) they are not participating in a distribution of the Exchange Notes and
      (C) they are not affiliates (as defined in Rule 144) of the Company.

      Concurrently with the issuance of such Notes, the Trustee will cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company will execute and the Trustee will
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Unrestricted Definitive Notes in the appropriate principal
amount.

      (g) Legends. The following legends will appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.

            (1) Private Placement Legend.

                  (A) Except as permitted by subparagraph (B) below, each Global
            Note and each Definitive Note (and all Notes issued in exchange
            therefor or substitution thereof) shall bear the legend in
            substantially the following form:

"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND THE

                                       29
<PAGE>

SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF American REal Estate Partners, L.P. AND AMERICAN REAL ESTATE FINANCE
CORP. THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) (a) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (c) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501 (a) (1), (2), (3) OR (7) OF THE SECURITIES ACT) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO AMERICAN REAL
ESTATE PARTNERS, L.P. THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
AMERICAN REAL ESTATE PARTNERS, L.P. SO REQUESTS), (2) TO AMERICAN REAL ESTATE
PARTNERS, L.P. OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. IF
AT ANY TIME THE NEVADA GAMING COMMISSION OR THE NEW JERSEY CASINO CONTROL
COMMISSION FIND THAT A HOLDER OF THIS SECURITY IS UNSUITABLE TO CONTINUE TO OWN
THE SECURITY, AMERICAN REAL ESTATE PARTNERS, L.P. SHALL HAVE THE RIGHT TO
REQUIRE SUCH HOLDER TO DISPOSE OF SUCH SECURITY AS PROVIDED BY THE GAMING LAWS
OF THE STATE OF NEVADA OR THE STATE OF NEW JERSEY AND THE RESPECTIVE REGULATIONS
PROMULGATED THEREUNDER. ALTERNATIVELY, AMERICAN REAL ESTATE PARTNERS, L.P. SHALL
HAVE THE RIGHT TO REDEEM THE SECURITY FROM THE HOLDER AT A PRICE SPECIFIED IN
THE INDENTURE GOVERNING THE SECURITY. NEVADA AND NEW JERSEY GAMING LAWS AND
REGULATIONS RESTRICT THE RIGHT UNDER CERTAIN CIRCUMSTANCES: (A) TO PAY OR
RECEIVE ANY INTEREST UPON SUCH SECURITY; (B) TO EXERCISE, DIRECTLY OR THROUGH
ANY TRUSTEE OR NOMINEE, ANY VOTING RIGHT CONFERRED BY SUCH SECURITY; OR (C) TO
RECEIVE ANY REMUNERATION IN ANY FORM FROM AMERICAN REAL ESTATE PARTNERS, L.P.,
FOR SERVICES RENDERED OR OTHERWISE."

                  (B) Notwithstanding the foregoing, any Global Note or
            Definitive Note issued pursuant to subparagraphs (b)(4), (c)(3),
            (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06
            (and all Notes issued in exchange therefor or substitution thereof)
            will not bear the Private Placement Legend.

            (2) Global Note Legend. Each Global Note will bear a legend in
      substantially the following form:

                                       30
<PAGE>

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF AMERICAN REAL ESTATE PARTNERS, L.P.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), 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 MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

            (3) Regulation S Temporary Global Note Legend. The Regulation S
      Temporary Global Note will bear a Legend in substantially the following
      form:

"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."

      (h) Cancellation and/or Adjustment of Global Notes. 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 will be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. 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 will be
reduced accordingly and an endorsement will be made on such Global Note by the
Trustee or by the Depositary 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 will be increased accordingly and
an endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.

      (i) General Provisions Relating to Transfers and Exchanges.

                                       31
<PAGE>

            (1) To permit registrations of transfers and exchanges, the Company
      will execute and the Trustee will authenticate Global Notes and Definitive
      Notes upon receipt of an Authentication Order in accordance with Section
      2.02 hereof or at the Registrar's request.

            (2) No service charge will be made to a Holder of a beneficial
      interest in a Global Note or to a Holder of a Definitive Note for any
      registration of transfer or exchange, but the Company may require payment
      of a sum sufficient to cover any transfer tax or similar governmental
      charge payable in connection therewith (other than any such transfer taxes
      or similar governmental charge payable upon exchange or transfer pursuant
      to Sections 2.10, 3.06, 4.15 and 9.05 hereof).

            (3) The Registrar will not be required to register the transfer of
      or exchange of any Note selected for redemption in whole or in part,
      except the unredeemed portion of any Note being redeemed in part.

            (4) All Global Notes and Definitive Notes issued upon any
      registration of transfer or exchange of Global Notes or Definitive Notes
      will be the valid obligations of the Company, evidencing the same debt,
      and entitled to the same benefits under this Indenture, as the Global
      Notes or Definitive Notes surrendered upon such registration of transfer
      or exchange.

            (5) Neither the Registrar nor the Company will be required:

                  (A) to issue, to register the transfer of or to exchange any
            Notes during a period beginning at the opening of business 15 days
            before the day of any selection of Notes for redemption under
            Section 3.02 hereof and ending at the close of business on the day
            of selection;

                  (B) to register the transfer of or to exchange any Note
            selected for redemption in whole or in part, except the unredeemed
            portion of any Note being redeemed in part; or

                  (C) to register the transfer of or to exchange a Note between
            a record date and the next succeeding interest payment date.

            (6) Prior to due presentment for the registration of a transfer of
      any Note, the Trustee, any Agent and the Company may deem and treat the
      Person in whose name any Note is registered as the absolute owner of such
      Note for the purpose of receiving payment of principal of and interest on
      such Notes and for all other purposes, and none of the Trustee, any Agent
      or the Company shall be affected by notice to the contrary.

            (7) The Trustee will authenticate Global Notes and Definitive Notes
      in accordance with the provisions of Section 2.02 hereof.

            (8) All certifications, certificates and Opinions of Counsel
      required to be submitted to the Registrar pursuant to this Section 2.06 to
      effect a registration of transfer or exchange may be submitted by
      facsimile.

Section 2.07 Replacement Notes.

      If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company will issue and the Trustee, upon receipt of an
Authentication Order, will authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by

                                       32
<PAGE>

the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may
charge for its expenses in replacing a Note.

      Every replacement Note is an additional obligation of the Company and will
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.

Section 2.08 Outstanding Notes.

      The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.08
as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Sections 3.07(a) or 9.02
hereof.

      If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a protected purchaser.

      If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.

      If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes will
be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09 Treasury Notes.

      In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Guarantor, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Guarantor, will be considered as though not outstanding, except that for the
purposes of determining whether the Trustee will be protected in relying on any
such direction, waiver or consent, only Notes that the Trustee knows are so
owned will be so disregarded.

Section 2.10 Temporary Notes.

      Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, will
authenticate temporary Notes. Temporary Notes will be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as may be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company will prepare and the Trustee
will authenticate definitive Notes in exchange for temporary Notes.

      Holders of temporary Notes will be entitled to all of the benefits of this
Indenture.

Section 2.11 Cancellation.

      The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent will forward to the Trustee any Notes surrendered
to them for registration of transfer,

                                       33
<PAGE>

exchange or payment. The Trustee and no one else will cancel all Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and will destroy canceled Notes (subject to the record retention
requirement of the Exchange Act). Certification of the destruction of all
canceled Notes will be delivered to the Company. The Company may not issue new
Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation.

Section 2.12 Defaulted Interest.

      If the Company defaults in a payment of interest on the Notes, it will pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company will notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company will fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
may be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) will mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.

                                    ARTICLE 3
                            REDEMPTION AND PREPAYMENT

Section 3.01 Notices to Trustee.

      If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 15
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth:

            (1) the clause of this Indenture pursuant to which the redemption
      shall occur;

            (2) the redemption date;

            (3) the principal amount of Notes to be redeemed; and

            (4) the redemption price.

Section 3.02 Selection of Notes to Be Redeemed or Purchased.

      If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee will select Notes for redemption or
purchase on a pro rata basis except:

            (1) if the Notes are listed on any national securities exchange, in
      compliance with the requirements of the principal national securities
      exchange on which the Notes are listed; or

            (2) if otherwise required by law.

      In the event of partial redemption or purchase by lot, the particular
Notes to be redeemed or purchased will be selected, unless otherwise provided
herein, not less than 15 nor more than 60 days prior to the redemption or
purchase date by the Trustee from the outstanding Notes not previously called
for redemption or purchase.

                                       34
<PAGE>

      The Trustee will promptly notify the Company in writing of the Notes
selected for redemption or purchase and, in the case of any Note selected for
partial redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of Notes selected will be in amounts of $1,000 or
whole multiples of $1,000; except that if all of the Notes of a Holder are to be
redeemed or purchased, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except
as provided in the preceding sentence, provisions of this Indenture that apply
to Notes called for redemption or purchase also apply to portions of Notes
called for redemption or purchase.

Section 3.03 Notice of Redemption.

      The Company will mail or cause to be mailed, at least 15 days but not more
than 60 days before a redemption date, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8
or 11 hereof.

      The notice will identify the Notes to be redeemed and will state:

            (1) the redemption date;

            (2) the redemption price;

            (3) if any Note is being redeemed in part, the portion of the
      principal amount of such Note to be redeemed and that, after the
      redemption date upon surrender of such Note, a new Note or Notes in
      principal amount equal to the unredeemed portion will be issued upon
      cancellation of the original Note;

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

            (5) that Notes called for redemption must be surrendered to the
      Paying Agent to collect the redemption price;

            (6) that, unless the Company defaults in making such redemption
      payment, interest on Notes called for redemption ceases to accrue on and
      after the redemption date;

            (7) the paragraph of the Notes and/or Section of this Indenture
      pursuant to which the Notes called for redemption are being redeemed; and

            (8) that no representation is made as to the correctness or accuracy
      of the CUSIP number, if any, listed in such notice or printed on the
      Notes.

      At the Company's request, the Trustee will give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
has delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

Section 3.04 Effect of Notice of Redemption.

                                       35
<PAGE>

      Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.

Section 3.05 Deposit of Redemption or Purchase Price.

      One Business Day prior to the redemption or purchase date, the Company
will deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption or purchase price of and accrued interest and Liquidated Damages,
if any, on all Notes to be redeemed or purchased on that date. The Trustee or
the Paying Agent will promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption or purchase price of, and accrued interest and
Liquidated Damages, if any, on, all Notes to be redeemed or purchased.

      If the Company complies with the provisions of the preceding paragraph, on
and after the redemption or purchase date, interest will cease to accrue on the
Notes or the portions of Notes called for redemption or purchase. If a Note is
redeemed or purchased on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption or purchase is
not so paid upon surrender for redemption or purchase because of the failure of
the Company to comply with the preceding paragraph, interest shall be paid on
the unpaid principal, from the redemption or purchase date until such principal
is paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.

Section 3.06 Notes Redeemed or Purchased in Part.

      Upon surrender of a Note that is redeemed or purchased in part, the
Company will issue and, upon receipt of an Authentication Order, the Trustee
will authenticate for the Holder at the expense of the Company a new Note equal
in principal amount to the unredeemed or unpurchased portion of the Note
surrendered.

Section 3.07 Optional Redemption.

      (a) At any time prior to June 1, 2007, the Company may on one or more
occasions redeem up to 35% of the aggregate principal amount of Notes (including
Additional Notes) issued under this Indenture at a redemption price of 108.125%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of one or
more Equity Offerings; provided, however, that:

            (1) at least 65% of the aggregate principal amount of Notes issued
      under this Indenture remains outstanding immediately after the occurrence
      of such redemption (excluding Notes held by AREP and its Subsidiaries
      (including any Guarantor)); and

            (2) the redemption occurs within 60 days of the date of the closing
      of such Equity Offering.

      (b) Except pursuant to the preceding paragraph, the Notes will not be
redeemable at the Company's option prior to June 1, 2008.

                                       36
<PAGE>

      (c) On or after June 1, 2008, the Company may redeem all or a part of the
Notes upon not less than 15 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, on the Notes
redeemed, to the applicable redemption date, if redeemed during the twelve-month
period beginning on one of the years indicated below:

<TABLE>
<CAPTION>
Year                                                                                      Percentage
----                                                                                      ----------
<S>                                                                                       <C>
2008.............................................................................          104.063%
2009.............................................................................          102.031%
2010 and thereafter..............................................................          100.000%
</TABLE>

      Unless the Company defaults in the payment of the redemption price,
interest will cease to accrue on the Notes or portions thereof called for
redemption on the applicable redemption date.

      (d) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08 Redemption Pursuant to Gaming Laws.

      (a) Notwithstanding any other provision of this Article 3, if any Gaming
Authority requires that a Holder or Beneficial Owner of Notes be licensed,
qualified or found suitable under any applicable Gaming Law and such Holder or
Beneficial Owner:

            (1) fails to apply for a license, qualification or a finding of
      suitability within 30 days (or such shorter period as may be required by
      the applicable Gaming Authority) after being requested to do so by the
      Gaming Authority; or

            (2) is denied such license or qualification or not found suitable;

      AREP shall then have the right, at its option:

            (1) to require each such Holder or Beneficial Owner to dispose of
      its Notes within 30 days (or such earlier date as may be required by the
      applicable Gaming Authority) of the occurrence of the event described in
      clause (1) or (2) above, or

            (2) to redeem the Notes of each such Holder or Beneficial Owner, in
      accordance with Rule 14e-1, if applicable, at a redemption price equal to
      the lowest of:

                  (a) the principal amount thereof, together with accrued and
      unpaid interest and Liquidated Damages, if any, to the earlier of the date
      of redemption, the date 30 days after such Holder or Beneficial Owner is
      required to apply for a license, qualification or finding of suitability
      (or such shorter period that may be required by any applicable Gaming
      Authority) if such Holder or Beneficial Owner fails to do so ("Application
      Date") or of the date of denial of license or qualification or of the
      finding of unsuitability by such Gaming Authority;

                  (b) the price at which such Holder or Beneficial Owner
      acquired the Notes, together with accrued and unpaid interest and
      Liquidated Damages, if any, to the earlier of the date of redemption, the
      Application Date or the date of the denial of license or qualification or
      of the finding of unsuitability by such Gaming Authority; and

                                       37
<PAGE>

                  (c) such other lesser amount as may be required by any Gaming
      Authority.

      Immediately upon a determination by a Gaming Authority that a Holder or
Beneficial Owner of the Notes will not be licensed, qualified or found suitable
and must dispose of the Notes, the Holder or Beneficial Owner will, to the
extent required by applicable Gaming Laws, have no further right:

            (1) to exercise, directly or indirectly, through any trustee or
      nominee or any other person or entity, any right conferred by the Notes,
      the Note Guarantee or this Indenture; or

            (2) to receive any interest, Liquidated Damages, dividend, economic
      interests or any other distributions or payments with respect to the Notes
      and the Note Guarantee or any remuneration in any form with respect to the
      Notes and the Note Guarantee from the Company, any Note Guarantor or the
      Trustee, except the redemption price referred to above.

      (b) AREP shall notify the Trustee in writing of any such redemption as
soon as practicable. Any Holder or Beneficial Owner that is required to apply
for a license, qualification or a finding of suitability will be responsible for
all fees and costs of applying for and obtaining the license, qualification or
finding of suitability and of any investigation by the applicable Gaming
Authorities and the Company and any Note Guarantor will not reimburse any Holder
or Beneficial Owner for such expense.

      (c) In connection with any redemption pursuant to this Section 3.08, and
except as may be required by a Gaming Authority, the Company shall be required
to comply with Sections 3.01 through 3.06 hereof.

Section 3.09 Mandatory Redemption.

      The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.

                                    ARTICLE 4
                                    COVENANTS

Section 4.01 Payment of Notes.

      The Company shall pay or cause to be paid the principal of, premium, if
any, and interest and Liquidated Damages, if any, on, the Notes on the dates and
in the manner provided in the Notes. Principal, premium, if any, and interest
and Liquidated Damages, if any will be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.

      The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.

Section 4.02 Maintenance of Office or Agency.

                                       38
<PAGE>

      The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company 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 Company
fails to maintain any such required office or agency or fails 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.

      The Company 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 Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company 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.

      The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03 Reports.

      Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Company shall furnish to the Holders of Notes
or cause the Trustee to furnish to the Holders of Notes, within the time periods
specified in the SEC's rules and regulations:

            (1) all quarterly and annual reports that would be required to be
      filed with the SEC on Forms 10-Q and 10-K if the Company were required to
      file such reports; and

            (2) all current reports that would be required to be filed with the
      SEC on Form 8-K if the Company were required to file such reports.

      All such reports shall be prepared in all material respects in accordance
with all of the rules and regulations applicable to such reports. Each annual
report on Form 10-K shall include a report on the Company's consolidated
financial statements by the Company's certified independent accountants. In
addition, the Company shall file a copy of each of the reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the rules and regulations applicable to such reports
(unless the SEC will not accept such a filing) and, if the SEC will not accept
such a filing, shall post the reports on its website within those time periods.

      If, at any time, the Company is no longer subject to the periodic
reporting requirements of the Exchange Act for any reason, the Company shall
nevertheless continue filing the reports specified in the preceding paragraphs
of this Section 4.03 with the SEC within the time periods specified above unless
the SEC will not accept such a filing. The Company shall not take any action for
the purpose of causing the SEC not to accept any such filings. If,
notwithstanding the foregoing, the SEC will not accept the Company's filings for
any reason, the Company shall post the reports referred to in the preceding
paragraphs on its website within the time periods that would apply if the
Company were required to file those reports with the SEC.

      In addition, the Company agrees that, for so long as any Notes remain
outstanding, if at any time it is not required to file with the SEC the reports
required by the preceding paragraphs, it shall furnish to

                                       39
<PAGE>

the Holders of Notes and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.

Section 4.04 Compliance Certificate.

      (a) The Company and each Guarantor (to the extent that such Guarantor is
so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default has occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.

      (b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.

      (c) So long as any of the Notes are outstanding, the Company shall deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.

Section 4.05 Taxes.

      The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.

Section 4.06 Stay, Extension and Usury Laws.

      The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the

                                       40
<PAGE>

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 has been enacted.

Section 4.07 Restricted Payments.

      AREP shall not, and shall not permit any of its Subsidiaries (including
any Guarantor) to:

            (1) declare or pay any dividend or make any other distribution on
      account of AREP's or any of its Subsidiaries' (including any Guarantor's)
      Equity Interests or to the Holders of AREP's or any of its Subsidiaries'
      (including AREH's) Equity Interests in their capacity as such (other than
      dividends or distributions payable in Equity Interests (other than
      Disqualified Stock) of AREP or to AREP or a Subsidiary of AREP (including
      AREH));

            (2) purchase, redeem or otherwise acquire or retire for value
      (including, without limitation, in connection with any merger or
      consolidation involving AREP) any Equity Interests of AREP; or

            (3) make any payment on or with respect to, or purchase, redeem,
      defease or otherwise acquire or retire for value any Indebtedness of AREP
      or any Guarantor that is contractually subordinated to the Notes or to any
      Note Guarantee (excluding any intercompany Indebtedness between or among
      AREP and any of its Subsidiaries (including any Guarantor)), except a
      payment of interest, Other Liquidated Damages or principal at the Stated
      Maturity on such subordinated Indebtedness (all such payments and other
      actions set forth in these clauses (1) through (3) (except as excluded
      therein) above being collectively referred to as "Restricted Payments"),

            unless, at the time of and after giving effect to such Restricted
      Payment:

            (1) no Default or Event of Default has occurred and is continuing or
      would occur as a consequence of such Restricted Payment;

            (2) AREP or any Guarantor would, at the time of such Restricted
      Payment and after giving pro forma effect thereto as if such Restricted
      Payment had been made at the beginning of the most recently ended
      four-quarter period for which financial statements are available, have
      been permitted to incur at least $1.00 of additional Indebtedness pursuant
      to Section 4.09(a); and

            (3) such Restricted Payment, together with the aggregate amount of
      all other Restricted Payments made by AREP and its Subsidiaries (including
      any Guarantor) after the Issuance Date (excluding Restricted Payments
      permitted by clauses (2), (3), (4), (6) and (8) of the second paragraph of
      Section 4.07) is less than the sum, without duplication, of.

                  (A) 50% of the Consolidated Net Income of AREP for the period
            (taken as one accounting period) from July 1, 2006 to the end of
            AREP's most recently ended fiscal quarter for which financial
            statements are available at the time of such Restricted Payment (or,
            if such Consolidated Net Income for such period is a deficit, less
            100% of such deficit); provided, however, that to the extent any
            payments of Tax Amounts were not deducted in the calculation of
            Consolidated Net Income during the applicable period, for purposes
            of this clause (a), such payments of Tax Amounts shall be deducted
            from Consolidated Net Income, plus

                                       41
<PAGE>

                  (B) 100% of the aggregate net cash proceeds received by AREP
            since the date of this Indenture as a contribution to its equity
            capital or from the issue or sale of Equity Interests of AREP
            (excluding Disqualified Stock) or from the issue or sale of
            convertible or exchangeable Disqualified Stock or convertible or
            exchangeable debt securities of AREP that have been converted into
            or exchanged for such Equity Interests (other than Equity Interests
            or Disqualified Stock or debt securities sold to a Subsidiary of
            AREP (including AREH)).

      So long as no Default or Event of Default has occurred and is continuing
or would be caused thereby (except with respect to clauses (6) and (8), which
payments shall be permitted notwithstanding a Default or Event of Default), the
preceding provisions shall not prohibit:

            (1) the payment of any dividend or the consummation of any
      irrevocable redemption or payment within 60 days after the date of
      declaration of the dividend or giving of the redemption notice or becoming
      irrevocably obligated to make such payment, as the case may be, if at the
      date of declaration or notice or becoming irrevocably obligated to make
      such payment, the dividend or payment would have complied with the
      provisions of this Indenture;

            (2) the making of any Restricted Payment in exchange for, or out of
      the net cash proceeds of the substantially concurrent sale (other than to
      a Subsidiary of AREP (including any Guarantor)) of, Equity Interests
      (other than Disqualified Stock) or from the substantially concurrent
      contribution of equity capital to AREP (including any contribution of
      equity capital by or to, or sale of Equity Interests of a successor or
      substitute entity pursuant to Section 5.01); provided, however, that the
      amount of any such net cash proceeds that are utilized for any such
      redemption, repurchase, retirement, defeasance or other acquisition shall
      be excluded from clause (3)(B) of the preceding paragraph;

            (3) the repurchase, redemption, defeasance or other acquisition or
      retirement for value of Indebtedness of AREP or any Guarantor that is
      contractually subordinated to the Notes with the net cash proceeds from a
      substantially concurrent incurrence of Permitted Refinancing Indebtedness;

            (4) the declaration or payment of any dividend or distribution by a
      Subsidiary of AREP (including any Guarantor) to the holders of its Equity
      Interests; provided, that if any such dividend or distribution is paid to
      an Affiliate of the Principal (other than AREP or any of its Subsidiaries
      (including any Guarantor)), that any such dividend or distribution is paid
      on a pro rata basis to all Holders (including AREP or any of its
      Subsidiaries (including any Guarantor)) that hold securities whose terms
      (either contractually or by law) entitle them to the same distribution
      upon which such dividend or distribution is paid;

            (5) the repurchase, redemption or other acquisition or retirement
      for value of any Equity Interests of AREP or any Subsidiary of AREP
      (including any Guarantor) held by any member of AREP's (or any of its
      Subsidiaries' (including any Guarantors)) management pursuant to any
      management equity subscription agreement, stock option agreement or
      similar agreement; provided that the aggregate price paid for all such
      repurchased, redeemed, acquired or retired Equity Interests shall not
      exceed $2.0 million;

            (6) for so long as AREP is a partnership or otherwise a pass-through
      entity for federal income tax purposes for any period, AREP may make cash
      distributions to its equity holders or partners in an amount not to exceed
      the Tax Amount for such period; provided that a distribution of the Tax
      Amount shall be made no earlier than 20 days prior to the due date for
      such tax (or the

                                       42
<PAGE>

      date that quarterly estimated taxes are required to be paid) that would be
      payable by AREP if it were a Delaware corporation;

            (7) the purchase, redemption or retirement for value of Capital
      Stock of AREP not owned by the Principal or any Affiliate of the
      Principal, provided that (a) AREP would, at the time of such Restricted
      Payment and after giving pro forma effect thereto as if such Restricted
      Payment had been made at the beginning of the most recently ended
      four-quarter period for which financial statements are available, have
      been permitted to incur at least $1.00 of additional Indebtedness pursuant
      to Section 4.09(a) hereof and (b) after giving effect to such purchase,
      redemption or retirement, the Partners' Equity is at least $1.0 billion;

            (8) the payment of dividends on the Preferred Units in the form of
      additional Preferred Units or other Capital Stock of AREP (that is not
      Disqualified Stock) or the payment of cash dividends on the Preferred
      Units in lieu of fractional Preferred Units; provided that the aggregate
      amount of cash under this clause (8) does not exceed $100,000 in any
      calendar year;

            (9) the purchase, redemption or retirement for value of the
      Preferred Units on or before March 31, 2010, provided that (a) AREP would,
      at the time of such Restricted Payment and after giving pro forma effect
      thereto as if such Restricted Payment had been made at the beginning of
      the most recently ended four-quarter period for which financial statements
      are available, have been permitted to incur at least $1.00 of additional
      Indebtedness pursuant to the first paragraph of Section 4.09 and (b) after
      giving effect to such purchase, redemption or retirement, the Partners'
      Equity is at least $1.0 billion; and

            (10) other Restricted Payments in an aggregate amount not to exceed
      $50.0 million since the date of this Indenture.

