PURCHASE AGREEMENT

 

the contrary, all references herein to the Offering Memorandum are to the Offering Memorandum at the Execution Time and are not meant to include any amendment or supplement, or any information incorporated by reference therein, subsequent to the Execution Time.  The Company hereby confirms that it has authorized the use of the Offering Memorandum, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchasers.

 

To the extent there are no additional parties listed in the table below other than you, the term “Representatives” as used herein shall mean the Initial Purchasers, and the term Representatives and Initial Purchasers shall mean either the singular or plural as the context requires.  The use of the neuter in this Agreement shall include the feminine and masculine wherever appropriate.  Certain terms used herein are defined in Section 9 of Annex I hereto.  Unless stated to the contrary, any references herein to the terms “amend,” “amendment” or “supplement” with respect to the Offering Memorandum shall be deemed to refer to and include any information filed under the Exchange Act subsequent to the Execution Time that is incorporated by reference therein.

 

Subject to the terms and conditions, and in reliance upon the representations and warranties, set forth or incorporated by reference herein, the Company hereby agrees to sell to the several Initial Purchasers, and each Initial Purchasers agrees, severally and not jointly, to purchase from the Company, the respective principal amounts of Securities set forth below opposite its name at a purchase price of 98.803% of the principal amount of Securities, plus accrued interest, if any, from May 27, 2005 to the date of payment and delivery:

 

Initial Purchaser		Principal Amount of Securities to Be Purchased
Citigroup Global Markets Inc.		$	259,950,000
Greenwich Capital Markets, Inc.		$	259,950,000
Wells Fargo Securities, LLC		$	29,460,000
Bank of America Securities LLC		$	29,460,000
Barclays Capital Inc.		$	28,920,000
Commerzbank Capital Markets Corporation		$	22,230,000
J.P. Morgan Securities Inc.		$	22,230,000
Deutsche Bank Securities Inc.		$	22,230,000
Daiwa Securities SMBC Europe Limited		$	22,230,000
Scotia Capital (USA) Inc.		$	22,230,000
BNP Paribas Securities Corp.		$	22,230,000
Goldman, Sachs & Co.		$	2,220,000
Bear, Stearns & Co. Inc.		$	2,220,000
Morgan Stanley & Co. Incorporated		$	2,220,000
Samuel A. Ramirez & Co., Inc		$	2,220,000
Total		$	750,000,000

 

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The Initial Purchasers will pay for the Securities upon delivery thereof at the offices of Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York, New York at 10:00 a.m. (New York City time) on May 27, 2005, or at such other time, not later than 5:00 p.m. (New York City time) on June 1, 2005, as shall be designated by the Representatives. The time and date of such payment and delivery are hereinafter referred to as the Closing Date.

 

The Securities shall have the terms set forth in the Offering Memorandum dated May 19, 2005, including the following:

 

Terms of Securities

 

Maturity Date:		June 1, 2015
Interest Rate:		5.625%
Optional Redemption:		Make Whole Call at TSY + 30 basis points
Interest Payment Dates:		Each June 1 and December 1, commencing December 1, 2005
Closing Date:		May 27, 2005

 

All provisions contained in the Annex I hereto, entitled “Purchase Agreement General Provisions,” are herein incorporated by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions had been set forth in full herein, except that if any term defined in such document is otherwise defined herein, the definition set forth herein shall control.

 

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Company and the Guarantor and the Initial Purchasers.

 

	Very truly yours,
	HARRAH’S OPERATING COMPANY, INC.
	By:	/s/ Jonathan S. Halkyard
		Name:	Jonathan S. Halkyard
		Title:	Vice President and Treasurer
	HARRAH’S ENTERTAINMENT, INC.
	By:	/s/ Jonathan S. Halkyard
		Name:	Jonathan S. Halkyard
		Title:	Vice President and Treasurer

 

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The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
CITIGROUP GLOBAL MARKETS INC.
By:	/s/ Evan Ladouceur
	Name:	Evan Ladouceur
	Title:	Managing Director
GREENWICH CAPITAL MARKETS, INC.
By:	/s/ Robert W. Mitchell
	Name:	Robert W. Mitchell
	Title:	Managing Director
for themselves and the other several Initial
Purchasers named in the foregoing Agreement.

 

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ANNEX I

 

HARRAH’S OPERATING COMPANY, INC.

Guaranteed Debt Securities

Payment of Principal, Interest and
Premium, if any, Guaranteed by

Harrah’s Entertainment, Inc.