      For purposes of determining compliance with this Section 4.07, in the
event that a proposed Restricted Payment meets the criteria of more than one of
the categories of Restricted Payments described in clauses (1) through (10) of
the immediately preceding paragraph, or is permitted to be made pursuant to the
first paragraph of this Section 4.07, AREP shall, in its sole discretion,
classify (or later reclassify, in whole or in part, in its sole discretion) such
Restricted Payment in any manner that complies with this Section 4.07.

      The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value on the date of the Restricted Payment of the assets, property or
securities proposed to be transferred or issued by AREP or such Subsidiary
(including AREH), as the case may be, pursuant to the Restricted Payment.

Section 4.08 [Intentionally Omitted]

Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.

      (a) Neither AREP nor any Guarantor shall create, incur, issue, assume,
guarantee or otherwise become liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and neither
AREP nor any Guarantor shall issue any Disqualified Stock; provided, however,
that AREP or any Guarantor may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock, if immediately after giving effect to the incurrence
of additional Indebtedness (including Acquired Debt) or issuance of Disqualified
Stock (including a pro forma application of the net proceeds therefrom), the
ratio of the aggregate principal amount of all outstanding Indebtedness
(excluding Indebtedness incurred pursuant to clauses (4), (7) and (8) of Section
4.09(b) and any Hedging Obligations of AREP's Subsidiaries that are not
Guarantors) of AREP and its Subsidiaries (including any

                                       43
<PAGE>

Guarantor) on a consolidated basis determined in accordance with GAAP (including
an amount of Indebtedness equal to the principal amount of any Guarantees by
AREP or its Subsidiaries (including any Guarantor) of any Indebtedness of a
Person (that is not AREP or a Subsidiary) to the extent such Guarantees were not
included in computing AREP's or its Subsidiaries' (including any Guarantor's)
outstanding Indebtedness) to the Tangible Net Worth of AREP and its Subsidiaries
(including any Guarantor) on a consolidated basis, would have been less than
1.75 to 1.

      (b) The provisions of Section 4.09(a) shall not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):

            (1) the incurrence by AREP or any Guarantor of Indebtedness
      represented by the Notes to be issued on the date of this Indenture and
      the Exchange Notes to be issued pursuant to the Registration Rights
      Agreement;

            (2) the incurrence by AREP or any Guarantor of Permitted Refinancing
      Indebtedness in exchange for, or the net proceeds of which are used to
      refund, refinance or replace Indebtedness (other than intercompany
      Indebtedness) that was incurred under Section 4.09(a) or clauses (1), (2)
      or (9) of this Section 4.09(b) or any Existing Indebtedness;

            (3) the incurrence by AREP or any Guarantor of intercompany
      Indebtedness between or among AREP and any of its Subsidiaries (including
      AREH) or the issuance of Disqualified Stock by any Guarantor to AREP;

            (4) the incurrence by AREP or any Guarantor of Hedging Obligations
      that are incurred in the normal course of business;

            (5) the incurrence by AREP or any Guarantor of Indebtedness arising
      from the honoring by a bank or other financial institution of a check,
      draft or similar instrument inadvertently drawn against insufficient
      funds, so long as such Indebtedness is covered within five Business Days;

            (6) the incurrence by AREP or any Guarantor of the Existing
      Indebtedness;

            (7) Indebtedness arising from any agreement entered into by AREP or
      AREH providing for indemnification, purchase price adjustment or similar
      obligations, in each case, incurred or assumed in connection with an asset
      sale;

            (8) Indebtedness of AREP or any Guarantor attributable to Bad Boy
      Guarantees; and

            (9) the incurrence by AREP or any Guarantor of additional
      Indebtedness in an aggregate principal amount at any time outstanding,
      including all Permitted Refinancing Indebtedness incurred to refund,
      refinance or replace any Indebtedness incurred pursuant to this clause
      (9), not to exceed $10.0 million at any one time outstanding.

      Neither AREP nor any Guarantor shall incur any Indebtedness (including
Permitted Debt) that is contractually subordinated in right of payment to any
other Indebtedness of AREP or any Guarantor unless such Indebtedness is also
contractually subordinated in right of payment to the Notes and the Note
Guarantee, as applicable, on substantially identical terms; provided, however,
that no Indebtedness of AREP or any Guarantor shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of AREP
or any Guarantor for purposes of this paragraph solely by virtue of being
unsecured or secured to a lesser extent or on a junior Lien basis.

                                       44
<PAGE>

      To the extent AREP or any Guarantor incurs any intercompany Indebtedness,
(a) if AREP or any Guarantor is the obligor on such Indebtedness, such
Indebtedness (other than intercompany Indebtedness of any Guarantor to or from
AREP or another Guarantor) must be expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Notes and (b)(i) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than AREP or a Subsidiary of AREP
(including any Guarantor) and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either AREP or a Subsidiary of AREP
(including any Guarantor) shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by AREP or any Guarantor, that is not
intercompany Indebtedness; provided that in the case of clause (a), that no
restriction on the payment of principal, interest or other obligations in
connection with such intercompany Indebtedness shall be required by such
subordinated terms except during the occurrence and continuation of a Default or
Event of Default.

      For purposes of determining compliance with Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (9) above or is
entitled to be incurred pursuant to Section 4.09(a), in each case, as of the
date of incurrence thereof, AREP shall, in its sole discretion, classify (or
later reclassify in whole or in part, in its sole discretion) such item of
Indebtedness in any manner that complies with this Section 4.09 and such
Indebtedness shall be treated as having been incurred pursuant to such clauses
or Section 4.09(a), as the case may be, designated by AREP.

      The accrual of interest, the accretion or amortization of original issue
discount, the payment of interest or Other Liquidated Damages on any
Indebtedness in the form of additional Indebtedness with the same terms, the
reclassification of preferred stock as Indebtedness due to a change in
accounting principles, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock shall not be
deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this Section 4.09. Notwithstanding any other provision of
Section 4.09, the maximum amount of Indebtedness that AREP or any Guarantor may
incur pursuant to Section 4.09 shall not be deemed to be exceeded solely as a
result of fluctuations in exchange rates or currency values.

            The amount of any Indebtedness outstanding as of any date shall be:

            (1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount;

            (2) the principal amount of the Indebtedness, in the case of any
other Indebtedness; and

            (3) in respect of Indebtedness of another Person secured by a Lien
on the assets of the specified Person, the lesser of:

                  (A) the Fair Market Value of such assets at the date of
            determination; and

                  (B) the amount of the Indebtedness of the other Person.

Section 4.10 [Intentionally Omitted]

Section 4.11 Transactions with Affiliates.

      (a) AREP shall not, and shall not permit any of its Subsidiaries
(including any Guarantor) to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or

                                       45
<PAGE>

purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, any Affiliate of AREP (each, an "Affiliate Transaction"), unless:

            (1) the Affiliate Transaction is on terms that are not materially
      less favorable to AREP or the relevant Subsidiary (including any
      Guarantor) than those that would have been obtained in a comparable
      transaction by AREP or such Subsidiary (including any Guarantor) with an
      unrelated Person as determined in good faith by the Board of Directors of
      AREP; and

            (2) AREP delivers to the Trustee:

                  (a) with respect to any Affiliate Transaction or series of
      related Affiliate Transactions involving aggregate consideration in excess
      of $2.0 million, a resolution of the Board of Directors of AREP set forth
      in an Officers' Certificate certifying that such Affiliate Transaction
      complies with this Section 4.11 and that such Affiliate Transaction has
      been approved by a majority of the disinterested members of the Board of
      Directors of AREP; and

                  (b) with respect to any Affiliate Transaction or series of
      related Affiliate Transactions involving aggregate consideration in excess
      of $10.0 million, an opinion as to the fairness to AREP or such Subsidiary
      (including any Guarantor) of such Affiliate Transaction from a financial
      point of view issued by an accounting, appraisal or investment banking
      firm of recognized standing.

      (b) The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of Section 4.11(a):

            (1) any employment agreement, employee benefit plan, officer or
      director indemnification agreement or any similar arrangement entered into
      by AREP or any of its Subsidiaries (including any Guarantor) in the
      ordinary course of business and payments pursuant thereto including
      payments or reimbursement of payments by API with respect to any such
      agreement, plan or arrangement entered into by API with respect to or for
      the benefit of officers or directors of API (other than any such
      agreements, plans or arrangements entered into by AREP or any of its
      Subsidiaries (including AREH) with Carl Icahn (other than employee benefit
      plans and officer or director indemnification agreements generally
      applicable to officers and directors of API, AREP or its Subsidiaries
      (including AREH)));

            (2) transactions between or among AREP, any Guarantor and/or their
      respective Subsidiaries (except any Subsidiaries of which Carl Icahn or
      Affiliates of Carl Icahn (other then AREP, AREH or their Subsidiaries) own
      more than 10% of the Voting Stock);

            (3) payment (or reimbursement of payments by API) of directors' fees
      to Persons who are not otherwise Affiliates of AREP;

            (4) any issuance of Equity Interests (other than Disqualified Stock)
      and Preferred Unit Distributions of AREP to Affiliates of AREP;

            (5) Restricted Payments that do not violate Section 4.07 hereof;

            (6) the acquisition of the membership interests of Charlie's Holding
      LLC pursuant to the membership interest purchase agreement, dated as of
      January 5, 2004, by and among American

                                       46
<PAGE>

      Casino and Entertainment Properties LLC, Starfire Holding Corporation and
      Carl Icahn, as amended, and the other transactions contemplated thereby;

            (7) transactions between AREP and/or any of its Subsidiaries
      (including any Guarantor), on the one hand, and other Affiliates, on the
      other hand, for the provision of goods or services in the ordinary course
      of business by such other Affiliates; provided that such other Affiliate
      is in the business of providing such goods or services in the ordinary
      course of business to unaffiliated third parties and the terms and pricing
      for such goods and services overall are not less favorable to AREP and/or
      its Subsidiaries (including AREH) than the terms and pricing upon which
      such goods and services are provided to unaffiliated third parties;

            (8) the provision or receipt of accounting, financial, management,
      information technology and other ancillary services to or from Affiliates,
      provided that AREP or its Subsidiaries (including any Guarantor) in the
      case of the provision of such services, are paid a fee not less than its
      out of pocket costs and allocated overhead (including a portion of
      salaries and benefits) and in the case of the receipt of such services,
      paid a fee not more than such Person's out-of-pocket costs and allocated
      overhead (including a portion of salaries and benefits), in each case, as
      determined by AREP in its reasonable judgment;

            (9) the license of a portion of office space pursuant to a license
      agreement, dated as of February 1, 1997, between AREP and an Affiliate of
      API and any renewal thereof;

            (10) the payment to API and reimbursements of payments made by API
      of expenses relating to AREP's, AREH's or any Guarantors' status as a
      public company;

            (11) services provided and payments received by NEG from NEG
      Operating LLC and TransTexas Gas Corporation pursuant to the NEG
      Management Agreements;

            (12) the pledge by NEG of its interest in the Capital Stock of NEG
      Holding LLC pursuant to the NEG Credit Agreement;

            (13) the exchange by AREH of its GB Securities for other securities
      of GB Holdings, Inc.; provided that such exchange is on terms no less
      favorable to AREH as the exchange of GB Securities offered to other
      non-Affiliated Persons; and

            (14) payments by AREH, AREP or any Subsidiary to API in connection
      with services provided to AREH, AREP or any Subsidiary in accordance with
      the AREP Partnership Agreement.

Section 4.12 Liens.

      Neither AREP nor any Guarantor shall, (a) issue, assume or guarantee any
Indebtedness if such Indebtedness is secured by a Lien upon, or (b) secure any
then outstanding Indebtedness by granting a Lien upon, any Principal Property of
AREP or any Guarantor, now owned or hereafter acquired by AREP or any Guarantor,
without effectively providing that the Notes and the Note Guarantee shall be
secured equally and ratably with such Indebtedness, except that the foregoing
restrictions shall not apply to:

            (1) Liens on any Principal Property acquired after the Issuance Date
      to secure or provide for the payment of the purchase price or acquisition
      cost thereof,

                                       47
<PAGE>

            (2) Liens on Principal Property acquired after the Issuance Date
      existing at the time such Principal Property is acquired;

            (3) Liens on any Principal Property acquired from a corporation
      merged with or into AREP or any Guarantor;

            (4) Liens in favor of AREP or any Guarantor;

            (5) Liens in existence on any Principal Property on the Issuance
      Date;

            (6) Liens on any Principal Property constituting unimproved real
      property constructed or improved after the Issuance Date to secure or
      provide for the payment or cost of such construction or improvement;

            (7) Liens in favor of, or required by, governmental authorities;

            (8) pledges or deposits in connection with workers' compensation,
      unemployment insurance and other social security legislation and deposits
      securing liability to insure carriers under insurance arrangements;

            (9) Liens for taxes, assessments or governmental charges or
      statutory liens of landlords, carriers, warehousemen, mechanics,
      suppliers, materialmen, repairmen or other similar Liens arising in the
      ordinary course of business or in the improvement or repair of any
      Principal Property not yet due or which are being contested in good faith
      by appropriate proceedings;

            (10) any judgment attachment or judgment Lien not constituting an
      Event of Default;

            (11) Liens to secure the performance of statutory obligations,
      surety or appeal bonds, performance bonds or other obligations of a like
      nature incurred in the ordinary course of business and in the improvement
      or repair of any Principal Property and which obligations are not
      expressly prohibited by this Indenture;

            (12) Liens to secure Indebtedness of AREP or any Guarantor
      attributable to Bad Boy Guarantees;

            (13) Liens in favor of the Trustee and required by Section 4.16;

            (14) Liens to secure margin Indebtedness; provided that such Liens
      are secured solely by the applicable margin securities; or

            (15) any extension, renewal, substitution or replacement (or
      successive extensions, renewals, substitutions or replacements), in whole
      or in part, of any Lien referred to in the foregoing clauses (1) through
      (14), inclusive;

      provided that in the case of clauses (1), (2) and (3) such Liens shall
only extend to the Principal Property so acquired (including through any merger
or consolidation) and not to any other Principal Property of AREP or any
Guarantor.

Section 4.13 [Intentionally Omitted]

Section 4.14 Corporate Existence.

                                       48
<PAGE>

      Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect:

            (1) its partnership or corporate or limited liability company
      existence, in accordance with the respective organizational documents (as
      the same may be amended from time to time) of the Company; and

            (2) the rights (charter and statutory), licenses and franchises of
      the Company.

Section 4.15 Offer to Repurchase Upon Change of Control.

      (a) Upon the occurrence of a Change of Control, the Company shall make an
offer (a "Change of Control Offer") to each Holder to repurchase all or any part
(equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount of Notes
repurchased plus accrued and unpaid interest and Liquidated Damages, if any, on
the Notes repurchased to the date of purchase, subject to the rights of Holders
on the relevant record date to receive interest due on the relevant interest
payment date (the "Change of Control Payment"). Within thirty days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and stating:

            (1) that the Change of Control Offer is being made pursuant to this
      Section 4.15 and that all Notes tendered shall be accepted for payment;

            (2) the purchase price and the purchase date, which shall be no
      earlier than 30 days and no later than 60 days from the date such notice
      is mailed (the "Change of Control Payment Date");

            (3) that any Note not tendered shall continue to accrue interest;

            (4) that, unless the Company defaults in the payment of the Change
      of Control Payment, all Notes accepted for payment pursuant to the Change
      of Control Offer shall cease to accrue interest after the Change of
      Control Payment Date;

            (5) that Holders electing to have any Notes purchased pursuant to a
      Change of Control Offer shall be required to surrender the Notes, with the
      form entitled "Option of Holder to Elect Purchase" attached to the Notes
      completed, or transfer by book-entry transfer, to the Paying Agent at the
      address specified in the notice prior to the close of business on the
      third Business Day preceding the Change of Control Payment Date;

            (6) that Holders shall be entitled to withdraw their election if the
      Paying Agent receives, not later than the close of business on the second
      Business Day preceding the Change of Control Payment Date, a telegram,
      telex, facsimile transmission or letter setting forth the name of the
      Holder, the principal amount of Notes delivered for purchase, and a
      statement that such Holder is withdrawing his election to have the Notes
      purchased; and

            (7) that Holders whose Notes are being purchased only in part shall
      be issued new Notes equal in principal amount to the unpurchased portion
      of the Notes surrendered, which unpurchased portion must be equal to
      $1,000 in principal amount or an integral multiple thereof.

      The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in

                                       49
<PAGE>

connection with the repurchase of the Notes as a result of a Change in Control.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of this Section 4.15, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15 by virtue of such compliance.

      (b) On the Change of Control Payment Date, the Company shall, to the
extent lawful:

            (1) accept for payment all Notes or portions of Notes properly
      tendered and not withdrawn pursuant to the Change of Control Offer;

            (2) deposit with the Paying Agent an amount equal to the Change of
      Control Payment in respect of all Notes or portions of Notes properly
      tendered; and

            (3) deliver or cause to be delivered to the Trustee the Notes
      properly accepted together with an Officers' Certificate stating the
      aggregate principal amount of Notes or portions of Notes being purchased
      by the Company.

      The Paying Agent shall promptly mail (but in any case not later than five
days after the Change of Control Payment Date) to each Holder of Notes properly
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that any new Note shall be in a
principal amount of $1000 or an integral multiple of $1,000. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

      (c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if (1) 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 this
Section 4.15 and purchases all Notes properly tendered and not withdrawn under
the Change of Control Offer, or (2) notice of redemption has been given pursuant
to Section 3.07 hereof, unless and until there is a default in payment of the
applicable redemption price.

Section 4.16 Maintenance of Interest Coverage.

      On each Quarterly Determination Date, the Fixed Charge Coverage Ratio of
AREP and the Guarantors shall be at least 1.5 to 1.0 for the four consecutive
fiscal quarters most recently completed prior to such Quarterly Determination
Date; provided that, in the event that the Fixed Charge Coverage Ratio of AREP
and the Guarantors is less than 1.5 to 1.0 for such four consecutive fiscal
quarters, the Company shall be deemed to have satisfied this maintenance test if
there is deposited, within 2 Business Days of such Quarterly Determination Date,
an amount in cash such that the deposited funds, together with any funds
previously deposited pursuant to this Section 4.16 (and that have not been paid
out or otherwise released) are in an amount equal to the Company's obligations
to pay interest on the Notes for one year; provided further, that the Company
shall grant to the Trustee, on behalf of the Holders of the Notes, a first
priority security interest in such deposited funds by executing and delivering a
Security and Control Agreement and by delivering to the Trustee an Opinion of
Counsel to the effect that the Security and Control Agreement (i) has been duly
authorized, executed and delivered and is the legal, valid and binding
obligation of the Company, enforceable against the Company, (ii) creates a valid
security interest in the Pledged Account and Collateral (each as defined in the
Security and Control Agreement) in favor of the Trustee on behalf of the Holders
and (iii) upon compliance with the terms thereof, the security interest in the
Pledged Account and Collateral in favor of the Trustee on behalf of the Holders
is perfected. At any subsequent Quarterly Determination Date, if the Fixed
Charge Coverage Ratio of

                                       50
<PAGE>

AREP and the Guarantors is at least 1.5 to 1.0 for the four consecutive fiscal
quarters most recently completed prior to such Quarterly Determination Date,
such deposited funds shall be released from the security interest granted to the
Trustee and paid to or at the direction of AREP.

Section 4.17 Maintenance of Total Unencumbered Assets

      On each Quarterly Determination Date, the ratio of Total Unencumbered
Assets to the then outstanding principal amount of the Unsecured Indebtedness
shall be greater than 1.5 to 1.0 as of the last day of the fiscal quarter most
recently completed.

Section 4.18 Compliance with Law

      AREP shall, and shall cause its Subsidiaries (including any Guarantor) to,
comply in all material respects with all applicable laws, rules and regulations.

Section 4.19 No Investment Company

      Neither AREP nor any Guarantor shall register as an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended.

                                    ARTICLE 5
                                   SUCCESSORS

Section 5.01 Merger, Consolidation, or Sale of Assets.

      (a) AREP will not: (1) consolidate or merge with or into another Person
(whether or not AREP, is the surviving entity) or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of AREP in one or more related transactions, to another Person; unless:

            (1) either:

                  (A) AREP is the surviving entity, or

                  (B) the Person formed by or surviving any such consolidation
            or merger (if other than AREP) or to which such sale, assignment,
            transfer, conveyance or other disposition has been made is a
            corporation, limited liability company or limited partnership entity
            organized or existing under the laws of the United States, any state
            of the United States or the District of Columbia;

            (2) the Person formed by or surviving any such consolidation or
      merger (if other than AREP) or the Person to which such sale, assignment,
      transfer, conveyance or other disposition has been made assumes all the
      obligations of AREP under the Notes, this Indenture and the Registration
      Rights Agreement and upon such assumption such Person will become the
      successor to, and be substituted for, AREP hereunder and thereunder and
      all references to AREP in each thereof shall then become references to
      such Person and such Person shall thereafter be able to exercise every
      right and power of AREP hereunder and thereunder;

            (3) immediately after such transaction no Default or Event of
      Default exists;

                                       51
<PAGE>

            (4) AREP or the Person formed by or surviving any such consolidation
      or merger (if other than AREP), or to which such sale, assignment,
      transfer, conveyance or other disposition has been made would, on the date
      of such transaction after giving pro forma effect thereto and any related
      financing transactions as if the same had occurred at the last day of the
      immediately preceding quarter, be permitted to incur at least $1.00 of
      additional Indebtedness pursuant to Section 4.09(a); and

            (5) AREP has delivered to the Trustee an Officers' Certificate and
      Opinion of Counsel, which may be an opinion of in-house counsel of AREP or
      an Affiliate, each stating that such transaction complies with the terms
      of this Indenture.