 

PURCHASE AGREEMENT GENERAL PROVISIONS

 

May 19, 2005

 

The provisions set forth herein are incorporated by reference in a Purchase Agreement of even date herewith (such agreement, including the provisions hereof as incorporated therein, the “ Purchase Agreement ”).  The Purchase Agreement is sometimes referred to herein as this “ Agreement .”  Terms defined in the Purchase Agreement are used herein as therein defined.

 

1.             Representations and Warranties .  The Company and the Guarantor, jointly and severally, represent and warrant to and agree with each of the Initial Purchasers that:

 

(a)           The Offering Memorandum does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Offering Memorandum based upon information relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representatives expressly for use therein;

 

(b)           Each of the Company and the Guarantor has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Offering Memorandum and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(c)           Each subsidiary of the Company and the Guarantor, respectively, has been duly organized or formed, as applicable, is validly existing as a corporation, limited

 

 

liability company or partnership in good standing under the laws of the jurisdiction of its organization or formation, as applicable, has the power and authority to own its property and to conduct its business as described in the Offering Memorandum and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole; all of the issued shares of capital stock or other equity interests of each subsidiary of the Company and the Guarantor, respectively, have been duly and validly authorized and issued and are fully paid and non-assessable.  Except as set forth in or as incorporated by reference in the Offering Memorandum, all of the shares of capital stock or other equity or partnership interests of each subsidiary of the Company or the Guarantor that would be considered a “significant subsidiary” for purposes of Rule 1-02 under Regulation S-X pursuant to the Securities Act (the “ Significant Subsidiaries ”) are owned directly or indirectly by the Company or the Guarantor, respectively, except that 20% of the equity interest in Des Plaines Development Ltd. is not owned directly or indirectly by the Company or the Guarantor.  Except as set forth in or as incorporated by reference in the Offering Memorandum, all of the shares of capital stock or other equity or partnership interests of subsidiaries of the Company or the Guarantor held by the Company or the Guarantor are held free and clear of all liens, encumbrances, equities or claims except such liens, encumbrances, equities or claims imposed by Gaming Laws or the terms of any partnership agreement pertaining to any partnership that is a subsidiary of the Company or that would not would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(d)           This Agreement has been duly authorized, executed and delivered by each of the Company and the Guarantor;

 

(e)           The Indenture has been, or will be by the Closing Date, duly authorized, executed and delivered by each of the Company and the Guarantor and, assuming due authorization, execution and delivery thereof by the Trustee, is, or will be by the Closing Date, a valid and binding agreement of each of the Company and the Guarantor, respectively, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity;

 

(f)            The Registration Rights Agreement has been, or will be by the Closing Date, duly authorized, executed and delivered by each of the Company and the Guarantor and, assuming due authorization, execution and delivery thereof by the Representatives, is, or will be by the Closing Date, a valid and binding agreement of each of the Company and the Guarantor, respectively, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity;

 

(g)           The Securities have been duly authorized by the Company and the Guarantor and, when executed, authenticated and issued in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers in

 

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accordance with the terms of the Purchase Agreement, (assuming due authorization, execution and delivery thereof by the Trustee) will be entitled to the benefits of the Indenture, and will be valid and binding obligations of the Company and the Guarantor, respectively, in each case enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity;

 

(h)           The execution and delivery by each of the Company and the Guarantor of, and the performance by each of the Company and the Guarantor of its respective obligations under, this Agreement, the Indenture, the Registration Rights Agreement and the Securities will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or the Guarantor, respectively, or any agreement or other instrument binding upon the Company or any of its subsidiaries, or the Guarantor or any of its subsidiaries, respectively, that is material to the Company or the Guarantor and their respective subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or the Guarantor and any of their respective subsidiaries, and no consent, approval, authorization, filing with or order of, or qualification with, any governmental body or agency is required in connection with, or prior to the consummation of, the transactions contemplated in, or for the performance by the Company or the Guarantor of its respective obligations under, this Agreement, the Indenture, the Registration Rights Agreement and the Securities, except such as will be obtained under the Securities Act, the Exchange Act, and the Trust Indenture Act, or as may be required by the securities or Blue Sky laws of the various states and securities laws of any jurisdiction outside the United States in connection with the offer and sale of the Securities, or as have been obtained pursuant to Gaming Laws;

 

(i)            There has not occurred any material adverse change in the condition, financial or otherwise, or in the earnings, business, operations or prospects of the Company or the Guarantor and their respective subsidiaries, taken as a whole, from that set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the Execution Time);

 