      Clauses (1), (2) or (4) above will not apply to, or be required to be
complied with in connection with, any merger or consolidation or the sale,
assignment, transfer, conveyance or other disposition of all or substantially
all of AREP's properties or assets to:

            (1) an Affiliate that has no material assets or liabilities where
      the primary purpose of such transaction is to change AREP into a
      corporation or other form of business entity or to change the jurisdiction
      of formation of AREP and such transaction does not cause the realization
      of any material federal or state tax liability that will be paid by AREP
      or any of its Subsidiaries (including AREH). For purposes of this
      paragraph (1), the term material refers to any assets, liabilities or tax
      liabilities that are greater than 5.0% of the Tangible Net Worth of AREP
      and its Subsidiaries (including AREH) on a consolidated basis; or

            (2) any Person; provided that AREP receives consideration in Cash
      Equivalents and marketable securities with an aggregate Fair Market Value
      determined at the time of the execution of such relevant agreement of at
      least $1.0 billion for such merger or consolidation or the sale,
      assignment, transfer, conveyance or other disposition of all or
      substantially all of AREP's properties or assets. In any transaction
      referred to in this clause (2), and subject to the terms and conditions
      thereof, the Trustee shall, without the need of any action by the Holders,
      (x) confirm that such other Person shall not be liable for and shall
      release such other Person from any obligation of AREP's under this
      Indenture and the Notes and (y) release any Guarantor from all obligations
      under its Note Guarantee if such Guarantor was directly or indirectly
      sold, assigned, transferred, conveyed or otherwise disposed of to such
      Person in such transaction.

      AREP or the Person formed by or surviving any merger or consolidation will
not have to comply with clause (4) above in connection with any merger or
consolidation if the effect of the merger or consolidation is to cause the
Capital Stock of AREP not owned by the Principal or any Affiliate of the
Principal to be retired or extinguished for consideration that was provided by
the Principal or an Affiliate of the Principal (other than AREP or its
Subsidiaries (including AREH) or the Person formed by or surviving any merger or
consolidation) and the Partners' Equity immediately after giving effect to the
merger or consolidation is not less than the Partners' Equity immediately prior
to such merger or consolidation.

      In addition, AREP may not lease all or substantially all of its properties
or assets, in one or more related transactions, to any other Person. In the case
of a lease of all or substantially all of the assets of AREP, AREP will not be
released from its obligations under the Notes or this Indenture, as applicable.

      (b) AREH will not: (1) consolidate or merge with or into another Person
(whether or not AREH, is the surviving entity) or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of AREH in one or more related transactions, to another Person; unless:

                                       52
<PAGE>

            (1) either: (a) AREH is the surviving entity, or (b) the Person
      formed by or surviving any such consolidation or merger (if other than
      AREH) or to which such sale, assignment, transfer, conveyance or other
      disposition has been made is a corporation, limited liability company or
      limited partnership entity organized or existing under the laws of the
      United States, any state of the United States or the District of Columbia;

            (2) the Person formed by or surviving any such consolidation or
      merger (if other than AREH) or the Person to which such sale, assignment,
      transfer, conveyance or other disposition has been made assumes all the
      obligations of AREH under the Note Guarantee (and becomes a Guarantor),
      the Notes, this Indenture and the Registration Rights Agreement, and upon
      such assumption such Person will become the successor to, and be
      substituted for, AREH hereunder and thereunder, and all references to AREH
      in each thereof shall than become references to such Person and such
      Person shall thereafter be able to exercise every right and power of AREH
      hereunder and thereunder;

            (3) immediately after such transaction no Default or Event of
      Default exists;

            (4) AREH or the Person formed by or surviving any such consolidation
      or merger (if other than AREP), or to which such sale, assignment,
      transfer, conveyance or other disposition has been made would, on the date
      of such transaction after giving pro forma effect thereto and any related
      financing transactions as if the same had occurred at the last day of the
      immediately preceding quarter, be permitted to incur at least $1.00 of
      additional Indebtedness pursuant to Section 4.09(a); and

            (5) AREH has delivered to the Trustee an Officers' Certificate and
      Opinion of Counsel which may be an opinion of in-house counsel of AREP or
      an Affiliate, each stating that such transaction complies with the terms
      of this Indenture.

      Clauses (1), (2) or (4) above will not apply to, or be required to be
complied with in connection with, any merger or consolidation or the sale,
assignment, transfer, conveyance or other disposition of all or substantially
all of AREH's properties or assets to:

            (1) an Affiliate that has no material assets or liabilities where
      the primary purpose of such transaction is to change AREH into a
      corporation or other form of business entity or to change the jurisdiction
      of formation of AREH and such transaction does not cause the realization
      of any material federal or state tax liability that will be paid by AREH
      or any of its Subsidiaries. For purposes of this paragraph (1), the term
      material refers to any assets, liabilities or tax liabilities that are
      greater than 5.0% of the Tangible Net Worth of AREP and its Subsidiaries
      (including AREH) on a consolidated basis;

            (2) any Person; provided that AREP receives consideration in Cash
      Equivalents and marketable securities with an aggregate Fair Market Value
      determined at the time of the execution of such relevant agreement of at
      least $1.0 billion for such merger or consolidation or the sale,
      assignment, transfer, conveyance or other disposition of all or
      substantially all of AREH's properties or assets; or

            (3) any Person; provided that AREH receives consideration in Cash
      Equivalents and marketable securities with an aggregate Fair Market Value
      determined at the time of the execution of such relevant agreement of at
      least $1.0 billion for such merger or consolidation or the sale,
      assignment, transfer, conveyance or other disposition of all or
      substantially all of AREH's properties or assets and AREH remains a
      Subsidiary of AREP.

                                       53
<PAGE>

      In any transaction referred to in clause (2) or (3) above, and subject to
the terms and conditions thereof, the Trustee shall, without the need of any
action by the Holders, (x) confirm that such other Person shall not be liable
for and shall release such other Person from any obligation of AREP's or AREH's
under this Indenture, the Notes and the Note Guarantees, and (y) release any
Guarantor from all obligations under its Note Guarantee if such Guarantor was
directly or indirectly sold, assigned, transferred, conveyed or otherwise
disposed of to such Person in such transaction.

      (c) This Section 5.01 will not apply to:

            (1) any consolidation or merger, or any sale, assignment, transfer,
      conveyance, lease or other disposition of assets between or among AREP,
      AREH or any one or more Guarantors; or

            (2) any sale, assignment, transfer, conveyance or other disposition
      of Cash Equivalents, including, without limitation, any investment or
      capital contribution of Cash Equivalents, or any purchase of property and
      assets, including, without limitation, securities, debt obligations or
      Capital Stock, with Cash Equivalents.

Section 5.02 Relief from Obligation.

      Except as provided in the Indenture, neither AREP nor AREH shall be
relieved from the obligation to pay the principal of and interest on the Notes.

                                    ARTICLE 6
                              DEFAULTS AND REMEDIES

Section 6.01 Events of Default.

      Each of the following is an "Event of Default":

            (1) the Company defaults for 30 days in the payment when due of
      interest on, or Liquidated Damages with respect to, the Notes or under any
      Note Guarantee;

            (2) the Company defaults in the payment when due and payable (at
      maturity, upon redemption or otherwise) of the principal of, or premium,
      if any, on the Notes or under any Note Guarantee;

            (3) failure by the Company to comply with the provisions of Section
      4.15 hereof;

            (4) failure by AREP or any Guarantor for 30 days after written
      notice from the Trustee to comply with the provisions Sections 4.07, 4.09;
      4.16 or 4.17 hereof;

            (5) the Company or any Guarantor fails to observe or perform any
      other covenant, representation, warranty or other agreement in this
      Indenture or the Notes or the Note Guarantee for 60 days after notice to
      the Company by the Trustee or the Holders of at least 25% in aggregate
      principal amount of the Notes then outstanding voting as a single class;

            (6) default under any mortgage, indenture or instrument under which
      there is issued or by which there is secured or evidenced any Indebtedness
      for money borrowed by the Company or any Guarantor or default on any
      Guarantee by the Company or AREH of Indebtedness, whether such
      Indebtedness or Guarantee now exists or is created after the Issuance
      Date, which default

                                       54
<PAGE>

                  (A) is caused by a failure to pay when due at final maturity
            (giving effect to any grace period or waiver related thereto) the
            principal of such Indebtedness (a "Payment Default"); or

                  (B) results in the acceleration of such Indebtedness prior to
            its express maturity and, in each case, the principal amount of any
            such Indebtedness as to which AREP or any Guarantor is obligated to
            pay, together with the principal amount of any other such
            Indebtedness under which a Payment Default then exists or with
            respect to which the maturity thereof has been so accelerated or
            which has not been paid at maturity as to which AREP or any
            Guarantor is obligated to pay, aggregates $10.0 million or more;

            (7) failure by the Company or any Guarantor to pay final judgments
      aggregating in excess of $10.0 million, which final judgments remain
      unpaid, undischarged or unstayed for a period of more than 60 days after
      such judgment becomes a final judgment;

            (8) except as permitted by this Indenture, any Note Guarantee shall
      be held in any judicial proceeding to be unenforceable or invalid or shall
      cease for any reason to be in full force and effect, or AREH or any other
      Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
      disaffirm its obligations under its Note Guarantee;

            (9) the Company or any Subsidiary of the Company that is a
      Significant Subsidiary or any group of Subsidiaries of the Company that,
      taken together, would constitute a Significant Subsidiary pursuant to or
      within the meaning of Bankruptcy Law:

                  (A) commences a voluntary case,

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

                  (C) consents to the appointment of a custodian of it or for
            all or substantially all of its property,

                  (D) makes a general assignment for the benefit of its
            creditors, or

                  (E) generally is not paying its debts as they become due; or

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

                  (A) is for relief against the Company or any Subsidiary of the
            Company that is a Significant Subsidiary or any group of
            Subsidiaries of the Company that, taken together, would constitute a
            Significant Subsidiary in an involuntary case;

                  (B) appoints a custodian of the Company or any of its
            Subsidiaries that is a Significant Subsidiary or any group of
            Subsidiaries of the Company that, taken together, would constitute a
            Significant Subsidiary or for all or substantially all of the
            property of the Company or any of its Subsidiaries that is a
            Significant Subsidiary or any group of Subsidiaries of the Company
            that, taken together, would constitute a Significant Subsidiary; or

                                       55
<PAGE>

                  (C) orders the liquidation of the Company or any of its
            Subsidiaries that is a Significant Subsidiary or any group of
            Subsidiaries of the Company that, taken together, would constitute a
            Significant Subsidiary;

                  (D) and the order or decree remains unstayed and in effect for
            60 consecutive days.

Section 6.02 Acceleration.

      In the case of an Event of Default specified in clause (9) or (10) of
Section 6.01 hereof, with respect to the Company, any Guarantor that is a
Significant Subsidiary or any group of Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately.

      Upon any such declaration, the Notes shall become due and payable
immediately.

      The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may, on behalf of all of the
Holders, rescind an acceleration and its consequences, if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium or Liquidated Damages, if
any, that has become due solely because of the acceleration) have been cured or
waived.

      If an Event of Default occurs on or after June 1, 2008 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium
shall also become and be immediately due and payable, to the extent permitted by
law, anything in this Indenture or in the Notes to the contrary notwithstanding.
If an Event of Default occurs prior to June 1, 2008 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable, to the extent permitted by law,
in an amount, for each of the years beginning on June 1 of the years set forth
below, as set forth below (expressed as a percentage of the principal amount of
the Notes on the date of payment that would otherwise be due but for the
provisions of this sentence):

<TABLE>
<CAPTION>
YEAR                                                                                         PERCENTAGE
----                                                                                         ----------
<S>                                                                                          <C>
2004.............................................................................              8.125%
2005.............................................................................              7.109%
2006.............................................................................              6.094%
2007.............................................................................              5.078%
</TABLE>

Section 6.03 Other Remedies.

      If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and 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 of a Note in

                                       56
<PAGE>

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. All remedies are cumulative to the extent permitted by law.

Section 6.04 Waiver of Past Defaults.

      Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase); provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

Section 6.05 Control by Majority.

      Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.

Section 6.06 Limitation on Suits.

      A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:

            (1) such Holder gives to the Trustee written notice that an Event of
      Default is continuing;

            (2) Holders of at least 25% in aggregate principal amount of the
      then outstanding Notes make a written request to the Trustee to pursue the
      remedy;

            (3) such Holder or Holders offer and, if requested, provide to the
      Trustee security or indemnity reasonably satisfactory to the Trustee
      against any loss, liability or expense;

            (4) the Trustee does not comply with the request within 60 days
      after receipt of the request and the offer of security or indemnity; and

            (5) during such 60-day period, Holders of a majority in aggregate
      principal amount of the then outstanding Notes do not give the Trustee a
      direction inconsistent with such request.

      A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.

Section 6.07 Rights of Holders of Notes to Receive Payment.

      Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or

                                       57
<PAGE>

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(1) or (2) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on, the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09 Trustee May File Proofs of Claim.

      The Trustee is authorized to 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 the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 Priorities.

      If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:

            First: to the Trustee, its agents and attorneys for amounts due
      under Section 7.07 hereof, including payment of all compensation, expenses
      and liabilities incurred, and all advances made, by the Trustee and the
      costs and expenses of collection;

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

            Third: to the Company or to such party as a court of competent
      jurisdiction shall direct.

                                       58
<PAGE>

      The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.

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 a 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, 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 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding Notes.

                                    ARTICLE 7
                                     TRUSTEE

Section 7.01 Duties of Trustee.

      (a) If an Event of Default has occurred and is continuing of which a
Responsible Officer of the Trustee has actual knowledge or of which written
notice shall have been given to the Trustee in accordance with the terms of the
Indenture, the Trustee will exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in its 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 of which a
Responsible Officer of the Trustee has actual knowledge or of which written
notice shall have been given to the Trustee in accordance with the terms of the
Indenture:

            (1) the duties of the Trustee will be determined solely by the
      express provisions of this Indenture and the Trustee need perform only
      those duties that are specifically set forth in this Indenture and no
      others, and no implied covenants or obligations shall be read into this
      Indenture against the Trustee; and

            (2) 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.
      However, the Trustee will examine the certificates and opinions to
      determine whether or not they conform on their face to the requirements of
      this Indenture, but shall not verify the contents thereof.

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

            (1) this paragraph does not and shall not be construed to limit the
      effect of paragraph (b) of this Section 7.01;

            (2) the Trustee will not be liable for any error of judgment made in
      good faith by a Responsible Officer, unless it is proved that the Trustee
      was negligent in ascertaining the pertinent facts; and

                                       59
<PAGE>

            (3) the Trustee will 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 hereof.

            (4) the Trustee shall not be required to examine any of the reports,
      information or documents delivered to it under this Indenture to determine
      whether there has been any breach of the covenants of the Company
      contained herein, except that if any breach or default is expressly stated
      in any such reports, information or documents, the Trustee shall be deemed
      to have actual knowledge of such breach or default.

      (d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.

      (e) No provision of this Indenture will require the Trustee to expend or
risk its own funds or incur any liability.

      (f) The Trustee will not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

Section 7.02 Rights of Trustee.

      (a) The Trustee may conclusively rely upon 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 any such 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 will not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its choice and the written advice of such counsel or any Opinion of
Counsel will be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.

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

      (d) The Trustee will not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.

      (e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor will be
sufficient if signed by an Officer of the Company or any Guarantor, as
applicable.

      (f) The Trustee will 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 unless such Holders have offered to the Trustee indemnity or
security satisfactory to it against the losses, liabilities and expenses that
might be incurred by it in compliance with such request or direction.

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, subject to TIA Section 310(b), may otherwise deal with
the Company or any Affiliate of the Company with

                                       60
<PAGE>

the same rights it would have if it were not Trustee. Any Agent may do the same
with like rights and duties.

Section 7.04 Trustee's Disclaimer.

      The Trustee will not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Notes or the Note Guarantee, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it will not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it will not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.

Section 7.05 Notice of Defaults.

      If a Default or Event of Default occurs and is continuing of which a
Responsible Officer of the Trustee has actual knowledge, the Trustee will mail
to Holders of Notes a notice of the Default or Event of Default within 90 days
after such Responsible Officer has actual knowledge of such Default or Event of
Default. Except in the case of a Default or Event of Default in payment of
principal of, premium or Liquidated Damages, if any, or interest on, any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.

Section 7.06 Reports by Trustee to Holders of the Notes.

      (a) Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee will mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also will comply
with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports
as required by TIA Section 313(c).

      (b) A copy of each report at the time of its mailing to the Holders of
Notes will be mailed by the Trustee to the Company and filed by the Trustee with
the SEC and each stock exchange on which the Notes are listed in accordance with
TIA Section 313(d). The Company will promptly notify the Trustee when the Notes
are listed on any stock exchange.

Section 7.07 Compensation and Indemnity.

      (a) The Company and the Guarantor will pay to the Trustee from time to
time reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation will not be limited by any law on
compensation of a trustee of an express trust. The Company will reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses will include the reasonable compensation, disbursements,
costs and expenses of the Trustee's agents, consultants and counsel (including
the costs and expenses of collection on the Notes and the Note Guarantees and
the enforcement and administration of any right or remedy or observing any of
its duties under this Indenture).

      (b) The Company and the Guarantor will indemnify the Trustee and hold the
Trustee harmless against any and all losses, liabilities or expenses incurred by
it arising out of or in connection with the

                                       61
<PAGE>

acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company and the
Guarantor (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company, the Guarantor, any Holder or any other Person)
or liability in connection with the exercise or performance of any of its powers
or duties hereunder, except any such loss, liability or expense attributable to
its negligence or bad faith. The Trustee will notify the Company and the
Guarantor promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company and the Guarantor will not relieve the Company
or any of the Guarantors of their obligations hereunder. The Company or such
Guarantor will defend the claim and the Trustee will cooperate in the defense.
The Trustee may have separate counsel and the Company will pay the reasonable
fees and expenses of such counsel. Neither the Company nor any Guarantor need
pay for any settlement made without its consent, which consent will not be
unreasonably withheld.

      (c) The obligations of the Company and the Guarantor under this Section
7.07 shall constitute additional Indebtedness hereunder and will survive the
satisfaction and discharge of this Indenture.

      (d) To secure the Company's and the Guarantor's payment obligations in
this Section 7.07, the Trustee will have a Lien prior to the Notes on all money
or property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien will survive the
satisfaction and discharge of this Indenture.

      (e) When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(9) or (10) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

      (f) The Trustee will comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.

Section 7.08 Replacement of Trustee.

      (a) A resignation or removal of the Trustee and appointment of a successor
Trustee will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.

      (b) The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in aggregate principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:

            (1) the Trustee fails to comply with Section 7.10 hereof;

            (2) the Trustee is adjudged a bankrupt or an insolvent or an order
      for relief is entered with respect to the Trustee under any Bankruptcy
      Law;

            (3) a custodian or public officer takes charge of the Trustee or its
      property; or

            (4) the Trustee becomes incapable of acting.

      (c) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company will promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

                                       62
<PAGE>

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

      (e) If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

      (f) A successor Trustee will deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee will become effective, and the
successor Trustee will have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee will mail a notice of its succession
to Holders. The retiring Trustee will promptly transfer all property held by it
as Trustee to the successor Trustee; provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof will continue for the
benefit of the retiring Trustee.

Section 7.09 Successor Trustee by Merger, etc.

      If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act will be the successor Trustee.

Section 7.10 Eligibility; Disqualification.

      There will at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.

      This Indenture will always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).

Section 7.11 Preferential Collection of Claims Against Company.

      The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

                                    ARTICLE 8
                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.

      The Company may at any time, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.

Section 8.02 Legal Defeasance and Discharge.

                                       63
<PAGE>

      Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each of the Guarantors will,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from their obligations with respect to all
outstanding Notes (including the Note Guarantees) on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company and the Guarantors will be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes (including the Note Guarantees), which will thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in clauses (1) and (2) below, and to have
satisfied all their other obligations under such Notes, the Note Guarantees and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which will survive until otherwise terminated or discharged
hereunder:

            (1) the rights of Holders of outstanding Notes to receive payments
      in respect of the principal of, or interest or premium and Liquidated
      Damages, if any, on, such Notes when such payments are due from the trust
      referred to in Section 8.04 hereof;

            (2) the Company's obligations with respect to such Notes under
      Article 2 and Section 4.02 hereof;

            (3) the rights, powers, trusts, duties and immunities of the Trustee
      hereunder and the Company's and the Guarantors' obligations in connection
      therewith; and

            (4) this Article 8.

      Subject to compliance with this Article 8, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.

Section 8.03 Covenant Defeasance.

      Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each of the Guarantors will,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from each of their obligations under the covenants contained in
Sections 4.07, 4.09, 4.11, 4.12, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof, Section
5.01(a)(4) and Section 5.01(b)(4) hereof with respect to the outstanding Notes
on and after the date the conditions set forth in Section 8.04 hereof are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but will continue to be deemed "outstanding" for
all other purposes hereunder (it being understood that such Notes will not be
deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes and Note
Guarantees, the Company and the Guarantors may omit to comply with and will have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply will not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes and Note Guarantees will be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(6) hereof will
not constitute Events of Default.

Section 8.04 Conditions to Legal or Covenant Defeasance.

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      In order to exercise either Legal Defeasance or Covenant Defeasance under
either Section 8.02 or 8.03 hereof:

            (1) the Company must irrevocably deposit with the Trustee, in trust,
      for the benefit of the Holders, cash in U.S. dollars, non-callable
      Government Securities, or a combination thereof, in such amounts as will
      be sufficient, in the opinion of a nationally recognized investment bank,
      appraisal firm, or firm of independent public accountants, to pay the
      principal of, premium and Liquidated Damages, if any, and interest on, the
      outstanding Notes on the stated date for payment thereof or on the
      applicable redemption date, as the case may be, and the Company must
      specify whether the Notes are being defeased to such stated date for
      payment or to a particular redemption date;

            (2) in the case of an election under Section 8.02 hereof, the
      Company must deliver to the Trustee an Opinion of Counsel confirming that:

                  (A) the Company has received from, or there has been published
            by, the Internal Revenue Service a ruling; or

                  (B) 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 of the outstanding Notes
            will not recognize income, gain or loss for federal income tax
            purposes as a result of such Legal 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 Legal Defeasance
            had not occurred;

            (3) in the case of an election under Section 8.03 hereof, the
      Company must deliver to the Trustee an Opinion of Counsel confirming that
      the Holders of the outstanding Notes will not recognize income, gain or
      loss for federal income tax purposes as a result of such Covenant
      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 Covenant Defeasance had not occurred;

            (4) no Default or Event of Default shall have occurred and be
      continuing on the date of such deposit (other than a Default or Event of
      Default resulting from the borrowing of funds to be applied to such
      deposit) and the deposit will not result in a breach or violation of, or
      constitute a default under, any other instrument to which the Company or
      any Guarantor is a party or by which the Company or any Guarantor is
      bound;

            (5) such Legal Defeasance or Covenant Defeasance will not result in
      a breach or violation of, or constitute a default under, any material
      agreement or instrument (other than this Indenture) to which the Company
      or any of its Subsidiaries is a party or by which the Company or any of
      its Subsidiaries is bound;

            (6) the Company must deliver to the Trustee an Opinion of Counsel,
      containing customary assumptions and exceptions, to the effect that upon
      and immediately following the deposit, the trust funds will not be subject
      to the effect of any applicable bankruptcy, insolvency, reorganization or
      similar laws affecting creditors' rights generally under any applicable
      law;

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            (7) the Company must deliver to the Trustee an Officers' Certificate
      stating that the deposit was not made by the Company with the intent of
      preferring the Holders of Notes over the other creditors of the Company
      with the intent of defeating, hindering, delaying or defrauding any
      creditors of the Company or others; and

            (8) the Company must deliver to the Trustee an Officers' Certificate
      and an Opinion of Counsel, each stating that all conditions precedent
      relating to the Legal Defeasance or the Covenant Defeasance have been
      complied with.

Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.

      Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
will be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium and Liquidated Damages, if
any, and interest, but such money need not be segregated from other funds except
to the extent required by law.

      The Company will pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.

      Notwithstanding anything in this Article 8 to the contrary, the Trustee
will deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(1) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06 Repayment to Company.

      Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium or Liquidated
Damages, if any, or interest on, any Note and remaining unclaimed for two years
after such principal, premium or Liquidated Damages, if any, or interest has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) will be discharged from such trust; and the Holder of such
Note will thereafter be permitted to look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, will
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which will not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.

Section 8.07 Reinstatement.

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      If the Trustee or Paying Agent is unable to apply any U.S. dollars or
non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Notes and the Note Guarantees will be revived and reinstated
as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium or
Liquidated Damages, if any, or interest on, any Note following the reinstatement
of its obligations, the Company will be subrogated to the rights of the Holders
of such Notes to receive such payment from the money held by the Trustee or
Paying Agent.

                                    ARTICLE 9
                        AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01 Without Consent of Holders of Notes.

      Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture or the Notes
or the Note Guarantees without the consent of any Holder of Note:

            (1) to cure any ambiguity, defect or inconsistency;

            (2) to provide for uncertificated Notes in addition to or in place
      of certificated Notes;

            (3) to provide for the assumption of the Company's or a Guarantor's
      obligations to the Holders of the Notes and Note Guarantees by a successor
      to the Company or such Guarantor pursuant to Article 5 or Article 10
      hereof;

            (4) to make any change that would provide any additional rights or
      benefits to the Holders of the Notes or that does not adversely affect the
      legal rights hereunder of any Holder;

            (5) to comply with requirements of the SEC in order to effect or
      maintain the qualification of this Indenture under the TIA;

            (6) to conform the text of this Indenture or the Notes to any
      provision of the "Description of Notes" section of the Company's Offering
      Memorandum, relating to the initial offering of the Notes, to the extent
      that such provision in that "Description of Notes" was intended to be a
      verbatim recitation of a provision of this Indenture, the Note Guarantees
      or the Notes;

            (7) to provide for the issuance of Additional Notes in accordance
      with the limitations set forth in this Indenture as of the date hereof; or

            (8) to allow any Guarantor to execute a supplemental indenture
      and/or a Note Guarantee with respect to the Notes.

      Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee will join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be

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therein contained, but the Trustee will not be obligated to enter into such
amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.

Section 9.02 With Consent of Holders of Notes.

      Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including, without limitation, Section
4.15 hereof) and the Notes and the Note Guarantees with the consent of the
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes (including, without limitation, Additional Notes, if any)
voting as a single class (including, without limitation, consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium or Liquidated Damages, if any, or interest on, the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture or the Notes or the Note
Guarantees may be waived with the consent of the Holders of a majority in
aggregate principal amount of the then outstanding Notes (including, without
limitation, Additional Notes, if any) voting as a single class (including,
without limitation, consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.

      Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee will
join with the Company and the Guarantors in the execution of such amended or
supplemental indenture unless such amended or supplemental indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but will not be
obligated to, enter into such amended or supplemental Indenture.

      It is not be necessary for the consent of the Holders of Notes under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it is sufficient if such consent approves the
substance thereof.

      After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company will mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, will not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes or the Note Guarantees. However,
without the consent of each Holder affected, an amendment, supplement or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):

            (1) reduce the principal amount of Notes whose Holders must consent
      to an amendment, supplement or waiver;

            (2) reduce the principal of or change the fixed maturity of any Note
      or alter or waive the provisions with respect to the redemption of the
      Notes (except as provided above with respect to Section 4.15 hereof);

            (3) reduce the rate of or change the time for payment of interest on
      any Note;

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            (4) waive a Default or Event of Default in the payment of principal
      of, premium or interest on the Notes (except a rescission of acceleration
      of the Notes by the Holders of at least a majority in aggregate principal
      amount of the Notes and a waiver of the payment default that resulted from
      such acceleration);

            (5) make any Note payable in money other than that stated in the
      Notes;

            (6) make any change in the provisions of this Indenture relating to
      waivers of past Defaults or the rights of Holders of Notes to receive
      payments of principal of or premium, if any, or interest on the Notes;

            (7) waive a redemption payment with respect to any Note (other than
      a payment required by Section 4.15 hereof);

            (8) release any Guarantor from any of its obligations under its Note
      Guarantee or this Indenture, except in accordance with the terms of this
      Indenture; or

            (9) make any change in this Article 9 relating to the amendment and
      waiver provisions

Section 9.03 Compliance with Trust Indenture Act.

      Every amendment or supplement to this Indenture or the Notes will be set
forth in a amended or supplemental indenture that complies with the TIA as then
in effect.

Section 9.04 Revocation and Effect of Consents.

      Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.

Section 9.05 Notation on or Exchange of Notes.

      The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.

      Failure to make the appropriate notation or issue a new Note will not
affect the validity and effect of such amendment, supplement or waiver.

Section 9.06 Trustee to Sign Amendments, etc.

      The Trustee will sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amended or supplemental indenture until the Board of Directors
of AREP approves it. In executing any amended or supplemental indenture, the
Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be
fully protected in relying upon, in addition

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to the documents required by Section 12.04 hereof, an Officers' Certificate and
an Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.

                                   ARTICLE 10
                                 NOTE GUARANTEES

Section 10.01. Guarantee.

      (a) Subject to this Article 10, the Guarantor hereby unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:

            (1) the principal of, premium and Liquidated Damages, if any, and
      interest on, the Notes will be promptly paid in full when due, whether at
      maturity, by acceleration, redemption or otherwise, and interest on the
      overdue principal of and interest on the Notes, if any, if lawful, and all
      other obligations of the Company to the Holders or the Trustee hereunder
      or thereunder will be promptly paid in full or performed, all in
      accordance with the terms hereof and thereof; and

            (2) in case of any extension of time of payment or renewal of any
      Notes or any of such other obligations, that same will be promptly paid in
      full when due or performed in accordance with the terms of the extension
      or renewal, whether at stated maturity, by acceleration or otherwise.

      Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantor will pay the same immediately. The
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.

      (b) The Guarantor hereby agrees that its obligations hereunder are
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. The Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.

      (c) If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantor or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantor, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, will be reinstated in full
force and effect.

      (d) The Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. The Guarantor
further agrees that, as between any Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (1) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purposes of this Note Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed

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hereby, and (2) in the event of any declaration of acceleration of such
obligations as provided in Article 6 hereof, such obligations (whether or not
due and payable) will forthwith become due and payable by the Guarantor for the
purpose of this Note Guarantee. The Guarantors will have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Note Guarantee.

Section 10.02. Limitation on Guarantor Liability.

      The Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee
not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law to the extent applicable to any Note
Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and
the Guarantor hereby irrevocably agree that the obligations of such Guarantor
will be limited to the maximum amount that will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such Guarantor
that are relevant under such laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
this Article 10, result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.

Section 10.03. Execution and Delivery of Note Guarantee.

      To evidence its Note Guarantee set forth in Section 10.01 hereof, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form attached as Exhibit E hereto will be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture will be executed on behalf of such Guarantor by one of its Officers.

      Each Guarantor hereby agrees that its Note Guarantee set forth in Section
10.01 hereof will remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Note Guarantee.

      If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee will be valid
nevertheless.

      The delivery of any Note by the Trustee, after the authentication thereof
hereunder, will constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Guarantors.

Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.

      (a) Except as otherwise provided in Section 10.05 hereof and subject to
10.04(b) hereof, no Guarantor may sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another Person, other
than the Company or another Guarantor, unless:

      (1) immediately after giving effect to such transaction, no Default or
      Event of Default exists; and

      (2) subject to Section 10.05 hereof, the Person acquiring the property in
      any such sale or disposition or the Person formed by or surviving any such
      consolidation or merger unconditionally assumes all the obligations of
      that Guarantor under this Indenture, its Note

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      Guarantee and the Registration Rights Agreement on the terms set forth
      herein or therein, pursuant to a supplemental indenture in form and
      substance reasonably satisfactory to the Trustee.

      In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person will succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued will in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.

      Except as set forth in Articles 4 and 5 hereof, and notwithstanding clause
2 above, nothing contained in this Indenture or in any of the Notes will prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or will prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.

      (b) Notwithstanding the foregoing, any merger or consolidation of AREH (or
an Affiliate referred to in clause (1) of the second paragraph of Section
5.01(b) or any Person that is the successor of AREH or any such successor ad
infinitum) or any sale of all or substantially all of AREH's assets (or of an
Affiliate referred to in clause (1) of the second paragraph of Section 5.01(b)
or any Person that is the successor of AREH or any such successor ad infinitum)
shall be governed by Section 5.01(b) hereof and Section 10.04(a) shall not apply
to any such transaction.

Section 10.05. Releases.

      (a) In the event of any sale or other disposition of all or substantially
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Guarantor, in each case to a Person that is not (either before or after giving
effect to such transactions) the Company or another Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the Capital Stock of such Guarantor) or
the entity acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of such Guarantor) will be released
and relieved of any obligations under its Note Guarantee. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture the Trustee will execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Note Guarantee.

      (b) Upon Legal Defeasance in accordance with Article 8 hereof or
satisfaction and discharge of this Indenture in accordance with Article 11
hereof, each Guarantor will be released and relieved of any obligations under
its Note Guarantee.

      Any Guarantor not released from its obligations under its Note Guarantee
as provided in this Section 10.05 will remain liable for the full amount of
principal of and interest and premium and Liquidated Damages, if any, on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article 10.

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                                   ARTICLE 11
                           SATISFACTION AND DISCHARGE

Section 11.01 Satisfaction and Discharge.

      This Indenture will be discharged and will cease to be of further effect
as to all Notes and Note Guarantees issued hereunder, when:

            (1) either:

                  (a) all Notes that have been authenticated, except lost,
      stolen or destroyed Notes that have been replaced or paid and Notes for
      whose payment money has theretofore been deposited in trust and thereafter
      repaid to AREP, have been delivered to the Trustee for cancellation; or

                  (b) all Notes that have not been delivered to the Trustee for
      cancellation (1) have become due and payable by reason of the mailing of a
      notice of redemption or otherwise, (2) will become due and payable within
      one year or (3) are to be called for redemption within 12 months under
      arrangements reasonably satisfactory to the Trustee for the giving of
      notice of redemption by the Trustee in the name, and at the reasonable
      expense of the Company, and the Company or any Guarantor have irrevocably
      deposited or caused to be deposited with the Trustee as trust funds in
      trust solely for the benefit of the Holders, cash in U.S. dollars,
      non-callable Government Securities, or a combination of cash in U.S.
      dollars and non-callable Government Securities, in amounts as will be
      sufficient without consideration of any reinvestment of interest, to pay
      and discharge the entire Indebtedness on the Notes not delivered to the
      Trustee for cancellation for principal and premium, if any, and accrued
      but unpaid interest to the date of maturity or redemption;

            (2) no Default of Event of Default has occurred and is continuing on
      the date of the deposit or will occur as a result of the deposit and the
      deposit will not result in a breach or violation of, or constitute a
      default under, any other material instrument to which the Company is a
      party or by which the Company is bound;

            (3) the Company has paid or caused to be paid all sums payable by it
      under this Indenture; and

            (4) the Company or any Guarantor have delivered irrevocable
      instructions to the Trustee under this Indenture to apply the deposited
      money toward the payment of the Notes at maturity or the redemption date,
      as the case may be.

In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.

      Notwithstanding the satisfaction and discharge of this Indenture, if money
has been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section 11.01, the provisions of Sections 11.02 and 8.06 hereof will
survive. In addition, nothing in this Section 11.01 will be deemed to discharge
those provisions of Section 7.07 hereof, that, by their terms, survive the
satisfaction and discharge of this Indenture.

Section 11.02 Application of Trust Money.

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      Subject to the provisions of Section 8.06 hereof, all money deposited with
the Trustee pursuant to Section 11.01 hereof shall be held in trust and applied
by it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium and Liquidated Damages, if any)
and interest for whose payment such money has been deposited with the Trustee;
but such money need not be segregated from other funds except to the extent
required by law.

      If the Trustee or Paying Agent is unable to apply any money or Government
Securities in accordance with Section 11.01 hereof 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
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium or Liquidated Damages, if any, or interest on, any Notes
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money or Government Securities held by the Trustee or Paying Agent.

                                   ARTICLE 12
                                  MISCELLANEOUS

Section 12.01 Trust Indenture Act Controls.

      If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties will control.

Section 12.02 Notices.

      Any notice or communication by the Company, any Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or by first
class mail (registered or certified, return receipt requested), facsimile
transmission or overnight air courier guaranteeing next day delivery, to the
others' address:

      If to the Company and/or any Guarantor:

      American Real Estate Partners, L.P.
      American Real Estate Finance Corp.
      100 South Bedford Road
      Mt. Kisco, NY 10549
      Facsimile No.: (914) 242-9282
      Attention: Felicia P.
      Buebel, Esq.

      With a copy to:

      Piper Rudnick LLP
      1251 Avenue of the Americas
      New York, New York 10020
      Telecopier No.: (212) 835-6001
      Attention: Steven L. Wasserman, Esq.

                                       74
<PAGE>

      If to the Trustee:

      Wilmington Trust Company
      Rodney Square North
      1100 North Market Street
      Wilmington, Delaware 19890
      Telecopier No.:(302) 636-4140
      Attention: Michael G. Oller

      With a copy to:
      Curtis, Mallet-Prevost, Colt & Mosle LLP
      101 Park Avenue
      Suite 3500
      New York, New York 10178
      Telecopier No.:(212) 697-1559
      Attention: Kathryn Alisbah, Esq.
                 Steven J. Reisman, Esq.

      The Company, any Guarantor or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.

      All notices and communications (other than those sent to Holders) will be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.

      Any notice or communication to a Holder will be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication will also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it will
not affect its sufficiency with respect to other Holders.

      If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.

      If the Company mails a notice or communication to Holders, it will mail a
copy to the Trustee and each Agent at the same time.

Section 12.03 Communication by Holders of Notes with Other Holders of Notes.

      Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).

Section 12.04 Certificate and Opinion as to Conditions Precedent.

      Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:

                                       75
<PAGE>

            (1) an Officers' Certificate in form and substance reasonably
      satisfactory to the Trustee (which must include the statements set forth
      in Section 12.05 hereof) stating that, in the opinion of the signers, all
      conditions precedent and covenants, if any, provided for in this Indenture
      relating to the proposed action have been satisfied; and

            (2) an Opinion of Counsel in form and substance reasonably
      satisfactory to the Trustee (which must include the statements set forth
      in Section 12.05 hereof) stating that, in the opinion of such counsel, all
      such conditions precedent and covenants have been satisfied.

Section 12.05 Statements Required in Certificate or Opinion.

      Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA
Section 314(e) and must include:

            (1) a statement that the Person making such certificate or opinion
      has read such covenant or condition;

            (2) 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;

            (3) a statement that, in the opinion of such Person, he or she has
      made such examination or investigation as is necessary to enable him or
      her to express an informed opinion as to whether or not such covenant or
      condition has been satisfied; and

            (4) a statement as to whether or not, in the opinion of such Person,
      such condition or covenant has been satisfied.

Section 12.06 Rules by Trustee and Agents.

      The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

Section 12.07 No Personal Liability of Directors, Officers, Employees and
Stockholders.

      No director, officer, employee, incorporator, manager (or managing member)
direct or indirect member, partner or stockholder of the Company, AREH, API or
any additional Guarantor shall have any liability for any obligations of the
Company, AREH, API or any additional Guarantor under the Notes, this Indenture,
any Note Guarantee or for any claim based on, in respect of, or by reason of
such obligations or its creation. Each Holder of the 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 12.08 Governing Law.

      THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

Section 12.09 No Adverse Interpretation of Other Agreements.

                                       76
<PAGE>

      This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

Section 12.10 Successors.

      All agreements of the Trustee in this Indenture will bind its successors.
All agreements of each Guarantor in this Indenture will bind its successors,
except as otherwise provided in Sections 5.01 and 10.05 hereof.

Section 12.11 Severability.

      In case any provision in this Indenture, the Note Guarantees or in the
Notes is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.

Section 12.12 Counterpart Originals.

      The parties may sign any number of copies of this Indenture. Each signed
copy will be an original, but all of them together represent the same agreement.

Section 12.13 Table of Contents, Headings, etc.

      The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and will in no way
modify or restrict any of the terms or provisions hereof.

Section 12.14 Clarity.

      For the avoidance of doubt, the inclusion of exceptions to the provisions
(including covenants and definitions) set forth in this Indenture will not be
interpreted to imply that the matters permitted by the exception would be
limited by the terms of such provisions but for such exceptions.

                         [Signatures on following page]

                                       77
<PAGE>

                                   SIGNATURES

Dated as of May 12, 2004

                                         AMERICAN REAL ESTATE  PARTNERS L.P.

                                         By: American Property Investors, Inc.,
                                         its general partner

                                         By: /s/ Keith A. Meister
                                             -----------------------------------
                                             Name:  Keith A. Meister
                                             Title: President and Chief
                                                    Executive Officer

                                         AMERICAN REAL ESTATE  FINANCE CORP.

                                         By: /s/  Keith A. Meister
                                             -----------------------------------
                                             Name:  Keith A. Meister
                                             Title: President and Chief
                                                    Executive Officer

                                         AMERICAN REAL ESTATE HOLDINGS LIMITED
                                         PARTNERSHIP

                                         By: American Property Investors, Inc.,
                                         its general partner

                                         By: /s/  Keith A. Meister
                                             -----------------------------------
                                             Name:  Keith A. Meister
                                             Title: President and Chief
                                                    Executive Officer

                                         WILMINGTON TRUST COMPANY

                                         By: /s/  Michael G. Oller, Jr.
                                             -----------------------------------
                                             Name:  Michael G. Oller, Jr.
                                             Title: Senior Financial Services
                                                    Officer

<PAGE>

                                                                      EXHIBIT A1

                                 [Face of Note]

                                                         CUSIP/CINS ____________

                          8-1/8% Senior Notes due 2012

No. ___                                                            $____________

                       AMERICAN REAL ESTATE PARTNERS, L.P.
                       AMERICAN REAL ESTATE FINANCE CORP.

promises to pay to ___________ or registered assigns,

the principal sum of __________________________________________________________
DOLLARS on June 1, 2012.

Interest Payment Dates: June 1 and December 1

Record Dates: May 15 and November 15

Dated:

                                         AMERICAN REAL ESTATE PARTNERS, L.P.

                                         By: American Property Investors, Inc.,
                                         its general partner

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         AMERICAN REAL ESTATE FINANCE CORP.

                                         By: ___________________________________
                                             Name:
                                             Title:

This is one of the Notes referred to
in the within-mentioned Indenture:

WILMINGTON TRUST COMPANY,
 as Trustee

By: _______________________________
         Authorized Signatory

                                      A1-1
<PAGE>

                                 [Back of Note]
                          8-1/8% Senior Notes due 2012

[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]

      Capitalized terms used herein have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.

            (1) INTEREST. American Real Estate Partners, L.P., a Delaware
      limited partnership ("AREP") and American Real Estate Finance Corp. ("AREP
      Finance", together with AREP, the "Company"), promises to pay interest on
      the principal amount of this Note at 8-1/8% per annum from
      ________________, 20__ until maturity and shall pay the Liquidated
      Damages, if any, payable pursuant to Section 5 of the Registration Rights
      Agreement referred to below. The Company will pay interest and Liquidated
      Damages, if any, semi-annually in arrears on June 1 and December 1 of each
      year, or if any such day is not a Business Day, on the next succeeding
      Business Day (each, an "Interest Payment Date"). Interest on the Notes
      will accrue from the most recent date to which interest has been paid or,
      if no interest has been paid, from the date of issuance; provided that if
      there is no existing Default in the payment of interest, and if this Note
      is authenticated between a record date referred to on the face hereof and
      the next succeeding Interest Payment Date, interest shall accrue from such
      next succeeding Interest Payment Date; provided further that the first
      Interest Payment Date shall be _____________, 20__. The Company will pay
      interest (including post-petition interest in any proceeding under any
      Bankruptcy Law) on overdue principal and premium, if any, from time to
      time on demand at a rate that is 1% per annum in excess of the rate then
      in effect to the extent lawful; it will pay interest (including
      post-petition interest in any proceeding under any Bankruptcy Law) on
      overdue installments of interest and Liquidated Damages, if any, (without
      regard to any applicable grace periods) from time to time on demand at the
      same rate to the extent lawful. Interest will be computed on the basis of
      a 360-day year of twelve 30-day months.

            (2) METHOD OF PAYMENT. The Company will pay or cause to pay interest
      on the Notes (except defaulted interest) and Liquidated Damages, if any,
      to the Persons who are registered Holders of Notes at the close of
      business on the May 15 or November 15 next preceding the Interest Payment
      Date, even if such Notes are canceled after such record date and on or
      before such Interest Payment Date, except as provided in Section 2.12 of
      the Indenture with respect to defaulted interest. The Notes will be
      payable as to principal, premium and Liquidated Damages, if any, and
      interest at the office or agency of the Company maintained for such
      purpose within or without the City and State of New York, or, at the
      option of the Company, payment of interest and Liquidated Damages, if any,
      may be made by check mailed to the Holders at their addresses set forth in
      the register of Holders; provided that payment by wire transfer of
      immediately available funds will be required with respect to principal of
      and interest, premium and Liquidated Damages, if any, on, all Global Notes
      and all other Notes the Holders of which will have provided wire transfer
      instructions to the Company or the Paying Agent. Such payment will be in
      such coin or currency of the United States of America as at the time of
      payment is legal tender for payment of public and private debts.

            (3) PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company,
      the Trustee under the Indenture, will act as Paying Agent and Registrar.
      The Company may change any

                                      A1-2
<PAGE>

      Paying Agent or Registrar without notice to any Holder. The Company or any
      of its Subsidiaries may act in any such capacity.

            (4) INDENTURE. The Company issued the Notes under an Indenture dated
      as of May 12, 2004 (the "Indenture") among the Company, the Guarantor 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 TIA. The Notes
      are subject to all such terms, and Holders are referred to the Indenture
      and such Act for a statement of such terms. To the extent any provision of
      this Note conflicts with the express provisions of the Indenture, the
      provisions of the Indenture shall govern and be controlling. The Notes are
      unsecured obligations of the Company.

            (5) OPTIONAL REDEMPTION.

      (a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company will not have the option to redeem the Notes prior to June 1, 2008. On
or after June 1, 2008, the Company will have the option to redeem all or a part
of the Notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes
redeemed to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 1 of the years indicated below, subject to the rights
of Holders on the relevant record date to receive interest on the relevant
interest payment date:

<TABLE>
<CAPTION>
Year                                                                                      Percentage
----                                                                                      ----------
<S>                                                                                       <C>
2008.............................................................................          104.063%
2009.............................................................................          102.031%
2010 and thereafter..............................................................          100.000%
</TABLE>

      Unless the Company defaults in the payment of the redemption price,
interest will cease to accrue on the Notes or portions thereof called for
redemption on the applicable redemption date.

      (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, at any time prior to June 1, 2007, the Company may on one or more occasions
redeem up to 35% of the aggregate principal amount of Notes (including
Additional Notes) issued under the Indenture at a redemption price of 108.125%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of one or
more Equity Offerings; provided that at least 65% of the aggregate principal
amount of Notes issued under the Indenture remains outstanding immediately after
the occurrence of such redemption (excluding Notes held by AREP and its
Subsidiaries (including any Guarantor)) and such redemption occurs within 60
days of the date of the closing of such Equity Offering.

            (6) MANDATORY REDEMPTION.

      Other than in connection with redemption pursuant to Gaming Laws, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.

            (7) REDEMPTION PURSUANT TO GAMING LAWS

      If any Gaming Authority requires that a Holder or Beneficial Owner of
Notes be licensed, qualified or found suitable under any applicable Gaming Law
and such Holder or Beneficial Owner:

                                      A1-3
<PAGE>

      (1) fails to apply for a license, qualification or a finding of
suitability within 30 days (or such shorter period as may be required by the
applicable Gaming Authority) after being requested to do so by the Gaming
Authority; or

      (2) is denied such license or qualification or not found suitable;

      AREP shall then have the right, at its option:

      (1) to require each such Holder or Beneficial Owner to dispose of its
Notes within 30 days (or such earlier date as may be required by the applicable
Gaming Authority) of the occurrence of the event described in clause (1) or (2)
above, or

      (2) to redeem the Notes of each such Holder or Beneficial Owner, in
accordance with Rule 14e-1 of the Exchange Act, if applicable, at a redemption
price equal to the lowest of:

      (a) the principal amount thereof, together with accrued and unpaid
interest and Liquidated Damages, if any, to the earlier of the date of
redemption, the date 30 days after such Holder or Beneficial Owner is required
to apply for a license, qualification or finding of suitability (or such shorter
period that may be required by any applicable Gaming Authority) if such Holder
or Beneficial Owner fails to do so ("Application Date") or of the date of denial
of license or qualification or of the finding of unsuitability by such Gaming
Authority;

      (b) the price at which such Holder or Beneficial Owner acquired the Notes,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
earlier of the date of redemption, the Application Date or the date of the
denial of license or qualification or of the finding of unsuitability by such
Gaming Authority; and

      (c) such other lesser amount as may be required by any Gaming Authority.

      Immediately upon a determination by a Gaming Authority that a Holder or
Beneficial Owner of the Notes will not be licensed, qualified or found suitable
and must dispose of the Notes, the Holder or Beneficial Owner will, to the
extent required by applicable Gaming Laws, have no further right:

      (1) to exercise, directly or indirectly, through any trustee or nominee or
any other person or entity, any right conferred by the Notes, the Note Guarantee
or the Indenture; or

      (2) to receive any interest, Liquidated Damages, dividend, economic
interests or any other distributions or payments with respect to the Notes and
the Note Guarantee or any remuneration in any form with respect to the Notes and
the Note Guarantee from the Company, any Note Guarantor or the Trustee, except
the redemption price referred to above.

      AREP shall notify the Trustee in writing of any such redemption as soon as
practicable. Any Holder or Beneficial Owner that is required to apply for a
license, qualification or a finding of suitability will be responsible for all
fees and costs of applying for and obtaining the license, qualification or
finding of suitability and of any investigation by the applicable Gaming
Authorities and the Company and any Note Guarantor will not reimburse any Holder
or Beneficial Owner for such expense.

            (8) REPURCHASE AT THE OPTION OF HOLDER.

                  (a) If there is a Change of Control, the Company will be
      required to make an offer (a "Change of Control Offer") to each Holder to
      repurchase all or any part (equal to $1,000

                                      A1-4
<PAGE>

      or an integral multiple thereof) of each Holder's Notes at a purchase
      price in cash equal to 101% of the aggregate principal amount thereof plus
      accrued and unpaid interest and Liquidated Damages, if any, thereon to the
      date of purchase, subject to the rights of Holders on the relevant record
      date to receive interest due on the relevant interest payment date (the
      "Change of Control Payment"). Within 30 days following any Change of
      Control, the Company will mail a notice to each Holder setting forth the
      procedures governing the Change of Control Offer as required by the
      Indenture.

            (9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at
      least 15 days but not more than 60 days before the redemption date to each
      Holder whose Notes are to be redeemed at its registered address, except
      that redemption notices may be mailed more than 60 days prior to a
      redemption date if the notice is issued in connection with a defeasance of
      the Notes or a satisfaction or discharge of the Indenture. Notes in
      denominations larger than $1,000 may be redeemed in part but only in whole
      multiples of $1,000, unless all of the Notes held by a Holder are to be
      redeemed.

            (10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
      form without coupons in denominations of $1,000 and integral multiples of
      $1,000. The transfer of Notes may be registered and Notes may be exchanged
      as provided in the Indenture. The Registrar and the Trustee may require a
      Holder, among other things, to furnish appropriate endorsements and
      transfer documents and the Company may require a Holder to pay any taxes
      and fees required by law or permitted by the Indenture. The Company need
      not exchange or register the transfer of any Note or portion of a Note
      selected for redemption, except for the unredeemed portion of any Note
      being redeemed in part. Also, the Company need not exchange or register
      the transfer of any Notes for a period of 15 days before a selection of
      Notes to be redeemed or during the period between a record date and the
      corresponding Interest Payment Date.

            (11) PERSONS DEEMED OWNERS. The registered Holder of a Note may be
      treated as its owner for all purposes.

            (12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
      exceptions, the Indenture or the Notes or the Note Guarantees may be
      amended or supplemented with the consent of the Holders of at least a
      majority in aggregate principal amount of the then outstanding Notes
      including Additional Notes, if any, voting as a single class, and any
      existing Default or Event or Default or compliance with any provision of
      the Indenture or the Notes or the Note Guarantees may be waived with the
      consent of the Holders of a majority in aggregate principal amount of the
      then outstanding Notes including Additional Notes, if any, voting as a
      single class. Without the consent of any Holder of a Note, the Indenture
      or the Notes or the Note Guarantees may be amended or supplemented to cure
      any ambiguity, defect or inconsistency, to provide for uncertificated
      Notes in addition to or in place of certificated Notes, to provide for the
      assumption of the Company's or a Guarantor's obligations to Holders of the
      Notes and Note Guarantees in case of a merger or consolidation, to make
      any change that would provide any additional rights or benefits to the
      Holders of the Notes or that does not adversely affect the legal rights
      under the Indenture of any such Holder, to comply with the requirements of
      the SEC in order to effect or maintain the qualification of the Indenture
      under the TIA, to conform the text of the Indenture or the Notes to any
      provision of the "Description of Notes" section of the Company's Offering
      Memorandum dated May 6, 2004, as supplemented, relating to the initial
      offering of the Notes, to the extent that such provision in that
      "Description of Notes" was intended to be a verbatim recitation of a
      provision of the Indenture, the Note Guarantees or the Notes; to provide
      for the issuance of Additional Notes in accordance with the limitations
      set forth in the Indenture, or to

                                      A1-5
<PAGE>

      allow any Guarantor to execute a supplemental indenture to the Indenture
      and/or a Note Guarantee with respect to the Notes.

            (13) DEFAULTS AND REMEDIES. Events of Default include: (i) default
      for 30 days in the payment when due of interest on, or Liquidated Damages,
      if any, with respect to the Notes, whether or not prohibited by the
      subordination provisions of the Indenture; (ii) default in the payment
      when due of the principal of, or premium, if any, on, the Notes when the
      same becomes due and payable at maturity, upon redemption (including in
      connection with an offer to purchase) or otherwise, (iii) failure by the
      Company to comply with Section 4.15, of the Indenture; (iv) failure by the
      Company or any Guarantor to comply with Sections 4.07, 4.09, 4.16 or 4.17
      for 30 days after written notice from the Trustee, (v) failure by the
      Company or any Guarantor for 60 days after written notice to the Company
      by the Trustee or the Holders of at least 25% in aggregate principal
      amount of the Notes including Additional Notes, if any, then outstanding
      voting as a single class to comply with any of the other agreements in the
      Indenture or the Notes; (vi) default under certain other agreements
      relating to Indebtedness of the Company or any Guarantor which default
      results in the acceleration of such Indebtedness prior to its express
      maturity; (vii) certain final judgments for the payment of money that
      remain undischarged for a period of 60 days; (viii) certain events of
      bankruptcy or insolvency with respect to the Company or any Guarantor that
      is a Significant Subsidiary and (ix) except as permitted by the Indenture,
      any Note Guarantee is held in any judicial proceeding to be unenforceable
      or invalid or ceases for any reason to be in full force and effect or AREH
      or any other Guarantor or any Person acting on behalf of any Guarantor
      denies or disaffirms its obligations under such Guarantor's Note
      Guarantee. If any Event of Default occurs and is continuing, the Trustee
      or the Holders of at least 25% in aggregate principal amount of the then
      outstanding Notes may declare all the Notes to be due and payable
      immediately. Notwithstanding the foregoing, in the case of an Event of
      Default arising from certain events of bankruptcy or insolvency, all
      outstanding Notes will become due and payable immediately without further
      action or notice. Holders may not enforce the Indenture or the Notes
      except as provided in the Indenture. Subject to certain limitations,
      Holders of a majority in aggregate principal amount of the then
      outstanding Notes may direct the Trustee in its exercise of any trust or
      power. The Trustee may withhold from Holders of the Notes notice of any
      continuing Default or Event of Default (except a Default or Event of
      Default relating to the payment of principal or interest or premium or
      Liquidated Damages, if any,) if it determines that withholding notice is
      in their interest. The Holders of a majority in aggregate principal amount
      of the then outstanding Notes by notice to the Trustee may, on behalf of
      the Holders of all of the Notes, rescind an acceleration or waive any
      existing Default or Event of Default and its consequences under the
      Indenture except a continuing Default or Event of Default in the payment
      of interest or premium or Liquidated Damages, if any, on, or the principal
      of, the Notes. The Company is required to deliver to the Trustee annually
      a statement regarding compliance with the Indenture, and the Company is
      required, upon becoming aware of any Default or Event of Default, to
      deliver to the Trustee a statement specifying such Default or Event of
      Default.

            (14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual
      or any other capacity, may make loans to, accept deposits from, and
      perform services for the Company or its Affiliates, and may otherwise deal
      with the Company or its Affiliates, as if it were not the Trustee.

            (15) NO RECOURSE AGAINST OTHERS. A director, officer, manager (or
      managing member), direct or indirect member, partner, employee,
      incorporator or stockholder of the Company API, or the general partner of
      the Company or any Guarantor or any of the Guarantors, as such, will not
      have any liability for any obligations of the Company or the Guarantors
      under the Notes, the Note Guarantees or the Indenture or for any claim
      based on, in respect of, or by

                                      A1-6
<PAGE>

      reason of, such obligations or their creation. Each Holder by accepting a
      Note waives and releases all such liability. The waiver and release are
      part of the consideration for the issuance of the Notes.

            (16) AUTHENTICATION. This Note will not be valid until authenticated
      by the manual signature of the Trustee or an authenticating agent.

            (17) 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 right of
      survivorship and not as tenants in common), CUST (= Custodian), and
      U/G/M/A (= Uniform Gifts to Minors Act).

            (18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
      RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
      of Notes under the Indenture, Holders of Restricted Global Notes and
      Restricted Definitive Notes will have all the rights set forth in the
      Registration Rights Agreement dated as of May 12, 2004, among the Company,
      the Guarantor and the other parties named on the signature pages thereof
      or, in the case of Additional Notes, Holders of Restricted Global Notes
      and Restricted Definitive Notes will have the rights set forth in one or
      more registration rights agreements, if any, among the Company, the
      Guarantor and the other parties thereto, relating to rights given by the
      Company and the Guarantor to the purchasers of any Additional Notes
      (collectively, the "Registration Rights Agreement").

            (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
      Committee on Uniform Security Identification Procedures, the Company has
      caused CUSIP numbers to be printed on the Notes, and the Trustee may use
      CUSIP numbers in notices of redemption as a convenience to 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.

            (20) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL
      GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE
      GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
      LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
      WOULD BE REQUIRED THEREBY.

      The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:

American Real Estate Partners, L.P.
American Real Estate Finance Corp.
100 South Bedford Road
Mt. Kisco, NY 10549
Facsimile No.: (914) 242-9282
Attention: Felicia P. Buebel, Esq.

                                      A1-7
<PAGE>

                                 ASSIGNMENT FORM

      To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:___________________________________
                                               (Insert assignee's legal name)

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company.  The agent may substitute
another to act for him.

Date:  _______________

                                         Your Signature:________________________
                                             (Sign exactly as your name appears
                                             on the face of this Note)

Signature Guarantee*:  _____________________

* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                      A1-8
<PAGE>

                       OPTION OF HOLDER TO ELECT PURCHASE

      If you want to elect to have this Note purchased by the Company pursuant
to Section 4.15 of the Indenture, check the box below:

                                  Section 4.15

      If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.15 of the Indenture, state the amount you elect to
have purchased:

                                $________________

Date:  _______________

                                         Your Signature:________________________
                                           (Sign exactly as your name appears on
                                               the face of this Note)

                                         Tax Identification No.:________________

Signature Guarantee*:  ____________________

* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                      A1-9
<PAGE>

             SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *

      The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:

<TABLE>
<CAPTION>

                                                                       Principal Amount
                       Amount of decrease    Amount of increase in    at maturity of this        Signature of
                       in Principal Amount      Principal Amount     Global Note following     authorized officer
                         at maturity of          at maturity of         such  decrease           of Trustee or
Date of Exchange        this Global Note        this Global Note         (or increase)             Custodian
----------------       -------------------   ---------------------   ---------------------     ------------------
<S>                    <C>                   <C>                     <C>                       <C>
</TABLE>

* This schedule should be included only if the Note is issued in global form.

                                     A1-10
<PAGE>

                                                                      EXHIBIT A2

                  [Face of Regulation S Temporary Global Note]

                                                           CUSIP/CINS __________

                          8-1/8% Senior Notes due 2012

No. ___                                                              $__________

                       AMERICAN REAL ESTATE PARTNERS, L.P.
                       AMERICAN REAL ESTATE FINANCE CORP.

promises to pay to CEDE & CO. or registered assigns,

the principal sum of ____________________________________________________DOLLARS
on June 1, 2012.

Interest Payment Dates:  June 1 and December 1

Record Dates:  May 15 and November 15

Dated:

                                         AMERICAN REAL ESTATE PARTNERS, L.P.

                                         By: American Property Investors, Inc.,
                                             its general partner

                                         By:____________________________________
                                            Name:
                                            Title:

                                         AMERICAN REAL ESTATE FINANCE CORP.

                                         By:____________________________________
                                            Name:
                                            Title:

This is one of the Notes referred to
in the within-mentioned Indenture:

WILMINGTON TRUST COMPANY,
  as Trustee

By: ______________________________
        Authorized Signatory

                                      A2-1
<PAGE>

                  [Back of Regulation S Temporary Global Note]
                          8-1/8% Senior Notes due 2012

THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.

THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF AMERICAN REAL ESTATE PARTNERS, L.P.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), 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 MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.

THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF American REal Estate Partners, L.P. AND AMERICAN REAL ESTATE FINANCE
CORP. THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) (a) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE

                                      A2-2
<PAGE>

SECURITIES ACT, (c) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501 (a) (1), (2), (3) OR (7) OF THE SECURITIES ACT) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO AMERICAN REAL
ESTATE PARTNERS, L.P. THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
AMERICAN REAL ESTATE PARTNERS, L.P. SO REQUESTS), (2) TO AMERICAN REAL ESTATE
PARTNERS, L.P. OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.

      Capitalized terms used herein have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.

            (1) INTEREST. American Real Estate Partners, L.P., a Delaware
      limited partnership ("AREP") and American Real Estate Finance Corp. ("AREP
      Finance", together with AREP, the "Company"), promises to pay interest on
      the principal amount of this Note at 8-1/8% per annum from
      ________________, 20__ until maturity and shall pay the Liquidated
      Damages, if any, payable pursuant to Section 5 of the Registration Rights
      Agreement referred to below. The Company will pay interest and Liquidated
      Damages, if any, semi-annually in arrears on June 1 and December 1 of each
      year, or if any such day is not a Business Day, on the next succeeding
      Business Day (each, an "Interest Payment Date"). Interest on the Notes
      will accrue from the most recent date to which interest has been paid or,
      if no interest has been paid, from the date of issuance; provided that if
      there is no existing Default in the payment of interest, and if this Note
      is authenticated between a record date referred to on the face hereof and
      the next succeeding Interest Payment Date, interest shall accrue from such
      next succeeding Interest Payment Date; provided further that the first
      Interest Payment Date shall be _____________, 20__. The Company will pay
      interest (including post-petition interest in any proceeding under any
      Bankruptcy Law) on overdue principal and premium, if any, from time to
      time on demand at a rate that is 1% per annum in excess of the rate then
      in effect to the extent lawful; it will pay interest (including
      post-petition interest in any proceeding under any Bankruptcy Law) on
      overdue installments of interest and Liquidated Damages, if any, (without
      regard to any applicable grace periods) from time to time on demand at the
      same rate to the extent lawful. Interest will be computed on the basis of
      a 360-day year of twelve 30-day months.

      Until this Regulation S Temporary Global Note is exchanged for one or more
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this Regulation
S Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.

            (2) METHOD OF PAYMENT. The Company will pay or cause to pay interest
      on the Notes (except defaulted interest) and Liquidated Damages, if any,
      to the Persons who are registered Holders of Notes at the close of
      business on the May 15 or November 15 next preceding the

                                      A2-3
<PAGE>

      Interest Payment Date, even if such Notes are canceled after such record
      date and on or before such Interest Payment Date, except as provided in
      Section 2.12 of the Indenture with respect to defaulted interest. The
      Notes will be payable as to principal, premium and Liquidated Damages, if
      any, and interest at the office or agency of the Company maintained for
      such purpose within or without the City and State of New York, or, at the
      option of the Company, payment of interest and Liquidated Damages, if any,
      may be made by check mailed to the Holders at their addresses set forth in
      the register of Holders; provided that payment by wire transfer of
      immediately available funds will be required with respect to principal of
      and interest, premium and Liquidated Damages, if any, on, all Global Notes
      and all other Notes the Holders of which will have provided wire transfer
      instructions to the Company or the Paying Agent. Such payment will be in
      such coin or currency of the United States of America as at the time of
      payment is legal tender for payment of public and private debts.

            (3) PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company,
      the Trustee under the Indenture, will act as Paying Agent and Registrar.
      The Company may change any Paying Agent or Registrar without notice to any
      Holder. The Company or any of its Subsidiaries may act in any such
      capacity.

            (4) INDENTURE. The Company issued the Notes under an Indenture dated
      as of May 12, 2004 (the "Indenture") among the Company, the Guarantor 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 TIA. The Notes
      are subject to all such terms, and Holders are referred to the Indenture
      and such Act for a statement of such terms. To the extent any provision of
      this Note conflicts with the express provisions of the Indenture, the
      provisions of the Indenture shall govern and be controlling. The Notes are
      unsecured obligations of the Company.

            (5) OPTIONAL REDEMPTION.

                  (a) Except as set forth in subparagraph (b) of this Paragraph
      5, the Company will not have the option to redeem the Notes prior to June
      1, 2008. On or after June 1, 2008, the Company will have the option to
      redeem all or a part of the Notes upon not less than 30 nor more than 60
      days' notice, at the redemption prices (expressed as percentages of
      principal amount) set forth below plus accrued and unpaid interest and
      Liquidated Damages, if any, on the Notes redeemed to the applicable
      redemption date, if redeemed during the twelve-month period beginning on
      June 1 of the years indicated below, subject to the rights of Holders on
      the relevant record date to receive interest on the relevant interest
      payment date:

<TABLE>
<CAPTION>
Year                                                                                      Percentage
----                                                                                      ----------
<S>                                                                                       <C>
2008.............................................................................          104.063%
2009.............................................................................          102.031%
2010 and thereafter..............................................................          100.000%
</TABLE>

      Unless the Company defaults in the payment of the redemption price,
interest will cease to accrue on the Notes or portions thereof called for
redemption on the applicable redemption date.

                  (b) Notwithstanding the provisions of subparagraph (a) of this
      Paragraph 5, at any time prior to June 1, 2007, the Company may on one or
      more occasions redeem up to 35% of the aggregate principal amount of Notes
      (including Additional Notes) issued under the Indenture at a redemption
      price of 108.125% of the principal amount thereof, plus accrued and unpaid
      interest and Liquidated Damages, if any, to the redemption date, with the
      net cash proceeds of one or more Equity Offerings; provided that at least
      65% of the aggregate principal amount of

                                      A2-4
<PAGE>

      Notes issued under the Indenture remains outstanding immediately after the
      occurrence of such redemption (excluding Notes held by AREP and its
      Subsidiaries (including any Guarantor)) and such redemption occurs within
      60 days of the date of the closing of such Equity Offering.

            (6) MANDATORY REDEMPTION.

      Other than in connection with redemption pursuant to Gaming Laws, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.

            (7) REDEMPTION PURSUANT TO GAMING LAWS

      If any Gaming Authority requires that a Holder or Beneficial Owner of
Notes be licensed, qualified or found suitable under any applicable Gaming Law
and such Holder or Beneficial Owner:

      (1) fails to apply for a license, qualification or a finding of
suitability within 30 days (or such shorter period as may be required by the
applicable Gaming Authority) after being requested to do so by the Gaming
Authority; or

      (2) is denied such license or qualification or not found suitable;

      AREP shall then have the right, at its option:

      (1) to require each such Holder or Beneficial Owner to dispose of its
Notes within 30 days (or such earlier date as may be required by the applicable
Gaming Authority) of the occurrence of the event described in clause (1) or (2)
above, or

      (2) to redeem the Notes of each such Holder or Beneficial Owner, in
accordance with Rule 14e-1 of the Exchange Act, if applicable, at a redemption
price equal to the lowest of:

      (a) the principal amount thereof, together with accrued and unpaid
interest and Liquidated Damages, if any, to the earlier of the date of
redemption, the date 30 days after such Holder or Beneficial Owner is required
to apply for a license, qualification or finding of suitability (or such shorter
period that may be required by any applicable Gaming Authority) if such Holder
or Beneficial Owner fails to do so ("Application Date") or of the date of denial
of license or qualification or of the finding of unsuitability by such Gaming
Authority;

      (b) the price at which such Holder or Beneficial Owner acquired the Notes,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
earlier of the date of redemption, the Application Date or the date of the
denial of license or qualification or of the finding of unsuitability by such
Gaming Authority; and

      (c) such other lesser amount as may be required by any Gaming Authority.

      Immediately upon a determination by a Gaming Authority that a Holder or
Beneficial Owner of the Notes will not be licensed, qualified or found suitable
and must dispose of the Notes, the Holder or Beneficial Owner will, to the
extent required by applicable Gaming Laws, have no further right:

      (1) to exercise, directly or indirectly, through any trustee or nominee or
any other person or entity, any right conferred by the Notes, the Note Guarantee
or the Indenture; or

                                      A2-5
<PAGE>

      (2) to receive any interest, Liquidated Damages, dividend, economic
interests or any other distributions or payments with respect to the Notes and
the Note Guarantee or any remuneration in any form with respect to the Notes and
the Note Guarantee from the Company, any Note Guarantor or the Trustee, except
the redemption price referred to above.

      AREP shall notify the Trustee in writing of any such redemption as soon as
practicable. Any Holder or Beneficial Owner that is required to apply for a
license, qualification or a finding of suitability will be responsible for all
fees and costs of applying for and obtaining the license, qualification or
finding of suitability and of any investigation by the applicable Gaming
Authorities and the Company and any Note Guarantor will not reimburse any Holder
or Beneficial Owner for such expense.

            (8) REPURCHASE AT THE OPTION OF HOLDER.