(j)            Except as disclosed in the Offering Memorandum, there are no known legal or governmental proceedings pending or threatened to which the Company or the Guarantor and any of their respective subsidiaries is a party or to which any of the properties of the Company or the Guarantor or any of their respective subsidiaries is subject and that would, individually or in the aggregate, have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole.  Neither the Company nor the Guarantor has any reason to believe that any governmental agency with authority pursuant to any Gaming Law is investigating the Company, the Guarantor or any of their respective subsidiaries in any non-routine matter, the results of which would materially affect the operations of the Company and the subsidiaries of the Company.  Due to the highly regulated nature of the business of the Company and the subsidiaries of the Company, there are ongoing investigations by various governmental agencies with authority pursuant to the various Gaming Laws;

 

I-3

 

(k)           Neither the Company nor the Guarantor is, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Offering Memorandum, neither will be, an “investment company” or an entity “controlled by an investment company” as such terms are defined in the Investment Company Act;

 

(l)            The Company and the Guarantor and their respective subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses, and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except in each case where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(m)          There are no costs or liabilities associated with obligations under applicable Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) that would, individually or in the aggregate, have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(n)           Except as disclosed in the Offering Memorandum, each of the Company and the Guarantor and their respective subsidiaries has sufficient trademarks, trade names, patent rights, copyrights, or licenses to conduct their respective businesses as now conducted in all material respects;

 

(o)           Except as disclosed in or specifically contemplated by the Offering Memorandum, each of the Company and the Guarantor and their respective subsidiaries has sufficient licenses, approvals and authorizations required pursuant to Gaming Laws to conduct their respective current businesses, except such licenses, approvals and authorizations required pursuant to Gaming Laws the absence of which, either individually or in the aggregate, would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(p)           Each of the Company’s and Guarantor’s and their respective subsidiaries’ controlling persons, key employees, and, to the Company’s or the Guarantor’s knowledge, stockholders, have all necessary permits, licenses and other authorizations required by Gaming Laws for the Company, the Guarantor and their respective subsidiaries to conduct their respective businesses as now conducted in all material respects; and neither the Company nor the Guarantor has any knowledge that any of their

 

I-4

 

respective stockholders is unsuitable or may be deemed unsuitable by any authorities pursuant to Gaming Laws;

 

(q)           No labor dispute with the employees of the Company or the Guarantor or any of their respective subsidiaries exists, or to the knowledge of the Company or the Guarantor, respectively, is imminent that would, individually or in the aggregate, have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole;

 

(r)            Neither the Company, nor the Guarantor, nor any of their respective affiliates, nor any person acting on its or their behalf other than the Initial Purchasers, has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Securities under the Securities Act;

 

(s)           Neither the Company, nor the Guarantor, nor any of their respective affiliates, nor any person acting on its or their behalf has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States;

 

(t)            Assuming the accuracy of the representations and warranties and compliance with the agreements of the Initial Purchasers made pursuant to Section 3, and except as described in the Offering Memorandum under “Description of Notes—Registration Rights,” it is not necessary in connection with the offer, sale and delivery of the Securities in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act;

 

(u)           The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act;

 

(v)           Neither the Company, nor the Guarantor, nor any of their respective affiliates, nor any person acting on its or their behalf has engaged in any directed selling efforts with respect to the Securities, and each of them has complied with the offering restrictions requirement of Regulation S.  Terms used in this paragraph have the meanings given to them by Regulation S;

 

(w)          The Company and Guarantor are subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act;

 

(x)            Neither the Company nor the Guarantor has, within the past 12 months, paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company or Guarantor (except as contemplated by this Agreement and the Purchase Agreements dated June 22, 2004 and February 4, 2005 between the Company and the initial purchasers as set forth therein and except in connection with any repurchase by the Guarantor of its outstanding securities (other than the Securities)); and

 

I-5

 

(y)           The Company and the Guarantor are in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission adopted thereunder.

 

2.             Payment and Delivery .  Except as otherwise provided in this Section 2, payment for the Securities shall be made to the Company in federal or other funds immediately available at the time and place set forth in the Purchase Agreement, upon delivery to the Representatives for the respective accounts of the several Initial Purchasers of the Securities registered in such names and in such denominations as the Representatives shall request in writing not less than one full Business Day prior to the date of delivery, with any transfer taxes payable in connection with the transfer of the Securities to the Initial Purchasers duly paid by the Company.  Delivery of the Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

 

3.             Offering by Initial Purchasers .  Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees with the Company and the Guarantor that:

 

(a)           It has not offered or sold, and, until the Securities are registered under the Act as described in the Offering Memorandum under the caption “Description of Notes—Registration Rights,” will not offer or sell, any Securities except (i) to those it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A; or (ii) in accordance with the restrictions set forth in Exhibit A hereto.

 

(b)           Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States.

 

4.             Conditions to the Initial Purchasers’ Obligations .  The several obligations of the Initial Purchasers are subject to the performance by the Company and Guarantor of their obligations hereunder and to the following conditions:

 

(a)           Subsequent to the execution and delivery of the Purchase Agreement and prior to the Closing Date:

 

(i)            there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company’s or the Guarantor’s securities by any “nationally recognized statistical rating organization,” as such term is defined for purposes of Rule 436(g)(2) under the Act; and

 

(ii)           there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company or the Guarantor and their respective subsidiaries, taken as a whole, from that set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent

 

I-6

 

to the Execution Time) that, in the judgment of the Representatives, is material and adverse and that makes it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the offering, sale or delivery of the Securities on the terms and in the manner contemplated in the Offering Memorandum.

 

(b)           The Initial Purchasers shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of each of the Company and the Guarantor, to the effect set forth in Section 4(a)(i) above and to the effect that the representations and warranties of the Company and the Guarantor, respectively, contained in this Agreement are true and correct as of the Closing Date and that the Company and the Guarantor, respectively, have complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.  The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.

 

(c)           The Initial Purchasers shall have received on the Closing Date an opinion of Stephen H. Brammell, Senior Vice President and General Counsel of the Company and the Guarantor, dated the Closing Date, to the effect that:

 

(i)            each of the Company, the Guarantor and the Significant Subsidiaries has been duly organized, is validly existing as a corporation, limited liability company or partnership in good standing under the laws of the jurisdiction of its organization, has the power and authority to own its property and to conduct its business as described in the Offering Memorandum and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole.

 

(ii)           after inquiry of the members of the law departments of the Company and Guarantor, to the best of such counsel’s knowledge, (A) there are no legal or governmental proceedings pending or threatened to which the Company or the Guarantor and any of their respective subsidiaries is a party or to which any of the properties of the Company or the Guarantor or any of their respective subsidiaries is subject that are not adequately disclosed in the Offering Memorandum and that would, individually or in the aggregate, have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole, (B) there are no material statutes, regulations, contracts or other documents that are not adequately disclosed in the Offering Memorandum, and (C) there is no non-routine investigation of the Company, the Guarantor or any of their respective subsidiaries, by any governmental agency with authority pursuant to any Gaming Law, the results of which would have material adverse effect on the Company, the Guarantor or any of their respective subsidiaries taken as a whole.

 

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(iii)          each of the Company’s, and Guarantor’s and their respective subsidiaries’ controlling persons, and key employees have all necessary permits, licenses and other authorizations required by Gaming Laws for the Company, the Guarantor and their respective subsidiaries to conduct their businesses as now conducted except such licenses, approvals and authorizations required pursuant to Gaming Laws the absence of which, either individually or in the aggregate, would not have a material adverse effect on the Company or the Guarantor and their respective subsidiaries, taken as a whole.

 

(iv)          the statements (A) in the Offering Memorandum under the captions “Regulation and Licensing,” and “Legal Matters,” (B) in “Item 1 - Business - Patents and Trademarks,” “Item 1 - Business - Governmental Regulation” and “Item 3 - Legal Proceedings” of the Guarantor’s most recent annual report on Form 10-K in respect of the year ended December 31, 2004, which is incorporated by reference in the Offering Memorandum and (C) in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – Debt and Liquidity” of the Guarantor’s most recent annual report on Form 10-K in respect of the year ended December 31, 2004, which is incorporated by reference in the Offering Memorandum, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, are accurate descriptions or summaries in all material respects.

 

(v)           no consent, approval, authorization of, or qualification with any authority pursuant to Gaming Laws is required with respect to issuance of the Securities or the transactions contemplated by this Agreement, except as has already been obtained or that the state of Nevada and Mississippi have not yet approved any negative pledges that may have been made in the Notes.  Neither Nevada nor Mississippi requirements would, individually or in the aggregate, have an adverse material effect on the ability of the Company to issue the Notes or the transactions contemplated by this Agreement, including, without limitation, any investor’s ability to purchase and hold the Notes.

 

(vi)          the execution and delivery by each of the Company and the Guarantor of the transactions contemplated in, and the performance by the Company and the Guarantor of its respective obligations pursuant to, this Agreement, the Indenture, the Registration Rights Agreement and the Securities will not contravene, to the best of such counsel’s knowledge, any agreement or other instrument binding upon the Company or the Guarantor and any