                  (a) If there is a Change of Control, the Company will be
      required to make an offer (a "Change of Control Offer") to each Holder to
      repurchase all or any part (equal to $1,000 or an integral multiple
      thereof) of each Holder's Notes at a purchase price in cash equal to 101%
      of the aggregate principal amount thereof plus accrued and unpaid interest
      and Liquidated Damages, if any, thereon to the date of purchase, subject
      to the rights of Holders on the relevant record date to receive interest
      due on the relevant interest payment date (the "Change of Control
      Payment"). Within 30 days following any Change of Control, the Company
      will mail a notice to each Holder setting forth the procedures governing
      the Change of Control Offer as required by the Indenture.

            (9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at
      least 15 days but not more than 60 days before the redemption date to each
      Holder whose Notes are to be redeemed at its registered address, except
      that redemption notices may be mailed more than 60 days prior to a
      redemption date if the notice is issued in connection with a defeasance of
      the Notes or a satisfaction or discharge of the Indenture. Notes in
      denominations larger than $1,000 may be redeemed in part but only in whole
      multiples of $1,000, unless all of the Notes held by a Holder are to be
      redeemed.

            (10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
      form without coupons in denominations of $1,000 and integral multiples of
      $1,000. The transfer of Notes may be registered and Notes may be exchanged
      as provided in the Indenture. The Registrar and the Trustee may require a
      Holder, among other things, to furnish appropriate endorsements and
      transfer documents and the Company may require a Holder to pay any taxes
      and fees required by law or permitted by the Indenture. The Company need
      not exchange or register the transfer of any Note or portion of a Note
      selected for redemption, except for the unredeemed portion of any Note
      being redeemed in part. Also, the Company need not exchange or register
      the transfer of any Notes for a period of 15 days before a selection of
      Notes to be redeemed or during the period between a record date and the
      corresponding Interest Payment Date.

      This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day distribution compliance period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.

                                      A2-6
<PAGE>

            (11) PERSONS DEEMED OWNERS. The registered Holder of a Note may be
      treated as its owner for all purposes.

            (12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
      exceptions, the Indenture or the Notes or the Note Guarantees may be
      amended or supplemented with the consent of the Holders of at least a
      majority in aggregate principal amount of the then outstanding Notes
      including Additional Notes, if any, voting as a single class, and any
      existing Default or Event or Default or compliance with any provision of
      the Indenture or the Notes or the Note Guarantees may be waived with the
      consent of the Holders of a majority in aggregate principal amount of the
      then outstanding Notes including Additional Notes, if any, voting as a
      single class. Without the consent of any Holder of a Note, the Indenture
      or the Notes or the Note Guarantees may be amended or supplemented to cure
      any ambiguity, defect or inconsistency, to provide for uncertificated
      Notes in addition to or in place of certificated Notes, to provide for the
      assumption of the Company's or a Guarantor's obligations to Holders of the
      Notes and Note Guarantees in case of a merger or consolidation, to make
      any change that would provide any additional rights or benefits to the
      Holders of the Notes or that does not adversely affect the legal rights
      under the Indenture of any such Holder, to comply with the requirements of
      the SEC in order to effect or maintain the qualification of the Indenture
      under the TIA, to conform the text of the Indenture or the Notes to any
      provision of the "Description of Notes" section of the Company's Offering
      Memorandum dated May 6, 2004, as supplemented, relating to the initial
      offering of the Notes, to the extent that such provision in that
      "Description of Notes" was intended to be a verbatim recitation of a
      provision of the Indenture, the Note Guarantees or the Notes; to provide
      for the issuance of Additional Notes in accordance with the limitations
      set forth in the Indenture, or to allow any Guarantor to execute a
      supplemental indenture to the Indenture and/or a Note Guarantee with
      respect to the Notes.

            (13) DEFAULTS AND REMEDIES. Events of Default include: (i) default
      for 30 days in the payment when due of interest on, or Liquidated Damages,
      if any, with respect to the Notes, whether or not prohibited by the
      subordination provisions of the Indenture; (ii) default in the payment
      when due of the principal of, or premium, if any, on, the Notes when the
      same becomes due and payable at maturity, upon redemption (including in
      connection with an offer to purchase) or otherwise, (iii) failure by the
      Company to comply with Section 4.15, of the Indenture; (iv) failure by the
      Company or any Guarantor to comply with Sections 4.07, 4.09, 4.16 or 4.17
      for 30 days after written notice from the Trustee, (v) failure by the
      Company or any Guarantor for 60 days after written notice to the Company
      by the Trustee or the Holders of at least 25% in aggregate principal
      amount of the Notes including Additional Notes, if any, then outstanding
      voting as a single class to comply with any of the other agreements in the
      Indenture or the Notes; (vi) default under certain other agreements
      relating to Indebtedness of the Company or any Guarantor which default
      results in the acceleration of such Indebtedness prior to its express
      maturity; (vii) certain final judgments for the payment of money that
      remain undischarged for a period of 60 days; (viii) certain events of
      bankruptcy or insolvency with respect to the Company or any Guarantor that
      is a Significant Subsidiary and (ix) except as permitted by the Indenture,
      any Note Guarantee is held in any judicial proceeding to be unenforceable
      or invalid or ceases for any reason to be in full force and effect or AREH
      or any other Guarantor or any Person acting on behalf of any Guarantor
      denies or disaffirms its obligations under such Guarantor's Note
      Guarantee. If any Event of Default occurs and is continuing, the Trustee
      or the Holders of at least 25% in aggregate principal amount of the then
      outstanding Notes may declare all the Notes to be due and payable
      immediately. Notwithstanding the foregoing, in the case of an Event of
      Default arising from certain events of bankruptcy or insolvency, all
      outstanding Notes will become due and payable immediately without further
      action or notice. Holders may not enforce the Indenture or the Notes
      except as provided in the Indenture. Subject to certain limitations,
      Holders of a

                                      A2-7
<PAGE>

      majority in aggregate principal amount of the then outstanding Notes may
      direct the Trustee in its exercise of any trust or power. The Trustee may
      withhold from Holders of the Notes notice of any continuing Default or
      Event of Default (except a Default or Event of Default relating to the
      payment of principal or interest or premium or Liquidated Damages, if
      any,) if it determines that withholding notice is in their interest. The
      Holders of a majority in aggregate principal amount of the then
      outstanding Notes by notice to the Trustee may, on behalf of the Holders
      of all of the Notes, rescind an acceleration or waive any existing Default
      or Event of Default and its consequences under the Indenture except a
      continuing Default or Event of Default in the payment of interest or
      premium or Liquidated Damages, if any, on, or the principal of, the Notes.
      The Company is required to deliver to the Trustee annually a statement
      regarding compliance with the Indenture, and the Company is required, upon
      becoming aware of any Default or Event of Default, to deliver to the
      Trustee a statement specifying such Default or Event of Default.

            (14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual
      or any other capacity, may make loans to, accept deposits from, and
      perform services for the Company or its Affiliates, and may otherwise deal
      with the Company or its Affiliates, as if it were not the Trustee.

            (15) NO RECOURSE AGAINST OTHERS. A director, officer, manager (or
      managing member), direct or indirect member, partner, employee,
      incorporator or stockholder of the Company API, or the general partner of
      the Company or any Guarantor or any of the Guarantors, as such, will not
      have any liability for any obligations of the Company or the Guarantors
      under the Notes, the Note Guarantees or the Indenture or for any claim
      based on, in respect of, or by reason of, such obligations or their
      creation. Each Holder by accepting a Note waives and releases all such
      liability. The waiver and release are part of the consideration for the
      issuance of the Notes.

            (16) AUTHENTICATION. This Note will not be valid until authenticated
      by the manual signature of the Trustee or an authenticating agent.

            (17) 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 right of
      survivorship and not as tenants in common), CUST (= Custodian), and
      U/G/M/A (= Uniform Gifts to Minors Act).

            (18) ADDITIONAL RIGHTS OF HOLDERS. In addition to the rights
      provided to Holders of Notes under the Indenture, Holders of Restricted
      Global Notes and Restricted Definitive Notes will have all the rights set
      forth in the Registration Rights Agreement dated as of May 12, 2004, among
      the Company, the Guarantor and the other parties named on the signature
      pages thereof or, in the case of Additional Notes, Holders of Restricted
      Global Notes and Restricted Definitive Notes will have the rights set
      forth in one or more registration rights agreements, if any, among the
      Company, the Guarantor and the other parties thereto, relating to rights
      given by the Company and the Guarantor to the purchasers of any Additional
      Notes (collectively, the "Registration Rights Agreement").

            (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
      Committee on Uniform Security Identification Procedures, the Company has
      caused CUSIP numbers to be printed on the Notes, and the Trustee may use
      CUSIP numbers in notices of redemption as a convenience to 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.

                                      A2-8
<PAGE>

            (20) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL
      GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE
      GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
      LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
      WOULD BE REQUIRED THEREBY.

      The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:

American Real Estate Partners, L.P.
American Real Estate Finance Corp.
100 South Bedford Road
Mt. Kisco, NY 10549
Facsimile No.: (914) 242-9282
Attention: Felicia P. Buebel, Esq.

                                      A2-9
<PAGE>

                                 ASSIGNMENT FORM

      To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to: __________________________________
                                                (Insert assignee's legal name)

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.

Date:  _______________

                                  Your Signature: ______________________________
                                     (Sign exactly as your name appears on the
                                               face of this Note)

Signature Guarantee*:  _________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                     A2-10
<PAGE>

                       OPTION OF HOLDER TO ELECT PURCHASE

      If you want to elect to have this Note purchased by the Company pursuant
to Section 4.15 of the Indenture, check the box below:

                                  Section 4.15

      If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.15 of the Indenture, state the amount you elect to
have purchased:

                                 $______________

Date:  _______________

                                    Your Signature:_____________________________
                                         (Sign exactly as your name appears on
                                                 the face of this Note)

                                    Tax Identification No.:_____________________

Signature Guarantee*:  _____________________

* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).

                                     A2-11
<PAGE>

  SCHEDULE OF EXCHANGES OF INTERESTS IN THE REGULATION S TEMPORARY GLOBAL NOTE

      The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or exchanges of a part of another
other Restricted Global Note for an interest in this Regulation S Temporary
Global Note, have been made:

<TABLE>
<CAPTION>
                                                                       Principal Amount
                       Amount of decrease    Amount of increase in    at maturity of this            Signature of
                       in Principal Amount      Principal Amount     Global Note following        authorized officer
                         at maturity of          at maturity of          such decrease              of Trustee or
Date of Exchange        this Global Note        this Global Note         (or increase)                Custodian
----------------       -------------------   ---------------------   ---------------------        ------------------
<S>                    <C>                   <C>                     <C>                          <C>
</TABLE>

                                     A2-12
<PAGE>

                                                                       EXHIBIT B

                         FORM OF CERTIFICATE OF TRANSFER

American Real Estate Partners, L.P.
American Real Estate Finance Corp.
100 South Bedford Road
Mt. Kisco, NY 10549
Facsimile No.: (914) 242-9282
Attention: Felicia P. Buebel, Esq.

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Telecopier No.:  (302) 636-4140
Attention:  Michael G. Oller

      Re: 8 1/8% Senior Notes due 2012

      Reference is hereby made to the Indenture, dated as of May 12, 2004 (the
"Indenture"), among American Real Estate Partners, L.P. ("AREP"), American Real
Estate Finance Corp. ("AREP Finance", together with AREP, the "Company"), the
Guarantor party thereto and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

      ___________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:

                             [CHECK ALL THAT APPLY]

      1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly,
the Transferor hereby further certifies that the beneficial interest or
Definitive Note is being transferred to a Person that the Transferor reasonably
believes is purchasing the beneficial interest or Definitive Note for its own
account, or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A, and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Restricted Definitive Note and
in the Indenture and the Securities Act.

      2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S PERMANENT GLOBAL NOTE
OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a Person in the United States and (x) at
the time the buy order was

                                      B-1
<PAGE>

originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Permanent Global Note,
the Regulation S Temporary Global Note and/or the Restricted Definitive Note and
in the Indenture and the Securities Act.

      3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):

            (a) [ ] such Transfer is being effected pursuant to and in
      accordance with Rule 144 under the Securities Act;

                                       or

            (b) [ ] such Transfer is being effected to the Company or a
      subsidiary thereof;

                                       or

            (c) [ ] such Transfer is being effected pursuant to an effective
      registration statement under the Securities Act and in compliance with the
      prospectus delivery requirements of the Securities Act;

                                       or

            (d) [ ] such Transfer is being effected to an Institutional
      Accredited Investor and pursuant to an exemption from the registration
      requirements of the Securities Act other than Rule 144A, Rule 144, Rule
      903 or Rule 904, and the Transferor hereby further certifies that it has
      not engaged in any general solicitation within the meaning of Regulation D
      under the Securities Act and the Transfer complies with the transfer
      restrictions applicable to beneficial interests in a Restricted Global
      Note or Restricted Definitive Notes and the requirements of the exemption
      claimed, which certification is supported by (1) a certificate executed by
      the Transferee in the form of Exhibit D to the Indenture and (2) if such
      Transfer is in respect of a principal amount of Notes at the time of
      transfer of less than $250,000, an Opinion of Counsel provided by the
      Transferor or the Transferee (a copy of which the Transferor has attached
      to this certification), to the effect that such Transfer is in compliance
      with the Securities Act. Upon consummation of the proposed transfer in
      accordance with the terms of the Indenture, the transferred beneficial
      interest or Definitive Note will be subject to the restrictions on
      transfer enumerated in the Private Placement Legend printed on the IAI
      Global Note and/or the Restricted Definitive Notes and in the Indenture
      and the Securities Act.

                                      B-2
<PAGE>

      4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.

      (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.

      (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.

      (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.

      This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

                                              __________________________________
                                                 [Insert Name of Transferor]

                                              By:_______________________________
                                                 Name:
                                                 Title:

      Dated: __________________

                                      B-3
<PAGE>

                       ANNEX A TO CERTIFICATE OF TRANSFER

1.    The Transferor owns and proposes to transfer the following:

                            [CHECK ONE OF (a) OR (b)]

            (a) [ ] a beneficial interest in the:

                  (i)   [ ] 144A Global Note (CUSIP _________), or

                  (ii)  [ ] Regulation S Global Note (CUSIP _________), or

                  (iii) [ ] IAI Global Note (CUSIP _________); or

            (b) [ ] a Restricted Definitive Note.

2.    After the Transfer the Transferee will hold:

                                   [CHECK ONE]

            (a) [ ] a beneficial interest in the:

                  (i)   [ ]  144A Global Note (CUSIP _________), or

                  (ii)  [ ] Regulation S Global Note (CUSIP _________), or

                  (iii) [ ] IAI Global Note (CUSIP _________); or

                  (iv)  [ ] Unrestricted Global Note (CUSIP _________); or

            (b)  [ ] a Restricted Definitive Note; or

            (c)  [ ] an Unrestricted Definitive Note,

            in accordance with the terms of the Indenture.

                                      B-4
<PAGE>

                                                                       EXHIBIT C

                         FORM OF CERTIFICATE OF EXCHANGE

American Real Estate Partners, L.P.
American Real Estate Finance Corp.
100 South Bedford Road
Mt. Kisco, NY 10549
Facsimile No.: (914) 242-9282
Attention: Felicia P. Buebel, Esq.

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Telecopier No.:  (302) 636-4140
Attention:  Michael G. Oller

      Re: 8 1/8% Senior Notes due 2012

                              (CUSIP ____________)

      Reference is hereby made to the Indenture, dated as of May 12, 2004 (the
"Indenture"), among American Real Estate Partners, L.P. ("AREP"), American Real
Estate Finance Corp. ("AREP Finance", together with AREP, the "Company"), the
Guarantor party thereto and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

      __________________________, (the "Owner") owns and proposes to exchange
the Note[s] or interest in such Note[s] specified herein, in the principal
amount of $____________ in such Note[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:

      1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE

      (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the Securities Act of 1933, as
amended (the "Securities Act"), (iii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest in
an Unrestricted Global Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

      (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and

                                      C-1
<PAGE>

pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.

      (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.

      (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

      2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES

      (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.

      (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
|_|144A Global Note, |_|Regulation S Global Note, |_|IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.

      This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

                                      C-2
<PAGE>

                                             ___________________________________
                                               [Insert Name of Transferor]

                                             By: _______________________________
                                                 Name:
                                                 Title:

Dated:  ______________________

                                      C-3
<PAGE>

                                                                       EXHIBIT D

                            FORM OF CERTIFICATE FROM

                   ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

American Real Estate Partners, L.P.
American Real Estate Finance Corp.
100 South Bedford Road
Mt. Kisco, NY 10549
Facsimile No.: (914) 242-9282
Attention: Felicia P. Buebel, Esq.

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Telecopier No.:  (302) 636-4140
Attention:  Michael G. Oller

      Re: 8 1/8% Senior Notes due 2012

      Reference is hereby made to the Indenture, dated as of May 12, 2004 (the
"Indenture"), among American Real Estate Partners, L.P. ("AREP"), American Real
Estate Finance Corp. ("AREP Finance", together with AREP, the "Company"), the
Guarantor party thereto and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

      In connection with our proposed purchase of $____________ aggregate
principal amount of:

      (a) [ ] a beneficial interest in a Global Note, or

      (b) [ ] a Definitive Note,

      we confirm that:

      1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").

      2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the

                                       D-1
<PAGE>

                                                                       EXHIBIT D

Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any Person purchasing the
Definitive Note or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.

                                      D-2
<PAGE>

      3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.

      4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and 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 and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.

      5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.

      You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

                                          ______________________________________
                                          [Insert Name of Accredited Investor]

                                          By:__________________________________
                                             Name:
                                             Title:

Dated:  _____________________

                                      D-3
<PAGE>

                                                                       EXHIBIT E

                          FORM OF NOTATION OF GUARANTEE

      For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of May 12, 2004 (the "Indenture"), among
American Real Estate Partners, L.P. ("AREP"), American Real Estate Finance Corp.
("AREP Finance", together with AREP, the "Company"), the Guarantor party thereto
and Wilmington Trust Company, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium and Liquidated Damages, if any,
and interest on, the Notes, whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal of and
interest on the Notes, if any, if lawful, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. The obligations of the Guarantors to the Holders of
Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are
expressly set forth in Article 10 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Note Guarantee. Each Holder of a
Note, by accepting the same, (a) agrees to and shall be bound by such provisions
and (b) appoints the Trustee attorney-in-fact of such Holder for all purposes

      Capitalized terms used but not defined herein have the meanings given to
them in the Indenture.

                                         [NAME OF GUARANTOR(S)]

                                         By:____________________________________
                                            Name:
                                            Title:

                                      E-1
<PAGE>

                                                                       EXHIBIT F

                         FORM OF SUPPLEMENTAL INDENTURE
                    TO BE DELIVERED BY SUBSEQUENT GUARANTORS

      SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, 200__, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of American Real Estate Partners, L.P., a Delaware
limited partnership, as issuer ("AREP") (or its permitted successor), American
Real Estate Finance Corp., a Delaware corporation, as co-issuer ("AREP Finance",
together with AREP, the "Company"), the other Guarantors (as defined in the
Indenture referred to herein) and Wilmington Trust Company, as trustee under the
Indenture referred to below (the "Trustee").

                               W I T N E S S E T H

      WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of May 12, 2004 providing for the
issuance of 8 1/8% Senior Notes due 2012 (the "Notes");

      WHEREAS, the Indenture provides that a Guaranteeing Subsidiary may execute
and deliver to the Trustee a supplemental indenture pursuant to which the
Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's
Obligations under the Notes and the Indenture on the terms and conditions set
forth herein (the "Note Guarantee"); and

      WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
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
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

      1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

      2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to
provide an unconditional Guarantee on the terms and subject to the conditions
set forth in the Note Guarantee and in the Indenture including but not limited
to Article 10 thereof.

      4. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator, manager (or managing member) direct or indirect member, partner or
stockholder of the Company, AREH, API or any additional Guarantor shall have any
liability for any obligations of the Company, AREH, API or any additional
Guarantor under the Notes, this Indenture, any Note Guarantee or for any claim
based on, in respect of, or by reason of such obligations or its creation. Each
Holder of the 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.

      5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

                                      F-1
<PAGE>

      6. 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.

      7. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.

      8. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.

                                      F-2
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated:  _______________, 20___

                                         [GUARANTEEING SUBSIDIARY]

                                         By: _______________________________
                                             Name:
                                             Title:

                                         AMERICAN REAL ESTATE PARTNERS, L.P.

                                         By: American Property Investors, Inc.,
                                             its general   partner

                                         By: _______________________________
                                             Name:
                                             Title:

                                         AMERICAN REAL ESTATE FINANCE CORP.

                                         By: _______________________________
                                             Name:
                                             Title:

                                         AMERICAN REAL ESTATE HOLDINGS LIMITED
                                         PARTNERSHIP

                                         By: American Property Investors, Inc.,
                                             its general   partner

                                         By: _______________________________
                                             Name:
                                             Title:

                                         WILMINGTON TRUST COMPANY,
                                           as Trustee

                                         By: _______________________________
                                             Authorized Signatory

                                      F-3
<PAGE>

                                                                       EXHIBIT G

                     FORM OF SECURITY AND CONTROL AGREEMENT

      This Security and Control Agreement (this "Agreement") dated as of
[__________], 200[ ] among American Real Estate Partners, L.P. (the "Grantor" or
"AREP"), Wilmington Trust Company in its capacity as Trustee on behalf of the
Holders (as defined in the Indenture) (the "Secured Party") and Wilmington Trust
Company in its capacity as a "bank" as defined in Section 9-102 of the UCC (in
such capacity, the "Financial Institution"). Capitalized terms used but not
defined herein shall have the meanings assigned in the Indenture, dated as of
May 12, 2004, between the Grantor, American Real Estate Holdings Limited
Partnership, a Delaware limited partnership ("AREH") and the Secured Party (the
"Indenture"). All references herein to the "UCC" shall mean the Uniform
Commercial Code as in effect in the State of New York.

      WHEREAS, the Grantor, AREH and the Secured Party on behalf of the
Noteholders have entered into the Indenture relating to the Grantor's and
AMERICAN Real Estate Finance Corp.'s, a Delaware corporation ("Finance Corp",
together with the Grantor, the "Issuers"), 8 1/8% senior notes due 2012;

      WHEREAS, the Grantor and the Secured Party are entering into this
Agreement to grant the Secured Party a security interest in the Pledged Account
(as hereinafter defined) and the Collateral (as hereinafter defined);

      WHEREAS, the parties hereto are entering into this Agreement to perfect
and ensure the priority of such security interest;

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      SECTION 1. GRANT OF SECURITY.

            (a) The Grantor hereby assigns, grants, hypothecates and pledges to,
and grants a lien on and a security interest in favor of the Secured Party, on
behalf of the Noteholders, on all estate, right, title and interest of the
Grantor, whether now owned or hereafter acquired, in the Pledged Account and in
all cash and other assets or property held therein or credited thereto or
received in connection therewith and all proceeds thereof, including all rights
of the Grantor to receive moneys due in respect of such Pledged Account, and all
claims with respect to such Pledged Account, all income or gain earned in
respect of any assets held in or credited to such Pledged Account, and all
proceeds receivable or received when any asset held in or credited to such
Pledged Account is collected, exchanged or otherwise disposed of, whether
voluntarily or involuntarily (all of the foregoing being collectively referred
to as the "Collateral").

            (b) The Grantor agrees that from time to time it shall promptly
execute and deliver all instruments and documents, and take all actions, that
may be reasonably necessary, or that the Secured Party may reasonably request,
in order to perfect and protect the assignment and security interest granted or
intended to be granted hereby or to enable the Secured Party to exercise or
enforce its rights and remedies hereunder with respect to the

                                      G-1
<PAGE>

Pledged Account and the Collateral. Furthermore, the Grantor hereby authorizes
the Secured Party to file such financing or continuation statements, or
amendments thereto, and such other instruments, endorsements or notices, as the
Secured Party may reasonably deem necessary or advisable in order to perfect and
preserve the assignment and security interest granted or purported to be granted
hereby.

            (c) The Grantor represents and warrants that:

      (i) the Agreement constitutes the valid and legally binding obligation of
the Grantor, enforceable in accordance with its terms and conditions;

      (ii) it has not assigned any of its rights under the Pledged Account or
the Collateral;

      (iii) it has not executed and is not aware of any effective financing
statement, security agreement, control agreement or other instrument similar in
effect covering all or any part of the Pledged Account or the Collateral;

      (iv) it has full power and authority to grant a security interest in and
assign its right, title and interest in the Pledged Account and the Collateral;
and

      (v) upon the execution and delivery of this Agreement by the Grantor, the
security interest granted to the Secured Party pursuant to this Agreement in and
to the Pledged Account and the Collateral will constitute, a first priority
perfected security interest.

      SECTION 2. Establishment and Maintenance of Collateral Accounts.

            (a) The Financial Institution hereby represents and warrants that it
has established and currently maintains the account listed on Schedule 1 hereto
as a separate account segregated from all other custodial, collateral or other
accounts, and that the Grantor is its sole customer with respect to such account
(such account and any successor account being referred to herein as the "Pledged
Account.") The Financial Institution agrees to act as bank with respect to the
Pledged Account and covenants and agrees that it shall not change the name or
account number of the Pledged Account without the prior written consent of the
Secured Party or, except in an Event of Default, the Grantor;

            (b) The Financial Institution represents and warrants that the
Pledged Account is a "deposit account" (as defined in Section 9-102(a)(29) of
the UCC); and

            (c) Each of the Financial Institution and the Grantor represents,
warrants and covenants that no investment property (as defined in Section
9-102(a)(49) of the UCC) shall be deposited or otherwise included in the Pledged
Account and agrees no funds on deposit in the Pledged Account shall be invested
in any investment property.

      SECTION 3. SECURED PARTY'S CONTROL OF THE PLEDGED ACCOUNTS. If at any time
the Financial Institution shall receive any instruction (within the meaning of
Section 9-104 of the UCC, i.e., an order directing the disposition of funds in a
Pledged Account) originated by

                                      G-2
<PAGE>

the Secured Party, the Financial Institution shall comply with such instruction
without further consent by the Grantor or any other person.

      SECTION 4. GRANTOR'S ACCESS TO THE ACCOUNT.

            (a) It is understood and agreed that until this Agreement is
terminated in accordance with the terms hereof, the Financial Institution shall
not comply with instructions of the Grantor or any person other than the Secured
Party without the express consent of the Secured Party to each such instruction;

            (b) Except if an Event of Default shall have occurred and be
continuing, if at any Quarterly Determination Date the amount of Collateral
exceeds the amount required to then be deposited in the Pledged Account pursuant
to Section 4.16 of the Indenture, the Grantor may provide a Notice of Partial
Release in substantially the form of Exhibit A hereto requesting that the
Secured Party instruct the Financial Institution to release such excess amount
to the Grantor.

      SECTION 5. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the
Financial Institution has or subsequently obtains by agreement, by operation of
law or otherwise a security interest in the Pledged Account or the Collateral,
the Financial Institution hereby agrees that such security interest shall be
subordinate to the security interest of the Secured Party. The money and other
items credited to the Pledged Account will not be subject to deduction, set-off,
banker's lien, or any other right in favor of any person other than the Secured
Party.

      SECTION 6. REMEDIES. If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the Pledged Account and
the Collateral, in addition to all other rights and remedies provided for
herein, in the Indenture or otherwise available to it at law or in equity, all
right and remedies of the Secured Party on default under the UCC (whether or not
the UCC applies to the affected Pledged Account or any Collateral) to collect,
enforce or satisfy any Obligation then owing, whether by acceleration or
otherwise, including, without limitation, applying any or all of the cash in the
Pledged Account in full or partial satisfaction of the Obligations, or otherwise
selling in one or more public or private sales or retaining in full or partial
satisfaction of the Obligations any or all of the Collateral granted hereunder.

      SECTION 7. CHOICE OF LAW. This Agreement shall each be governed by the
laws of the State of New York. Regardless of any provision in any other
agreement, for purposes of the UCC, with respect to the Pledged Account, New
York shall be deemed to be the bank's jurisdiction (within the meaning of
Section 9-304 of the UCC). The Pledged Account shall be governed by the laws of
the State of New York.

      SECTION 8. CONFLICT WITH OTHER AGREEMENTS. The Financial Institution
hereby represents, warrants, covenants and agrees that:

            (a) There are no other agreements entered into between the Financial
Institution and the Grantor (or any other person) with respect to the Pledged
Account or the Collateral;

                                      G-3
<PAGE>

            (b) It has not entered into, and until the termination of this
Agreement will not enter into, any agreement with any person other than the
Secured Party relating to the Pledged Account or the Collateral pursuant to
which it agrees or has agreed to comply with instructions (within the meaning of
Section 9-104 of the UCC) of such other person;

            (c) It has not entered into, and until the termination of this
Agreement will not enter into, any agreement with the Grantor or the Secured
Party purporting to limit or condition the obligation of the Financial
Institution to comply with instructions with respect to the Pledged Account or
the Collateral; and

            (d) In the event of any conflict between this Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered into
with respect to the Pledged Account or the Collateral, the terms of this
Agreement shall prevail.

      SECTION 9. ADVERSE CLAIMS. The Financial Institution represents and
warrants that except for the claims and interest of the Secured Party and of the
Grantor in the Pledged Account and the Collateral, it does not know of any
security interest in, lien on or claim to, or other interest in, the Pledged
Account or the Collateral. If any person asserts any lien, encumbrance or
adverse claim (including any writ, garnishment, judgment, warrant of attachment,
execution or similar process) against the Pledged Account or the Collateral, the
Financial Institution will promptly notify the Secured Party and the Grantor
thereof.

      SECTION 10. ADDITIONAL PROVISIONS REGARDING MAINTENANCE OF ACCOUNTS. The
Financial Institution covenants and agrees:

            (a) Statements and Confirmations. The Financial Institution will
promptly send copies of all statements, confirmations and other correspondence
concerning the Pledged Account or the Collateral, simultaneously to each of the
Grantor and the Secured Party at the address for each set forth in Section 14 of
this Agreement.

            (b) Tax Reporting. All interest, if any, relating to the Pledged
Account, shall be reported to the Internal Revenue Service and all state and
local taxing authorities under the name and taxpayer identification number of
the Grantor.

      SECTION 11. ADDITIONAL REPRESENTATION AND WARRANTY OF THE FINANCIAL
INSTITUTION. The Financial Institution represents and warrants that this
Agreement constitutes the valid and legally binding obligation of the Financial
Institution, enforceable in accordance with its terms and conditions.

      SECTION 12. INDEMNIFICATION OF FINANCIAL INSTITUTION AND SECURED PARTY.

      (a) The Grantor hereby agrees that the Financial Institution shall be
relieved from liabilities (i) arising from the error of judgment made in good
faith by it, unless it is proved that the Financial Institution was negligent in
ascertaining the pertinent facts; and (ii) with respect to any action it takes
or omits to take in good faith in accordance with a direction received pursuant
to the terms of this Agreement.

                                      G-4
<PAGE>

      The Financial Institution (i) will not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Agreement; (ii) may act through its
attorneys and agents and will not be responsible for the misconduct or
negligence of any attorney or agent appointed with due care; (iii) may
conclusively rely upon any document believed by it to be genuine and to have
been signed or presented by the proper person and it need not investigate any
fact or matter stated in any such document; and (iv) may consult with counsel of
its choice and the written advice of such counsel will be full and complete
authorization and protection from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.

      The Grantor will indemnify the Financial Institution and hold it harmless
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Agreement, including the costs and expenses of enforcing this Agreement
against the Grantor (including this Section 12) and defending itself against any
claim (whether asserted by the Grantor or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except any such loss, liability or expense attributable to its
negligence or bad faith. The Financial Institution will notify the Grantor
promptly of any claim for which it may seek indemnity. Failure by the Financial
Institution to so notify the Grantor will not relieve the Grantor of its
obligations hereunder. The Grantor will defend the claim and the Financial
Institution will cooperate in the defense. The Financial Institution may have
separate counsel and the Grantor will pay the reasonable fees and expenses of
such counsel. The Grantor need not pay for any settlement made without its
consent, which consent will not be unreasonably withheld.

      (b) The Secured Party shall be entitled to all benefits and rights arising
under the protections and indemnification granted to it by Grantor under the
terms of the Indenture in connection with any actions taken or omissions made by
the Secured Party with respect to its duties and obligations hereunder as if
such protections and indemnification were explicitly granted hereunder.

      (c) The obligations of the Grantor under this Section 12 will survive the
termination of this Agreement.

      SECTION 13. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns, except that neither the Grantor nor the
Financial Institution may delegate their obligations hereunder without the prior
written consent of the Secured Party. Additionally, in the event that the
Secured Party is replaced as Trustee under the Indenture any entity that
succeeds to such role shall be entitled to the benefits of this Agreement. The
Secured Party agrees to send written notice to the Financial Institution of any
such replacement.

      SECTION 14. NOTICES. Any notice, request or other communication required
or permitted to be given under this Agreement shall be in writing and deemed to
have been properly given when delivered in person, or when sent by telecopy or
other electronic means and electronic confirmation of error free receipt is
received or two days after being sent by certified or registered United States
mail, return receipt requested, postage prepaid, addressed to the party at the
address set forth below.

                                      G-5
<PAGE>

      Grantor:

               American Real Estate Partners, L.P.
               100 South Bedford Road
               Mt. Kisco, New York 10549
               Attention: Chief Financial Officer
               Facsimile: [       ]

      Secured Party:

               Wilmington Trust Company
               Rodney Square North
               1100 North Market Street
               Wilmington, Delaware 19890
               Attention:  Corporate Trust Administration
                           Michael G. Oller
               Facsimile:  (302) 636-4140

      Financial Institution:

               Wilmington Trust Company
               Rodney Square North
               1100 North Market Street
               Wilmington, Delaware 19890
               Attention:  Corporate Capital Markets
                           Trust Officer
               Facsimile: (302) 636-4140

      Any party may change its address for notices by giving notice to the other
parties hereto in the manner set forth above.

      SECTION 15. AMENDMENT. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it is
in writing and is signed by all of the parties hereto.

      SECTION 16. TERMINATION.

            (a) The obligations of the Financial Institution to the Secured
Party pursuant to this Agreement shall continue in effect until the security
interests of the Secured Party in the Pledged Account and the Collateral have
been terminated pursuant to the terms of the Indenture and the Secured Party has
notified the Financial Institution of such termination in writing. The Secured
Party agrees to provide Notice of Termination in substantially the form of
Exhibit B hereto to the Financial Institution upon the request of the Grantor on
or after the termination of the Secured Party's security interest in the Pledged
Account and the Collateral pursuant to the terms of the Indenture. The
termination of this Agreement shall not terminate the Pledged Account or alter
the obligations of the Financial Institution to the Grantor pursuant to any
other agreement with respect to the Pledged Account.

                                      G-6
<PAGE>

            (b) Without limitation to the foregoing, if at any Quarterly
Determination Date, the Fixed Charge Coverage Ratio of AREP and the Guarantors
is at least 1.5 to 1.0 for the four consecutive fiscal quarters most recently
completed prior to such Quarterly Determination Date, the Secured Party shall
provide to the Financial Institution a Notice of Termination in the form of
Exhibit B.

      SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.

                  [Remainder of page intentionally left blank]

                                      G-7
<PAGE>

      IN WITNESS WHEREOF, each of the Grantor, the Secured Party and the
Financial Institution have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the date
first written above.

                                         AMERICAN REAL ESTATE PARTNERS,
                                         L.P., as Grantor

                                         By: American Property Investors, Inc.,
                                             its general partner

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         WILMINGTON TRUST COMPANY, as Secured
                                         Party in its capacity as Trustee on
                                         behalf of the Noteholders

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         WILMINGTON TRUST COMPANY, in its
                                         capacity as Financial Institution

                                         By: ___________________________________
                                             Name:
                                             Title:

                                      G-8
<PAGE>

                                                                      SCHEDULE 1

Existing Deposit Account Subject to this Agreement

Exact Name of Account                        Account Number

                                      G-9
<PAGE>

                                                                       Exhibit A

                             [Letterhead of Grantor]

                                                          [Date]

[Name and Address of Secured Party]

Attention:   ______

            Re: Notice of Partial Release

      Reference is made to the Security and Control Agreement, between you, the
Financial Institution and the undersigned, dated as of [__________, 200__]. We
hereby notify you that as of [________, 200__] the Collateral held in the
Pledged Account exceeded the amount required to be deposited in the Pledged
Account, as follows:

      QUARTERLY DETERMINATION BALANCE:      $[           ]

      LESS: ONE YEAR OF INTEREST PAYMENTS:  $[           ]

      AMOUNT OF PARTIAL RELEASE:            $[           ]

      We hereby request that you instruct the Financial Institution to release
to us such Amount of Partial Release.

      We hereby certify that no Event of Default has occurred and is continuing
under the Indenture.

                                         Very truly yours,

                                         [Grantor]

                                         By: ___________________________________
                                                Title:

                                      G-10
<PAGE>

                                                                       Exhibit B

                             [Letterhead of Grantor]

                                                            [Date]

[Name and Address of Secured Party]

Attention:   ______

            Re: Termination of Security and Control Agreement

      You are hereby notified that the Security and Control Agreement between
you, the Grantor and the undersigned is terminated and you have no further
obligations to the undersigned pursuant to such Agreement. Notwithstanding any
previous instructions to you, you are hereby instructed to accept all future
directions with respect to account number _______from the Grantor. This notice
terminates any obligations you may have to the undersigned with respect to such
account, however nothing contained in this notice shall alter any obligations
which you may otherwise owe to the Grantor pursuant to any other agreement.

      You are instructed to deliver a copy of this notice by facsimile
transmission to American Real Estate Partners, L.P.

                                         Very truly yours,

                                         [Name of Secured Party]

                                         By: _______________________________
                                                   Title:

                                      G-11<PAGE>

                                                                     EXHIBIT 4.3
                                                                  EXECUTION COPY

================================================================================

                          REGISTRATION RIGHTS AGREEMENT

                            DATED AS OF MAY 12, 2004
                                  BY AND AMONG

                      AMERICAN REAL ESTATE PARTNERS, L.P.,
                       AMERICAN REAL ESTATE FINANCE CORP.,
                AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP

                                       AND

                            BEAR, STEARNS & CO. INC.

================================================================================

<PAGE>

                                                                     EXHIBIT 4.3
                                                                  EXECUTION COPY

      This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of May 12, 2004, by and among American Real Estate Partners, L.P., a
Delaware limited partnership, as issuer ("AREP"), American Real Estate Finance
Corp., a Delaware corporation, as co-issuer ("AREP FINANCE"), American Real
Estate Holdings Limited Partnership, a Delaware limited partnership (the
"GUARANTOR", and together with AREP and AREP Finance, the "COMPANY") and Bear,
Stearns & Co. Inc. (the "INITIAL PURCHASER"), who has agreed to purchase AREP's
8 1/8% Senior Notes due 2012 (the "INITIAL NOTES") pursuant to the Purchase
Agreement (as defined below). The Initial Notes are to be guaranteed (the
"GUARANTEE", and together with the Initial Notes, the "OFFERED SECURITIES") by
the Guarantor.

      This Agreement is made pursuant to the Purchase Agreement, dated May 6,
2004 (the "PURCHASE AGREEMENT"), by and among the AREP, AREP Finance, AREH, as
Guarantor and the Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Initial Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchaser set forth in Section
10(q) of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Indenture, dated as of
May 12, 2004, among the Company and Wilmington Trust Company, as trustee,
relating to the Offered Securities and the Exchange Securities (the
"INDENTURE").

      The parties hereby agree as follows:

SECTION 1. DEFINITIONS

      As used in this Agreement, the following capitalized terms shall have the
following meanings:

      ACT: The Securities Act of 1933, as amended.

      AFFILIATE: As defined in Rule 144.

      AREH: Shall have the meaning set forth in the preamble of this Agreement.

      AREP: Shall have the meaning set forth in the preamble of this Agreement.

      AREP FINANCE: Shall have the meaning set forth in the preamble of this
Agreement.

      BROKER-DEALER: Any broker or dealer registered under the Exchange Act.

      BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at place of payment are
authorized by law, regulation or executive order to remain closed.

      CLOSING DATE: The date hereof.

      COMMISSION: The Securities and Exchange Commission.

      COMPANY: Shall have the meaning set forth in the preamble of this
Agreement.

<PAGE>

      CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Securities to be issued in the Exchange Offer, (b) the maintenance of the
continuous effectiveness of such Exchange Offer Registration Statement and the
keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Securities in the same aggregate
principal amount as the aggregate principal amount of Offered Securities
tendered by Holders thereof pursuant to the Exchange Offer.

      CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.

      EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.

      EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.

      EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Exchange Securities (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Offered Securities that are tendered by such Holders in connection with such
exchange and issuance.

      EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.

      EXCHANGE SECURITIES: AREP and AREP Finance's 8 1/8% Senior Notes due 2012
to be issued pursuant to the Indenture: (a) in the Exchange Offer or (b) as
contemplated by Section 4 hereof.

      FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.

      GUARANTEE: Shall have the meaning set forth in the preamble of this
Agreement.

      HOLDERS: As defined in Section 2 hereof.

      INDENTURE: Shall have the meaning set forth in the preamble of this
Agreement.

      INITIAL NOTES: Shall have the meaning set forth in the preamble of this
Agreement.

      INITIAL PURCHASER: Shall have the meaning set forth in the preamble of
this Agreement.

      LIQUIDATED DAMAGES: As defined in Section 5 hereof.

      OFFERED SECURITIES: Shall have the meaning set forth in the preamble of
this Agreement.

      PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

                                       2
<PAGE>

      PURCHASE AGREEMENT: Shall have the meaning set forth in the preamble of
this Agreement.

      RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.

      REGISTRATION DEFAULT: As defined in Section 5 hereof.

      REGISTRATION STATEMENT: Any registration statement of the Company relating
to (a) an offering of Exchange Securities pursuant to an Exchange Offer or (b)
the registration for resale of Transfer Restricted Securities pursuant to the
Shelf Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement, (ii) including the Prospectus included therein and
(iii) including all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.

      RULE 144: Rule 144 promulgated under the Act.

      SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.

      SUSPENSION NOTICE: As defined in Section 6(d) hereof.

      TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.

      TRANSFER RESTRICTED SECURITIES: Each Offered Security until the earliest
to occur of (a) the date on which such Offered Security has been exchanged by a
Person other than a Broker-Dealer for an Exchange Security in the Exchange
Offer, (b) following the exchange by a Broker-Dealer in the Exchange Offer of an
Offered Security for an Exchange Security, the date on which such Exchange
Security is sold to a purchaser who receives from such Broker-Dealer on or prior
to the date of such sale a copy of the Prospectus contained in the Exchange
Offer Registration Statement, (c) the date on which such Offered Security has
been effectively registered under the Act and disposed of in accordance with the
Shelf Registration Statement or (d) the date on which such Offered Security is
distributed to the public pursuant to Rule 144.

SECTION 2. HOLDERS

      A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.

SECTION 3. REGISTERED EXCHANGE OFFER

      (a) Unless the Exchange Offer shall not be permitted by applicable law or
Commission rule, regulation or policy (after the procedures set forth in Section
6(a)(i) below have been complied with), the Company shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission no later than 90
days after the Closing Date (such 90th day being the "FILING DEADLINE"), (ii)
use all commercially reasonable efforts to cause such Exchange Offer
Registration Statement to become effective no later than 180 days after the
Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A

                                       3
<PAGE>

under the Act and (C) cause all necessary filings, if any, in connection with
the registration and qualification of the Exchange Securities to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting (i) registration of the
Exchange Securities to be offered in exchange for the Offered Securities that
are Transfer Restricted Securities and (ii) resales of Exchange Securities by
Broker-Dealers that tendered into the Exchange Offer Offered Securities that
such Broker-Dealer acquired for its own account as a result of market-making
activities or other trading activities (other than Offered Securities acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.

      (b) The Company shall use all commercially reasonable efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply in
all material respects with all applicable federal and state securities laws. No
securities other than the Exchange Securities shall be included in the Exchange
Offer Registration Statement. The Company shall use all commercially reasonable
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter, or longer, if
required by federal securities laws (the last day of such period being the
"CONSUMMATION DEADLINE").

      (c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Offered Securities acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.

      Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Exchange
Securities received by such Broker-Dealer in the Exchange Offer, the Company
shall permit the use of the Prospectus contained in the Exchange Offer
Registration Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. To the extent necessary to ensure that the Prospectus contained in
the Exchange Offer Registration Statement is available for sales of Exchange
Securities by Broker-Dealers, the Company agrees to use all commercially
reasonable efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the

                                       4
<PAGE>

Commission as announced from time to time, for a period of 270 days from the
Consummation Deadline or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto. The Company shall provide sufficient copies of the latest
version of such Prospectus to such Broker-Dealers, promptly upon request, and in
no event later than two Business Days after such request, at any time during
such period.

SECTION 4. SHELF REGISTRATION

      (a) Shelf Registration. If (i) the Company is not (A) required to file the
Exchange Offer Registration Statement or (B) permitted to Consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission regulations, rules or policy (after the Company has complied with the
procedures set forth in Section 6(a)(i) below) or (ii) any Holder of Transfer
Restricted Securities notifies the Company prior to 20 Business Days following
Consummation of the Exchange Offer that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer, (B) such Holder may
not resell the Exchange Securities acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Offered
Securities acquired directly from the Company or any of its Affiliates, then the
Company shall:

    (x) use all commercially reasonable efforts on or prior to 30 days after
the earlier of (i) the date as of which the Company determines that the Exchange
Offer Registration Statement will not be or cannot be, as the case may be, filed
as a result of clause (a)(i) above (after the Company has complied with the
procedures set forth in Section 6(a)(i) below, and (ii) the date on which the
Company receives the notice specified in clause (a)(ii) above (such earlier
date, the "FILING DEADLINE"), to file a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to all
Transfer Restricted Securities, and

    (y) shall use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline such obligation arises (such 90th day being the "EFFECTIVENESS
DEADLINE").

      If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i)(B) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).

      To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use all commercially reasonable efforts to keep any Shelf Registration Statement
required by this Section 4(a) continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(b) and (c)
hereof and in

                                       5
<PAGE>

conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, until
the expiration of the period referred to in Rule 144(k) (as extended pursuant to
Section 6(d)), or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.

      (b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, (x) the information specified in Item 507 or 508 of Regulation S-K, as
applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary prospectus included therein, (y) an
agreement to update such information, from time to time, as required or
appropriate, and (z) an agreement to comply with the prospectus delivery
requirements in connection with the offer and sale of Transfer Restricted
Securities. No Holder of Transfer Restricted Securities shall be entitled to
Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information and agreements. Each selling Holder
agrees to promptly furnish additional information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.

SECTION 5. LIQUIDATED DAMAGES

      If: (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 30 Business Days of the applicable Effectiveness
Deadline or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified herein (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), then the Company hereby jointly and severally agrees to
pay to each Holder of Transfer Restricted Securities affected thereby Liquidated
Damages in an amount equal to $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90-day period
immediately following the occurrence of such Registration Default. The amount of
the Liquidated Damages shall increase by an additional $.05 per week per $1,000
in principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of $.50 per
week per $1,000 in principal amount of Transfer Restricted Securities; provided
that the Company shall in no event be required to pay Liquidated Damages for
more than one Registration Default at any given time. Notwithstanding anything
to the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable,
in

                                       6
<PAGE>

the case of (iv) above, the Liquidated Damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.

      All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Initial Notes. Notwithstanding the fact that any securities for which Liquidated
Damages are due cease to be Transfer Restricted Securities, all obligations of
the Company to pay Liquidated Damages with respect to securities shall survive
until such time as such obligations with respect to such securities shall have
been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

      (a)   Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use all commercially reasonable efforts to effect such
exchange and to permit the resale of Exchange Securities by Broker-Dealers that
tendered in the Exchange Offer Offered Securities that such Broker-Dealer
acquired for its own account as a result of its market-making activities or
other trading activities (other than Offered Securities acquired directly from
the Company or any of its Affiliates) being sold in accordance with the intended
method or methods of distribution thereof, and (z) comply with all of the
following provisions:

            (i)   If, following the date hereof there has been announced a
      change in Commission policy with respect to exchange offers such as the
      Exchange Offer, that in the reasonable opinion of counsel to the Company
      raises a substantial question as to whether the Exchange Offer is
      permitted by applicable federal law, the Company hereby agrees to seek a
      no-action letter or other favorable decision from the Commission or the
      staff of the Commission allowing the Company to Consummate an Exchange
      Offer for such Transfer Restricted Securities. The Company hereby agrees
      to pursue the issuance of such a no-action letter or decision to the
      Commission staff level. In connection with the foregoing, the Company
      hereby agrees to take all such other actions as may be requested by the
      Commission or otherwise required by the Commission in connection with the
      issuance of such decision, including without limitation (A) participating
      in telephonic conferences with the Commission, (B) delivering to the
      Commission staff an analysis prepared by counsel to the Company setting
      forth the legal bases, if any, upon which such counsel has concluded that
      such an Exchange Offer should be permitted and (C) diligently pursuing a
      resolution (which need not be favorable) by the Commission staff; provided
      that this Section 6(a)(i) shall not restrict or limit the Company from
      complying with the requirements of Section 4, including filing and making
      effect a Shelf Registration Statement before obtaining a no-action letter
      or other decision or resolution from the Commission or the staff of the
      Commission.

            (ii)  As a condition to its participation in the Exchange Offer,
      each Holder of Transfer Restricted Securities (including, without
      limitation, any Holder who is a Broker-Dealer) shall furnish, upon the
      request of the Company, prior to the Consummation of the Exchange Offer, a
      written representation to the Company (which may be contained in the
      letter of transmittal contemplated by the Exchange Offer Registration
      Statement) to the effect that (A) it is not an Affiliate of the Company,
      (B) it is not engaged in, and does not intend to engage in, and has no
      arrangement or understanding with any person to participate in, a
      distribution of the Exchange Securities to be issued in the Exchange

                                       7
<PAGE>

      Offer and (C) it is acquiring the Exchange Securities in its ordinary
      course of business. As a condition to its participation in the Exchange
      Offer each Holder using the Exchange Offer to participate in a
      distribution of the Exchange Securities shall acknowledge and agree that,
      if the resales are of Exchange Securities obtained by such Holder in
      exchange for Offered Securities acquired directly from the Company or an
      Affiliate thereof, it (1) could not, under Commission policy as in effect
      on the date of this Agreement, rely on the position of the Commission
      enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
      Exxon Capital Holdings Corporation (available May 13, 1988), as
      interpreted in the Commission's letter to Shearman & Sterling dated July
      2, 1993, and similar no-action letters (including, if applicable, any
      no-action letter obtained pursuant to clause (i) above), and (2) must
      comply with the registration and prospectus delivery requirements of the
      Act in connection with a secondary resale transaction and that such a
      secondary resale transaction must be covered by an effective registration
      statement containing the selling security holder information required by
      Item 507 or 508, as applicable, of Regulation S-K.

            (iii) Prior to effectiveness of the Exchange Offer Registration
      Statement, the Company shall, upon request of the Commission, provide a
      supplemental letter to the Commission (A) stating that the Company is
      registering the Exchange Offer in reliance on the position of the
      Commission enunciated in Exxon Capital Holdings Corporation (available May
      13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
      interpreted in the Commission's letter to Shearman & Sterling dated July
      2, 1993, and, if applicable, any no-action letter obtained pursuant to
      clause (i) above, (B) including a representation that the Company has not
      entered into any arrangement or understanding with any Person to
      distribute the Exchange Securities to be received in the Exchange Offer
      and that, to the best of the Company's information and belief, each Holder
      participating in the Exchange Offer is acquiring the Exchange Securities
      in its ordinary course of business and has no arrangement or understanding
      with any Person to participate in the distribution of the Exchange
      Securities received in the Exchange Offer and (C) any other undertaking or
      representation required by the Commission as set forth in any no-action
      letter obtained pursuant to clause (i) above, if applicable.

      (b)   Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall:

            (i)   comply with all the provisions of Section 6(c) below and use
      all commercially reasonable efforts to effect such registration to permit
      the sale of the Transfer Restricted Securities being sold in accordance
      with the intended method or methods of distribution thereof (as indicated
      in the information furnished to the Company pursuant to Section 4(b)
      hereof), and pursuant thereto the Company will prepare and file with the
      Commission a Registration Statement relating to the registration on any
      appropriate form under the Act, which form shall be available for the sale
      of the Transfer Restricted Securities in accordance with the intended
      method or methods of distribution thereof within the time periods and
      otherwise in accordance with the provisions hereof, and

            (ii)  issue, upon the request of any Holder or purchaser of Offered
      Securities covered by any Shelf Registration Statement contemplated by
      this Agreement, Exchange Securities having an aggregate principal amount
      equal to the aggregate principal amount

                                       8
<PAGE>

      of Offered Securities sold pursuant to the Shelf Registration Statement
      and surrendered to the Company for cancellation; the Company shall
      register Exchange Securities on the Shelf Registration Statement for this
      purpose and issue the Exchange Securities to the purchaser(s) of
      securities subject to the Shelf Registration Statement in the names as
      such purchaser(s) shall designate.

      (c)   General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company shall:

            (i)   use all commercially reasonable efforts to keep such
      Registration Statement continuously effective and provide all requisite
      financial statements for the period specified in Section 3 or 4 of this
      Agreement, as applicable. Upon the occurrence of any event that would
      cause any such Registration Statement or the Prospectus contained therein
      (A) to contain an untrue statement of material fact or omit to state any
      material fact necessary to make the statements therein in light of the
      circumstances under which they were made not misleading or (B) not to be
      effective and usable for resale of Transfer Restricted Securities during
      the period required by this Agreement, the Company shall file promptly an
      appropriate amendment to such Registration Statement or supplement to the
      Prospectus curing such defect, and, if Commission review is required of
      any such amendment, use all commercially reasonable efforts to cause such
      amendment to be declared effective as soon as practicable;

            (ii)  prepare and file with the Commission such amendments and
      post-effective amendments to the applicable Registration Statement as may
      be necessary to keep such Registration Statement effective for the
      applicable period set forth in Section 3 or 4 hereof, as the case may be;
      cause the Prospectus to be supplemented by any required Prospectus
      supplement, and as so supplemented to be filed pursuant to Rule 424 under
      the Act, and to comply fully with Rules 424 and 430A, as applicable, under
      the Act in a timely manner; and comply with the provisions of the Act with
      respect to the disposition of all securities covered by such Registration
      Statement during the applicable period in accordance with the intended
      method or methods of distribution by the sellers thereof set forth in such
      Registration Statement or supplement to the Prospectus;

            (iii) advise each Holder promptly and, if requested by such Holder,
      confirm such advice in writing, (A) when the Prospectus or any Prospectus
      supplement or post-effective amendment to the Registration Statement has
      been filed, and, with respect to any applicable Registration Statement or
      any post-effective amendment thereto, when the same has become effective,
      (B) of any request by the Commission for amendments to the Registration
      Statement or amendments or supplements to the Prospectus or for additional
      information relating thereto, (C) of the issuance by the Commission of any
      stop order suspending the effectiveness of the Registration Statement
      under the Act or of the suspension by any state securities commission of
      the qualification of the Transfer Restricted Securities for offering or
      sale in any jurisdiction, or the initiation of any proceeding for any of
      the preceding purposes, and (D) of the existence of any fact or the
      happening of any event that makes any statement of a material fact made in
      the Registration Statement, the Prospectus, any amendment or supplement
      thereto or any document incorporated by reference therein untrue, or that
      requires the making of any additions to or changes in the
      Registration Statement in order to make the statements therein not
      misleading, or that requires the making of any additions to or changes in
      the

                                       9
<PAGE>

      Prospectus in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading; provided that
      any notice required pursuant to this Section 6(c)(iii) shall be provided
      by the Company on its behalf and on behalf of the Guarantors. If at any
      time the Commission shall issue any stop order suspending the
      effectiveness of the Registration Statement, or any state securities
      commission or other regulatory authority shall issue an order suspending
      the qualification or exemption from qualification of the Transfer
      Restricted Securities under state securities or Blue Sky laws, the Company
      shall use all commercially reasonable efforts to obtain the withdrawal or
      lifting of such order at the earliest possible time;

            (iv)  subject to Section 6(c)(i), if any fact or event contemplated
      by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
      supplement or amendment to the Registration Statement or related
      Prospectus or any document incorporated therein by reference or file any
      other required document so that, as thereafter delivered to the purchasers
      of Transfer Restricted Securities, the Prospectus will not contain an
      untrue statement of a material fact or omit to state any material fact
      necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading;

            (v)   furnish to each Holder in connection with such exchange or
      sale, if any, before filing with the Commission, copies of any
      Registration Statement or any Prospectus included therein or any
      amendments or supplements to any such Registration Statement or Prospectus
      (including all documents incorporated by reference after the initial
      filing of such Registration Statement), which documents, upon such
      Holders' request, will be subject to the review and comment of such
      Holders in connection with such sale, if any, for a period of at least
      five Business Days, and the Company will not file any such Registration
      Statement or Prospectus or any amendment or supplement to any such
      Registration Statement or Prospectus (including all such documents
      incorporated by reference) to which such Holders shall reasonably object
      within five Business Days after the receipt thereof. A Holder shall be
      deemed to have reasonably objected to such filing if such Registration
      Statement, amendment, Prospectus or supplement, as applicable, as proposed
      to be filed, contains an untrue statement of a material fact or omits any
      material fact necessary to make the statements therein in light of the
      circumstances under which they were made not misleading or fails to comply
      with the applicable requirements of the Act;

            (vi)  promptly prior to the filing of any document that is to be
      incorporated by reference into a Registration Statement or Prospectus in
      connection with such exchange or sale, if any, provide copies of such
      document to each Holder, make the Company's representatives available for
      discussion of such document and other customary due diligence matters, and
      include such information in such document prior to the filing thereof as
      such Holders may reasonably request;

            (vii) make available, at reasonable times, for inspection by each
      Holder and any attorney or accountant retained by such Holders at the
      offices at which such information normally is kept during normal business
      hours, all financial and other records, pertinent corporate documents of
      the Company and cause the Company's officers, directors and employees to
      supply all information reasonably requested by any such Holder, attorney

                                       10
<PAGE>

      or accountant in connection with such Registration Statement or any
      post-effective amendment thereto subsequent to the filing thereof and
      prior to its effectiveness;

            (viii) if requested by any Holders in connection with such exchange
      or sale, promptly include in any Registration Statement or Prospectus,
      pursuant to a supplement or post-effective amendment if necessary, such
      information as such Holders may reasonably request to have included
      therein, including, without limitation, information relating to the "Plan
      of Distribution" of the Transfer Restricted Securities; and make all
      required filings of such Prospectus supplement or post-effective amendment
      as soon as practicable after the Company is notified of the matters to be
      included in such Prospectus supplement or post-effective amendment;

            (ix)  furnish to each Holder in connection with such exchange or
      sale, without charge, at least one copy of the Registration Statement, as
      first filed with the Commission, and of each amendment thereto, including,
      upon request, all documents incorporated by reference therein and all
      exhibits (including exhibits incorporated therein by reference);

            (x)   deliver to each Holder without charge, as many copies of the
      Prospectus (including each preliminary prospectus) and any amendment or
      supplement thereto as such Persons reasonably may request; the Company
      hereby consents to the use (in accordance with law) of the Prospectus and
      any amendment or supplement thereto by each selling Holder in connection
      with the offering and the sale of the Transfer Restricted Securities
      covered by the Prospectus or any amendment or supplement thereto;

            (xi)  upon the request of any Holder, enter into such agreements
      (including underwriting agreements) and make such representations and
      warranties and take all such other actions in connection therewith in
      order to expedite or facilitate the disposition of the Transfer Restricted
      Securities pursuant to any applicable Registration Statement contemplated
      by this Agreement as may be reasonably requested by any Holder in
      connection with any sale or resale pursuant to any applicable Registration
      Statement. In such connection, the Company shall:

                  (A)   upon request of any Holder, furnish (or, in the case of
            paragraphs (2), (3) and (4), use all commercially reasonable efforts
            to cause to be furnished) to each Holder, upon the effectiveness of
            the Shelf Registration Statement:

                        (1)   a certificate, dated such date, signed on behalf
                  of the Company, in form and substance reasonably satisfactory
                  to the Initial Purchaser, including such matters as such
                  Holders may reasonably request;

                        (2)   an opinion, dated the date of effectiveness of the
                  Shelf Registration Statement, of counsel for the Company, in
                  form and substance reasonably satisfactory to the Initial
                  Purchaser and counsel for the Initial Purchaser, to the effect
                  set forth in Exhibit C to the Purchase Agreement and such
                  other similar matters as such Holders may reasonably request;

                                       11
<PAGE>

                        (3)   an opinion, dated the date of effectiveness of the
                  Shelf Registration Statement, of Nevada counsel for the
                  Company, in form and substance reasonably satisfactory to the
                  Initial Purchaser and counsel for the Initial Purchaser, to
                  the effect set forth in Exhibit D to the Purchase Agreement
                  and such other similar matters as such Holders may reasonably
                  request;

                        (4)   an opinion, dated the date of effectiveness of the
                  Shelf Registration Statement, of New Jersey counsel for the
                  Company, in form and substance reasonably satisfactory to the
                  Initial Purchaser and counsel for the Initial Purchaser, to
                  the effect set forth in Exhibit E to the Purchase Agreement
                  and such other similar matters as such Holders may reasonably
                  request;

                        (5)   a customary comfort letter, dated the date of
                  effectiveness of the Shelf Registration Statement, from the
                  Company's independent accountants, in the customary form and
                  covering matters of the type customarily covered in comfort
                  letters to underwriters in connection with underwritten
                  offerings, and affirming the matters set forth in the comfort
                  letters delivered pursuant to Section 10(j) and (k) of the
                  Purchase Agreement, provided that any Holder so requesting a
                  comfort letter confirms in writing to the Company's
                  independent accountants that it is of the class of persons
                  entitled to receive a comfort letter under applicable
                  accounting standards or pronouncements; and

                  (B)   deliver such other documents and certificates as may be
            reasonably requested by the selling Holders to evidence compliance
            with clause (A) above and with any customary conditions contained in
            the any agreement entered into by the Company pursuant to this
            clause (xi);

            (xii) prior to any public offering of Transfer Restricted
      Securities, cooperate with the selling Holders and their counsel in
      connection with the registration and qualification of the Transfer
      Restricted Securities under the securities or Blue Sky laws of such
      jurisdictions as the selling Holders may reasonably request and do any and
      all other acts or things necessary or advisable to enable the disposition
      in such jurisdictions of the Transfer Restricted Securities covered by the
      applicable Registration Statement; provided, however, that the Company
      shall not be required to register or qualify as a foreign corporation
      where it is not now so qualified or to take any action that would subject
      it to the service of process in suits or to taxation, other than as to
      matters and transactions relating to the Registration Statement, in any
      jurisdiction where it is not now so subject;

            (xiii) in connection with any sale of Transfer Restricted Securities
      that will result in such securities no longer being Transfer Restricted
      Securities, cooperate with the Holders to facilitate the timely
      preparation and delivery of certificates representing Transfer Restricted
      Securities to be sold and not bearing any restrictive legends; and to
      register such Transfer Restricted Securities in such denominations and
      such names as the selling Holders may request at least two Business Days
      prior to such sale of Transfer Restricted Securities;

                                       12
<PAGE>

            (xiv) use all commercially reasonable efforts to cause the
      disposition of the Transfer Restricted Securities covered by the
      Registration Statement to be registered with or approved by such other
      governmental agencies or authorities as may be necessary to enable the
      seller or sellers thereof to consummate the disposition of such Transfer
      Restricted Securities, subject to the proviso contained in clause (xii)
      above;

            (xv)  obtain a CUSIP number for all Transfer Restricted Securities
      not later than the effective date of a Registration Statement covering
      such Transfer Restricted Securities and provide the Trustee under the
      Indenture with printed certificates for the Transfer Restricted Securities
      which are in a form eligible for deposit with the Depository Trust
      Company;

            (xvi) otherwise use all commercially efforts to comply with all
      applicable rules and regulations of the Commission, and make generally
      available to its security holders with regard to any applicable
      Registration Statement, as soon as practicable, a consolidated earnings
      statement meeting the requirements of Rule 158 under the Act (which need
      not be audited) covering a twelve-month period beginning after the
      effective date of the Registration Statement (as such term is defined in
      paragraph (c) of Rule 158 under the Act);

            (xvii) cause the Indenture to be qualified under the TIA not later
      than the effective date of the first Registration Statement required by
      this Agreement and, in connection therewith, cooperate with the Trustee
      and the Holders to effect such changes to the Indenture as may be required
      for such Indenture to be so qualified in accordance with the terms of the
      TIA; and execute and use all commercially reasonable efforts to cause the
      Trustee to execute, all documents that may be required to effect such
      changes and all other forms and documents required to be filed with the
      Commission to enable such Indenture to be so qualified in a timely manner;
      and

            (xviii) provide promptly to each Holder, upon request, each document
      filed with the Commission pursuant to the requirements of Section 13 or
      Section 15(d) of the Exchange Act.

      (d)   Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable,

                                       13
<PAGE>

shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the
Recommencement Date.

SECTION 7. REGISTRATION EXPENSES

      (a)   All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange
Securities to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and the Holders of Transfer Restricted Securities
(subject to (b) below); (v) all application and filing fees in connection with
listing the Exchange Securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).

      The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.

      Anything contained herein to the contrary notwithstanding, the Company
shall not have any obligation whatsoever in respect of any brokerage
commissions, dealers' selling concessions, transfer taxes or, except as
otherwise expressly set forth herein, any other selling expenses incurred in
connection herewith or the Exchange Offer or sale of Transfer Restricted Notes,
Offered Securities or Exchange Securities.

      (b)   In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Initial Securities in the Exchange Offer and/or selling or reselling
Offered Securities or Exchange Securities pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins LLP, unless another firm shall
be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared; provided that the Company's reimbursement obligation relating to such
fees and disbursements shall not exceed $15,000.

SECTION 8. INDEMNIFICATION

      (a)   Indemnification by Company. The Company agrees to indemnify and hold
harmless each Holder, its directors, officers and each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any reasonable legal or
other expenses incurred in connection with investigating or defending any
matter, including any action that could give rise to any such losses, claims,
damages,

                                       14
<PAGE>

liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Exchange
Securities or registered Offered Securities, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is based upon information relating
to any of the Holders furnished in writing to the Company by any of the Holders.

      (b)   Indemnification by Holders. Each Holder of Transfer Restricted
Securities agrees, severally and not jointly, to indemnify and hold harmless the
Company and its directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company to the same extent as the foregoing indemnity from the Company set
forth in section (a) above, but only with reference to information relating to
such Holder furnished in writing to the Company by such Holder expressly for use
in any Registration Statement. In no event shall any Holder, its directors,
officers or any Person who controls such Holder be liable or responsible for any
amount in excess of the amount by which the total amount received by such Holder
with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages that such
Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.

      (c)   Notice. In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required
to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the indemnified party). In any such
case, the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all

                                       15
<PAGE>

indemnified parties and all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action effected with its written consent;
provided that such consent was not unreasonably withheld. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.

      (d)   Contribution. To the extent that the indemnification provided for in
this Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i) above but
also the relative fault of the Company, on the one hand, and of the Holder, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company, on the one
hand, and of the Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.

      The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its

                                       16
<PAGE>

officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.

SECTION 9. RULE 144A AND RULE 144

      AREP agrees with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which AREP (i) is not
subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.

SECTION 10. MISCELLANEOUS

      (a)   Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.

      (b)   No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into, and is not currently a party to, any agreement granting any
registration rights with respect to its securities to any Person that would
require such securities to be included in any Registration Statement filed
hereunder. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any agreement in effect on the date hereof.

      (c)   Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities (except that in the
event Holders of less than all outstanding Transfer

                                       17
<PAGE>

Restricted Securities provide their written consent, such amendment,
modification or supplement and waiver or consent shall only be enforceable
against such Holders that provided their written consent) and (ii) in the case
of all other provisions hereof, the Company has obtained the written consent of
Holders of a majority of the outstanding principal amount of Transfer Restricted
Securities (excluding Transfer Restricted Securities held by the Company or its
Affiliates). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders
whose Transfer Restricted Securities are being tendered pursuant to the Exchange
Offer, and that does not affect directly or indirectly the rights of other
Holders whose Transfer Restricted Securities are not being tendered pursuant to
such Exchange Offer, may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities subject to such
Exchange Offer.

      (d)   Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.

      (e)   Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier or air courier
guaranteeing overnight delivery:

            (i)   if to a Holder, at the address set forth on the records of the
      Registrar under the Indenture, with a copy to the Registrar under the
      Indenture; and

            (ii)  if to the Company:

                         American Real Estate Partners, L.P.
                         100 Bedford Road
                         Mt. Kisco, N.Y. 10549
                         Telecopier No.: (914) 242-9282
                         Attention: Chief Financial Officer

                         With a copy to:

                         Piper Rudnick LLP
                         1251 Avenue of the Americas
                         New York, New York 10020
                         Telecopier No.: (212) 884-8448
                         Attention: Steven L. Wasserman, Esq.

      All notices and communications will be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged in writing, if telecopied; and on the next
Business Day, if timely delivered to an overnight air courier guaranteeing next
day delivery.

                                       18
<PAGE>

      Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

      (f)   Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement, the terms of the offering described in the Offering Memorandum under
the caption "Notice to Investors" or the Indenture. If any transferee of any
Holder shall acquire Transfer Restricted Securities in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Transfer Restricted Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.

      (g)   Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

      (h)   Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      (i)   Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

      (j)   Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

      (k)   Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

                  [Remainder of page intentionally left blank]

                                       19
<PAGE>

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

                                        AMERICAN REAL ESTATE PROPERTIES, L.P.

                                        By:  /s/  Keith A. Meister
                                             -----------------------------------
                                             Name:   Keith A. Meister
                                             Title:  President and Chief
                                                     Executive Officer

                                        AMERICAN REAL ESTATE Finance Corp.

                                        By: /s/  Keith A. Meister
                                            ------------------------------------
                                            Name:  Keith A. Meister
                                            Title: President and Chief Executive
                                                   Officer

                                        AMERICAN REAL ESTATE HOLDINGS LIMITED
                                        PARTNERSHIP

                                        By: /s/  Keith A. Meister
                                            ------------------------------------
                                            Name:  Keith A. Meister
                                            Title: President and Chief Executive
                                                   Officer

BEAR, STEARNS & CO. INC.

By:  /s/  Stephen A. Mongillo
     -----------------------------------
     Name:  Stephen A. Mongillo
     Title: Senior Managing Director

                                       20

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